UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported):   December 20, 2010
 
FOODFEST INTERNATIONAL 2000 INC.
 (Exact name of registrant as specified in its charter)
 
Delaware
333-142658
74-3191757
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
361 Connie Crescent
Concord, Ontario Canada L4K 5R2
(Address of principal executive offices) (Zip Code)
 
(905) 709-4775
 (Registrant’s telephone number, including area code)

 (Former name or former address, if changed since last report)

––––––––––––––––
Copies to:
Gregg E. Jaclin, Esq.
Anslow + Jaclin,  LLP
195 Route 9 South, Suite 204
Manalapan, New Jersey 07726
(732) 409-1212
––––––––––––––––

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Current Report on Form 8-K contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  All statements other than statements of historical fact contained in this Current Report on Form 8-K, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements.  We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology.  Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Current Report on Form 8-K, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  Moreover, we operate in a very competitive and rapidly changing environment.  New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.  All forward-looking statements included in this document are based on information available to us on the date hereof, and we assumes no obligation to update any such forward-looking statements

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Current Report on Form 8-K.  Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Current Report on Form 8-K could negatively affect our business, operating results, financial condition and stock price.  Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Current Report on Form 8-K to conform our statements to actual results or changed expectations.
 
 
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Item 1.01 Entry Into A Material Definitive Agreement
 
C losing of Acquisition of Foodfest
 
As more fully described in Item 2.01 below, Foodfest International 2000 Inc (“we”, “Foodfest USA” or the “Company”) completed the acquisition of all of the issued and outstanding shares of Foodfest International 2000, Inc., a private company incorporated under the laws of Ontario, Canada (“CanCo”). CanCo is in the business of processing and distributing kosher, natural, and organic food and drink. Closing of the acquisition (the "Closing") took place on December 20, 2010 (the “Closing Date”). On the Closing Date, pursuant to the terms and conditions of the Share Exchange Agreement (the “Exchange Agreement”) between Foodfest USA, CanCo, Foodfest Acquisition Corp (a wholly owned subsidiary of Foodfest USA incorporated under the laws of Ontario, Canada) “Acquisitionco” and all the shareholders of CanCo (the “CanCo Shareholders”), we acquired all the outstanding shares (the “Interests”) of CanCo from the CanCo Shareholders.
 
A copy of the Exchange Agreement is included as Exhibit 2.1 to this Current Report and is hereby incorporated by reference. All references to the Exchange Agreement and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.

Pursuant to the Exchange Agreement, CanCo became a wholly-owned subsidiary of the Company. The directors of the Company have approved the Exchange Agreement and the transactions contemplated under the Exchange Agreement. The directors of CanCo have approved the Exchange Agreement and the transactions contemplated thereunder.

The Combination transaction is discussed more fully in Section 2.01 of this Current Report. The information therein is hereby incorporated in this Section 1.01 by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets
 
CLOSING OF EXCHANGE AGREEMENT

As described in Item 1.01 above, on the Closing Date, pursuant to the terms of the Exchange Agreement, we acquired all the interests of CanCo from the CanCo Shareholders; and the CanCo Shareholders transferred and contributed all of their Interests to us. Pursuant to the terms of the Exchange Agreement, each CanCo shareholder received 48,400 shares in the capital of Foodfest USA for each 1 common share of CanCo they held prior to closing. In exchange for all the issued and outstanding shares of CanCo, we issued a total of 48,400,000 exchangeable shares of its subsidiary, Acquisitionco (the “Exchange Shares”), each of which is exchangeable into one share of Foodfest USA in accordance with the terms and conditions of the Exchange Agreement, the Voting and Exchange Trust Agreement and the Support Agreement entered into concurrently at Closing, and the provisions of the Exchange Shares. The Exchange Shares were issued to the CanCo Shareholders in order to minimize or defer adverse tax consequences relating to the Closing.
 
Following Closing, 3,950,509 shares of Foodfest USA common stock are issued and outstanding and 48,400,000 shares of Foodfest USA common stock are reserved for issuance upon conversion of the Exchange Shares.
 
Voting and Exchange Trust Agreement
 
As a condition of the closing of the Exchange Agreement, Foodfest USA agreed to enter into a Voting and Exchange Trust Agreement (the "Trust Agreement") with Acquisitionco and Patriquin Law, Professional Corporation (the “Trustee”). Pursuant to the terms of the Trust Agreement, the parties created a trust for the benefit of the exchangeable shareholders of Acquisitionco enabling the Trustee to exercise certain voting rights of the CanCo Shareholders (or their designates, transferees, or assigns) until such time as they (or their designates, transferees or assigns) are issued common shares of Foodfest USA in exchange for their Exchange Shares, and allowing the Trustee to hold certain exchange rights in respect of the Exchange Shares. As a condition of the Trust Agreement, Foodfest USA agreed to file a Certificate of Designation, effective October 22, 2010, designating a class of its preferred shares as Series A Preferred Stock (the "Special Voting Shares") and issue one Special Voting Share to the Trustee. The Special Voting Share entitles the Trustee to exercise the number of votes equal to the number of Exchange Shares issued and outstanding during the term of the Trust Agreement. The Trust Agreement further sets out the terms and conditions under which the owners of Exchange Shares are entitled to instruct the Trustee as to how to vote during any stockholder meetings of Foodfest USA.

 
 
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The Trust Agreement remains in force until the date that all Exchange Shares are exchanged for common stock in the Corporation. At that time, the Special Voting Share shall be redeemed for cancellation for nominal consideration.
 
A copy of the Trust Agreement is included as Exhibit 2.2 to this Current Report and is hereby incorporated by reference. All references to the Trust Agreement and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.
 
Support Agreement and terms of Exchange Shares
 
The Support Agreement and the Exchange Share provisions create certain obligations for Foodfest USA, including the obligation to reserve sufficient common shares in its stock to issue to the owners of Exchange Shares, the obligation to ensure that equivalent dividends are paid to the owners of the Exchange Shares if dividends are paid on the common shares of Foodfest USA while any Exchange Shares are outstanding, and the obligation to not issue any Special Voting Shares or designate or issue any other shares in its capital that are superior to the Special Voting Shares, except with the consent of the owners of the Exchange Shares.
 
Copies of the Support Agreement and the provisions of the Exchange Shares are included as Exhibits 2.3 and 2.4 respectively to this Current Report and is hereby incorporated by reference. All references to the Support Agreement, Exchange Shares, and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.

BUSINESS
 
Overview

Foodfest International 2000 Inc. was incorporated in Ontario, Canada on June 25, 1987 by Henry Ender, Chief Executive Officer and Fred Farnden, President and Chief Financial Officer. The company was formed to align ourselves with food distributors and processors specializing in kosher, natural, and organic food and drink to expand sales and manufacturing growth opportunities.

We are one of the largest kosher food distributors in North America and our mission statement is simple. To be the best supplier of Kosher, natural and organic food and drink to existing and new customers through our association with associated companies and suppliers servicing retail and institutional markets in North America and globally.

Our vision is to provide a state of the art distribution channels offering Kosher, natural and organic food and drink products through regionally dedicated warehouses strategically placed throughout North America.

The guiding principles we dedicate to ourselves are
 
ü  
Our customers are the focus of everything we do.
 
ü  
Continued improvements are fundamental to everything we do.
 
ü  
We will not compromise our integrity.
 
ü  
Employee involvement is an integral part of our culture.
 
ü  
Dedicated experienced management.
 
Our business vision is simple and our objectives clear – consolidate food distribution of kosher, organic and natural food and drink resources in key markets in North America. Distributors of kosher, organic and natural foods and drink are typically small to medium sized with a strong entrepreneurial owner/manager restricted from dynamic growth due to limited access to capital markets. We are focused on acquiring, merging and consolidating distributors in key markets in North America. Through possible mergers and acquisitions we will be able to offer products to the Kosher and mainstream markets at the best prices possible through consolidated purchasing, warehousing and distribution while achieving and maintaining sound gross margins and profitability.
 
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Our other key strategy is innovation. The economic community today is global. As a result we will be searching all four corners of the globe to find and introduce new innovative products that fit our mandate of Kosher, organic or natural.
 
Who buys Kosher?

Millions of people throughout the world limit their food consumption, and seek out the kosher symbol to ensure their preferences are being addressed. According to market studies, the appeal for kosher foods transcends the interests of any one specific ethnic group. The consumers of ethnic foods include Jews, Muslims, and members of other religious denominations, vegetarians, those with lactose intolerance, and those that simply believe kosher is better. Millions of Muslims around the world follow a dietary regimen similar to the kosher code. Since they recognize that food products bearing a kosher symbol conform to the requirements of “Halal”, foods certified as kosher have a broad base appeal for Muslims.

Lactose intolerance afflicts millions of people. Moreover, people with allergies to dairy products may have a life threatening reaction to the most minute consumption of dairy products. Kosher law requires complete segregation between milk and meat. Thus, products containing a dairy ingredient must bear the kosher symbol with the letter “D”. Lactose intolerant consumers therefore search for the kosher symbol because it is their guarantee that the product has never come into contact with any dairy derivative.

Vegetarians due to a variety of considerations, exclude meat, poultry and fish from their diets. The Kosher symbol in conjunction with the “Parve” designation, guarantees that the product contains no meat, dairy, or poultry derivative and is therefore is suitable for vegetarian use.
 
From the inception of the company, originally incorporated in the Province of Ontario Canada in 1987 by the current shareholders and founders of Foodfest, the company has had a singular goal – providing our customers and thus the end user with more with superior quality for less. Our name has grown to be synonymous with reliability, service, flexibility, quality and innovation for over 25 years. Over these many years we have developed relationships with such names as Loblaw’s, Fortinos, Zehrs, Real Canadian Super stores, No Frills, Your Independent Grocer, Sobeys, Food Basics, Foodland, IGA, Dominion, Metro, A&P, Price Choppers, Thrifty’s, Atlantic Coop, Shoppers Drug Mart, Highland Farms, Longos, Pusateri’s, Universities, Airlines, Hospitals, Bakeries, independent retailers and many more regional distributors. In all Foodfest services over 3000 customers coast to coast as well as regional distributors in New York State, Florida and California.

As our customers have grown our relationships with suppliers internationally have grown. Today we represents such Household brands as Zoglo-Soglowek, Elite, Wissotzky, Of Tov, Sabra, Nanuk Salmon, Dr, Praegers, Dyna Sea, and many more.

For all the success achieved to date we regard the United States as its most promising market for growth over the short term.  We have made the decision to invest its sales, operations and administrative infrastructure and regionalize its U.S. operations to enable us to expand our U.S. customer base and to more efficiently introduce to existing customers and new customers more of our existing products, and new products our company and other manufacturers have developed or are in the process of developing. Expanding our business into the U.S. kosher, organic and natural food and drink markets will achieve our ultimate goal of being the largest kosher, organic and natural food distributor in North America providing the consumer the best at affordable prices.

Mintel's exclusive consumer research shows that 28% of respondents have purchased a kosher product. Obviously, kosher food is not just for people who keep kosher. The products are also of interest to Muslims, Seventh Day Adventists, vegetarians, and people with food allergies. The kosher labeling system provides a clear listing of the contents of a product and identifies whether it contains dairy or meat products, which is a "value add" for vegetarian and food-allergic consumers. There is also a strong demand for kosher food because many people believe that the products are produced in cleaner environments and are "safer" than foods produced in non-kosher plants.
 
The kosher food market encompasses almost every segment of the food industry, from raw ingredients (meat, poultry, and baking products, for example) to processed foods and beverages. Any food product that is prepared under the laws of kashrut (the Jewish laws governing food products- see terms below) is considered kosher; only rabbinical law, therefore, limits the market.
 

 
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Almost all major manufacturers produce at least some food products that bear the kosher symbol, including Coca-Cola, Procter & Gamble, Frito Lay, Kraft, Nabisco, and General Mills. According to Integrated Marketing Communications (IMC), a New York based marketing firm serving the kosher market, in 2002 some 75,000 CPG products in the U.S. were kosher certified, up from 60,000 in 2000.
 
 
Some of the products that gain certification each year are mainstays of the food industry, and their certification adds dollar value to the "mainstream kosher" market while having little overall bearing on product sales themselves. For example, Nabisco Oreo cookies attained kosher certification in 1997, giving the kosher food market a $300 million boost (based on IRI data for sales of Oreos through food, drug, and mass merchandisers, calendar year 1997). However, Oreo cookie sales showed no significant dollar increase between 1996 and 1997.
 
The kosher market can be considered as two separate markets: "mainstream and kosher" and "ethnic kosher." The former, "mainstream and kosher products," are those foods that are certified kosher but have little relevance or bearing on traditional kosher foodways. These kosher certified products are as much at home on the shelves of consumers who have no interest in kosher foods as they are on the shelves of those consumers for whom the kosher symbol is important. "Ethnic kosher foods," on the other hand, are products that are "kosher by design"-such items as gefilte fish, matzo, schav and borscht (both types of soup), and other traditional ethnic Jewish food products.
 
While the "mainstream and kosher" market enjoys more than $100 billion in sales, these sales may not be indicative of the "market" for kosher foods, since a minority of consumers buy these products because they are kosher, but for some other reason. On the other hand, sales of some "ethnic kosher" foods are so low that it is impossible to track them through the usual means (IRI or other scanner services). While ethnic kosher foods may be purchased by any consumer interested in Jewish food traditions, it is undeniable that the major market for these products is the consumer looking for a kosher product. In any case, it is difficult to arrive at a dollar figure that represents the "true" kosher market.
 
As a way of highlighting the difference between the "mainstream and kosher" market and the "ethnic kosher" market, this report examines a representative sample of segments in which kosher and non-kosher products can be found. Segments in which kosher certification is likely to be absent or extremely limited (e.g. meat snacks) are not included.
 
For each of the five segments analyzed in this report (cookies, chocolate confectionery, snacks, sugar confectionery, and crackers), both total dollar sales and dollar sales of the kosher component are given. Top manufacturers in each segment and their top-selling products are also itemized, and efforts are made to estimate the total kosher sales of each top manufacturer. The report also highlights (when possible) sales by small, "ethnic kosher" manufacturers in each segment. Even if sales figures are not available for these smaller manufacturers, their brands are discussed in as much detail as possible.
 
The Jewish population in the U.S. remains relatively stable, and although the Islamic population continues to grow, it still constitutes only a small percentage of the U.S. population (see Market Drivers, below). Vegetarians and other concerned consumers, therefore, will drive the kosher market to a greater degree than those who choose kosher foods for religious reasons.
 
Size of Kosher Food Market:
 
The kosher food market is a $9 billion market today.
 
 
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Competition

As the company develops its business plan to grow its kosher and natural food businesses, it may face competition from other similar businesses who would sell kosher products. The kosher food industry is intensely competitive with respect to price, location and food quality, and there are other potential competitors with similar resources to Foodfest International 2000 Inc. The kosher food consumer market for kosher foods is often impacted by changes in the taste and eating habits of the public, economic and political conditions affecting spending habits, population and traffic patterns. The principal bases of competition in the industry are the quality and price of the food products offered.

Employees
 
As of the date hereof, we have approximately 25 full-time employees.

RISK FACTORS
 
You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities.  The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

 
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Risks Relating to Our Business

We operate in a highly competitive industry, which may affect our profitability.

The food industry is highly competitive. We compete based on price, product innovation, product quality, brand recognition and loyalty, effectiveness of marketing, promotional activity and the ability to identify and satisfy consumer preferences.

From time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share. Competition and customer pressures may also restrict our ability to increase prices in response to commodity and other input cost increases. Our results of operations will suffer if profit margins decrease as a result of a reduction in prices, increased input costs or other factors, and if we are unable to increase sales volumes to offset those profit margin decreases.

Retailers are increasingly offering retailer brands that compete with some of our products. It is important that our products provide higher value and / or quality to our consumers than less expensive alternatives. If the difference in value or quality between our products and those of retailer brands narrows, or if the perceived difference in quality narrows, then consumers may not buy our products. Furthermore, during periods of economic uncertainty, such as we continue to experience, consumers tend to purchase more retailer brands or other economy brands, which could reduce sales volumes of our products or shift our product mix to our lower margin offerings. If we are not able to maintain or improve our brand image or value proposition, it could have a material effect on our market share and our profitability.

We may also need to increase spending on marketing, advertising and new product innovation to protect existing market share or increase market share. The success of our investments is subject to risks, including uncertainties about trade and consumer acceptance. As a result, our increased expenditures may not maintain or enhance market share and could result in lower profitability.

The consolidation of retail customers, the loss of a significant customer or a material reduction in sales to a significant customer could affect our operating margins, our profitability, our net revenues and our results of operations.

Retail customers, such as supermarkets, warehouse clubs and food distributors in the U.S., the European Union and our other major markets continue to consolidate. These consolidations have produced large, sophisticated customers with increased buying power. These larger retailers, capable of operating with reduced inventories, can resist price increases and demand lower pricing, increased promotional programs and specifically tailored products. In addition, they may use shelf space currently used for our products for their own retailer brands. The consolidation of retail customers also increases the risk that a severe adverse impact on their business operations could have a corresponding material adverse effect on us. Also, our retail customers may be affected by recent economic conditions. For example, they may not have access to funds or financing and that could cause them to delay, decrease or cancel purchases of our products, or to not pay us or to delay paying us for previous purchases.

Increased price volatility for commodities we purchase may affect our profitability.

We are a major purchaser of commodities, including dairy, coffee, cocoa, wheat, corn products, soybean and vegetable oils, nuts, meat products, and sugar and other sweeteners. In addition, we use significant quantities of plastic, glass and cardboard to package our products, and natural gas for our factories and warehouses. Price volatility for commodities we purchase has increased due to conditions outside of our control, including recent economic conditions, currency fluctuations, availability of supply, weather, consumer demand and changes in governmental agricultural programs. Although we monitor our exposure to commodity prices as an integral part of our overall risk management program, continued volatility in the prices of commodities we purchase could increase the costs of our products and services, and our profitability could suffer.
 
 
 
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If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

If adequate additional financing is not available on reasonable terms, we may not be able to undertake acquisitions of additional business or enter into other strategic alliances, and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.
 
In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our securities can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding we will, most likely, seek such funding in the United States (although we may be able to obtain funding in the P.R.C.) and the market fluctuations affect on our stock price could limit our ability to obtain equity financing.
 
If we cannot obtain additional funding, we may be required to: (i) limit our expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete.
 
Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to the Units. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

Our product sales depend on our ability to predict, identify and interpret changes in consumer preferences and demand, and our ability to develop and offer new products rapidly enough to meet those changes.

Consumer preferences for food products change continually. Our success depends on our ability to predict, identify and interpret the tastes and dietary habits of consumers and to offer products that appeal to those preferences.

If we do not succeed in offering products that appeal to consumers, our sales and market share will decrease and our profitability could suffer. We must be able to distinguish among short-term fads, mid-term trends and long-term changes in consumer preferences. If we are unable to accurately predict which shifts in consumer preferences will be long-term, or if we fail to introduce new and improved products to satisfy those preferences, our sales could decline. In addition, because of our varied consumer base, we must offer a sufficient array of products to satisfy the broad spectrum of consumer preferences. If we fail to expand our product offerings successfully across product categories or if we do not rapidly develop products in faster growing and more profitable categories, demand for our products will decrease and our profitability could suffer.

Prolonged negative perceptions concerning the health implications of certain food products could influence consumer preferences and acceptance of some of our products and marketing programs. For example, recently, consumers have been increasingly focused on health and wellness, including weight management and sodium consumption. Although we strive to respond to consumer preferences and social expectations, we may not be successful in these efforts. Continued negative perceptions and failure to satisfy consumer preferences could decrease demand for our products and adversely affect our profitability.

 
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We may not be able to consummate proposed acquisitions or divestitures successfully or integrate acquired businesses successfully.
 
From time to time, we may evaluate acquisition candidates that would strategically fit our business objectives. If we are unable to complete acquisitions, or integrate successfully and develop these businesses to realize revenue growth and cost savings, including recently acquired Cadbury, our financial results could be adversely affected. In addition, from time to time, we divest businesses that do not meet our strategic objectives, or do not meet our growth or profitability targets. Our profitability may be affected by either gains or losses on the sales of, or lost operating income from, those businesses. Also, we may not be able to complete desired or proposed divestitures on terms favorable to us. Moreover, we may incur asset impairment charges related to acquisitions or divestitures which may reduce our profitability. Finally, our acquisition or divestiture activities may present financial, managerial and operational risks, including diversion of management attention from existing core businesses, difficulties integrating or separating personnel and financial and other systems, adverse effects on existing business relationships with suppliers and customers, inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported earnings, potential loss of customers or key employees of acquired businesses, and indemnities and potential disputes with the buyers or sellers. Any of these activities could affect our product sales, financial condition and results of operations.

Legal claims, product recalls or other regulatory enforcement actions could affect our sales, reputation and profitability.

As a large food company that operates in a highly regulated, highly competitive environment with growing retailer power and a constantly evolving legal and regulatory framework around the world, we are subject to heightened risk of legal claims or other regulatory enforcement actions. Legal claims or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could adversely affect our sales, reputation and profitability.

Further, selling products for human consumption involves inherent risks. We could be required to recall products due to product contamination, spoilage or other adulteration, product misbranding or product tampering.

We may also suffer losses if our products or operations violate applicable laws or regulations, or if our products cause injury, illness or death. In addition, our marketing could be the target of claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment or a related regulatory enforcement action against us, or a widespread product recall, may adversely affect our profitability. Moreover, even if a product liability or consumer fraud claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against our products or processes could adversely affect our sales, reputation and profitability.

We may be unable to hire or retain key personal.

The competition for qualified personal is intense and may take longer than expected to find the key personal required achieving our goals. Also, current key personal employed today can terminate their services at any time. None of our key personal has employment contracts. Failure to hire or retain key personal will restrict our growth plans.

Increased regulation could increase our costs and affect our profitability.

Food production and marketing are highly regulated by a variety of federal, state, local and foreign agencies. New regulations and changes to existing regulations are issued regularly. Increased governmental regulation of the food industry, such as proposed requirements designed to enhance food safety or to regulate imported ingredients, could increase our costs and adversely affect our profitability.

The loss of the services of our key employees, particularly the services rendered by Fred Farnden, our President and Chief Financial Officer and Henry Ender our Chief Executive Officer and Secretary, could harm our business.

Our success depends to a significant degree on the services rendered to us by our key employees.  If we fail to attract, train and retain sufficient numbers of these qualified people, our prospects, business, financial condition and results of operations will be materially and adversely affected. In particular, we are heavily dependent on the continued services of Fred Farnden, Our President and Chief Financial Officer and Henry Ender our Chief Executive Officer and Secretary. The loss of any key employees, including members of our senior management team, and our inability to attract highly skilled personnel with sufficient experience in our industry could harm our business.

 
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We will incur significant costs to ensure compliance with United States corporate governance and accounting requirements.
 
We will incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
 
We may not be able to meet the accelerated filing and internal control reporting requirements imposed by the Securities and Exchange Commission resulting in a possible decline in the price of our common stock and our inability to obtain future financing.

As directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release No. 33-8934 on June 26, 2008, the Securities and Exchange Commission adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports.    The internal control report must include a statement

●
Of management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;

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Of management’s assessment of the effectiveness of its internal control over financial reporting as of year end; and

●
Of the framework used by management to evaluate the effectiveness of our internal control over financial reporting.

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule.  In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the Securities and Exchange Commission, which could also adversely affect the market price of our securities and our ability to secure additional financing as needed.

Risks Relating to Our Securities
 
In order to raise sufficient funds to expand our operations, we may have to issue additional securities at prices which may result in substantial dilution to our shareholders.

If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of our securities outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our common stock. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations and financial condition.

 
11
 
 
We are not likely to pay cash dividends in the foreseeable future.
 
We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate. Should we determine to pay dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from our PRC operating subsidiary may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency and other regulatory restrictions.

Our common stock is quoted on the OTC bulletin board which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board.  The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ system.  The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

There is limited liquidity on the OTCBB.
 
When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one's orders for shares of our Common Stock being executed, and current prices may differ significantly from the price one was quoted at the time of one's order entry.

Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
 
Currently our Common Stock is quoted in the OTC Bulletin Board market and the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Bulletin Board stocks because they are considered speculative, volatile and thinly traded. The OTC Bulletin Board market is an inter-dealer market much less regulated than the major exchanges and our Common Stock is subject to abuses, volatility and shorting. Thus there is currently no broadly followed and established trading market for our Common Stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.
 
The trading volume of our Common Stock has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for our Common Stock on the OTC Bulletin Board may not necessarily be a reliable indicator of its fair market value.

Our common stock is subject to price volatility unrelated to our operations.

The market price of our Common Stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our Common Stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our Common Stock.

 

 
12
 

Our common stock may be classified as a “penny stock” as that term is generally defined in the securities exchange act of 1934 to mean equity securities with a price of less than $5.00. As such our common stock would be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

We may be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our Common Stock, which in all likelihood would make it difficult for our stockholders to sell their securities.
 
Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. This classification would severely and adversely affect any market liquidity for our Common Stock.
 
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased.  In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
 
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
 
●
The basis on which the broker or dealer made the suitability determination, and
●
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commission payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly traded. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our Common Stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their common stock.
 
Listing Our Stock on Markets Other than the OTCBB could be costly for us
 
Our common stock is currently quoted and trades on the OTCBB in the United States. The OTCBB is operated by Financial Industry Regulatory Authority, Inc. (“FINRA”). In the future, we may file an application to be quoted on the NASDAQ Stock Exchange or another national securities exchange (collectively, an “Exchange”). Unlike the OTCBB, every Exchange has corporate governance and other public interest standards, which we will have to meet. Such standards and regulations may restrict our capital raising or other activities by requiring stockholder approval for certain issuances of stock, for certain acquisitions, and for the adoption of stock option or stock purchase plans.
 
The Exchange will require that a majority of the members of our Board of Directors be independent directors as defined by the Exchange. The independent directors must have regularly scheduled meetings at which only independent directors are present. Compensation of our chief executive officer must be determined, or recommended to the Board of Directors for determination, either by (i) a majority of the independent directors, or (ii) a compensation committee comprised solely of independent directors, and the chief executive officer cannot be present during voting or deliberations. Compensation of our other executive officers must be determined, or recommended to the Board of Directors either by (i) a majority of the independent directors, or (ii) a compensation committee comprised solely of independent directors. Director nominees must either be selected, or recommended for selection by the Board of Directors either by (i) a majority of the independent directors, or (ii) a nominations committee comprised solely of independent directors. The nominations process must be set forth in a formal written charter or a Board of Directors’ resolution.
 

 
13
 
 
In addition, the audit committee will have to be composed of at least three (3) members, all of whom are independent as defined by the Exchange and under SEC Rule 10A-3(c), and who have not participated in the preparation of the financial statements of us or any subsidiary of us during the past three (3) years. One member of the audit committee must have specified employment experience in finance or accounting. Accordingly, we would have to appoint three independent directors to serve on our audit committee and one of those audit committees members would need the required experience in finance and accounting.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the Selected Consolidated Financial Data, our financial statements, and the notes to those financial statements that are included elsewhere in this 8-K. References in this section to “we,” “us,” “our,” or the “Company” are to the consolidated business of Foodfest International 2000 Inc.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this 8-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

COMPANY OVERVIEW

We are a distributor of Kosher, organic and natural food products. We operate a 52,000 square foot distribution center from our headquarters in Toronto Canada and services customers from coast to coast. We carry a variety of more than 2,000 Kosher, organic and natural food products in frozen, grocery and refrigerated. We service more than 3,000 customers coast to coast in Canada and the United States. We focus on retail chains but we also service independent retailers, natural and organic retailers, Foodservice customers as well as distributing through regional distributors.

Our focus has traditionally been on kosher products in the Kosher markets. Today the focus is taking kosher mainstream. Customers of all ethnic backgrounds view Kosher as symbolizing products of higher quality produced under strict guidelines. We have have a singular goal – provide the consuming public with more superior quality for less. Foodfest, the name, has become synonymous with reliability, service, flexibility, quality and innovation for over 25 years and we will continue to maintain this goal.

RESULTS OF OPERATIONS

Year ended June 30, 2010 compared to year ended June 30, 2009

We had revenues of $12,970,385 for the year ended June 30, 2010 compared to $9,424,872 for the year ended June 30, 2009 representing an increase of 37.6%. This significant increase was a direct result of our expanding business with the retail chains, increasing product lines and greater emphasis on the U.S. market.

Of equal or greater significance to our sales growth is its dedication to continue to improve our gross margin. For the year ending June 30, 2010, the ourgross margin was 19.4%, an increase of 1.6% compared to the year ended June 30, 2009 of 17.8%. We continually endeavors to reduce product costs to maximize its gross margin. The main contributing factors to this increase was the strengthening Canadian dollar and reduced product costs.

Operating expenses for the year ended June 30, 2010 were $2,451,554, an increase of $159,872 compared to the year ended June 30, 2009. The main contributing factors for this increase was additional administrative and warehousing staff, travel and advertising costs.
 
Net income for the year ended June 30, 2010 was $78,832, an increase of $174,029 compared to the year ended June 30, 2009. The increase in net income is a direct result of increased sales and an improved gross margin.
 
 
14
 

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

Sales were $3,697,883 for the three months ended September 30, 2010; an increase of $632,621 compared to the three months ended September 30, 2009. This significant increase was a direct result of our expanding business with the retail chains, increasing product lines and greater emphasis on the U.S. market.

Gross margin for the three months ended September 30, 2010 show a further increase to 21% compared to the three months ended September 30, 2009 of 15.1%. We continually endeavor to reduce product costs to maximize its gross margin. The Canadian dollar has continued to improve and decreased product costs from our suppliers in the second half of 2010 both contributed to our increase in gross margin for the three months ended September 30, 2010.

Operating expenses for the three months ended September 30, 2010 were $673,799, an increase of $139,409 compared to the three months ended September 30, 2009. The major contributing factors to this increase was the salary increases and new staff hired in the second half of 2010.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2010, our working capital was $631,328, an increase of $573,926 compared to June 30, 2009. The increase was a result of our rapid growth resulting in an increase in receivables of $683,400 and inventory of $86,278.  As of September 30, 2010, our working capital decreased to $447,507, which was mainly because we have been delaying payment of our accounts receivable until our receivables are collected or we obtain additional financing.

During the year ended June 30, 2010, we purchased a new cooler for our distribution center to enable us to store additional refrigerated products in order to expand our refrigerated business. The cost of the new cooler was approximately $160,000.
 
Traditionally we have funded our working capital requirements through bank loans and credit facilities, shareholder advances and related party loans. Throughout the last year we have experienced rapid growth and it has become increasingly more difficult to finance increasing receivables and inventories through these traditional means of financing. In order to finance our increasing receivables and inventories, we will be offering company stock to the general public once we become a public reporting entity.

We have no plans to incur any capital expenditures in the near future and no additional staff is anticipated until such time as future sales warrant it.
OFF-BALANCE SHEET ARRANGEMENTS
 
There were no off-balance sheet arrangements during the year ended December 31, 2009 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests

 
 
15
 
 

DESCRIPTION OF SECURITIES

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share. There are currently 3,950,809 shares of common stock issued and outstanding held by at least 26 shareholders and 1 share of preferred stock is issued and outstanding.

(a) Common Stock . Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at times and in amounts as our board of directors may determine. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders. Cumulative voting is not provided for in our amended articles of incorporation, which means that the majority of the shares voted can elect all of the directors then standing for election. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of shares of common stock are entitled to share ratably in all assets remaining after payment of liabilities and satisfaction of preferential rights of any outstanding preferred stock. There are no sinking fund provisions applicable to the common stock. The outstanding shares of common stock are, and the shares of common stock to be issued upon exercise of the Exchange Shares   will be, fully paid and non-assessable.

(b) Preferred Stock . The Board of Directors is empowered to designate and issue from time to time one or more classes or series of preferred stock and to fix and determine the relative rights, preferences, designations, qualifications, privileges, options, conversion rights, limitations and other special or relative rights of each such class or series so authorized. Such action could adversely affect the voting power and other rights of the holders of the Company’s capital shares or could have the effect of discouraging or making difficult any attempt by a person or group to obtain control of the Company.

On October 22, 2010, the Board of Directors designated and issued 1 share of Preferred Stock as a Super Voting Share in accordance with the Trust Agreement and the terms of the filed designation. A copy of the Certificate of Designation is included as exhibit 2.5

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted for trading on the OTCBB under symbol “FDFT.”  There has been minimal trading to date.

Holders

As of the date hereof, 3,950,809 shares of common stock are issued and outstanding.  There are approximately 26 shareholders of our common stock. Further, there are 48,400,000 shares of common stock reserved for issuance to owners of the Exchange Shares.

Dividend Policy

We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.

Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.    

In the event that any dividends are declared and/or paid while any Exchange Shares are issued and outstanding, we must pay an equal dividend per Exchange Share calculated on a share for share basis with the total number of issued and outstanding common shares in the stock of Foodfest USA as of the date the dividend is declared, all in accordance with the terms of the Support Agreement and the provisions of the Exchange Shares.

LEGAL PROCEEDINGS

Currently there are no legal proceedings pending or threatened against us. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 
16
 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act.

Our certificate of incorporation provides that we shall indemnify our directors to the full extent permitted by the provisions of Section 102(b)(7) and Section 145 of the Delaware General Corporation Law (the “DGCL”) as the same may be amended and supplemented. Section 102(b)(7) of the DGCL, relating to indemnification is hereby incorporated herein by reference. Notwithstanding the above, our certificate of incorporation provides that a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to us; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.

At present, there is no pending litigation or proceeding involving any of our director, officer or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.
  
Item 3.02 Unregistered Sales of Equity Securities.
 
Pursuant to the Exchange Agreement and the Support Agreement, on December 20, 2010, we reserved 48,400,000 shares of common stock for issuance to individuals and entities as designated by the owners of the Exchange Shares in exchange for 100% of the outstanding shares of CanCo. Such securities were not registered under the Securities Act.  These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On December 20, 2010, the Board of Directors of the Company approved by unanimous written consent the change of the Company’s fiscal year end from October 31 to June 30.

Item 9.01 Financial Statement and Exhibits
 
(a)  Financial Statements of Business Acquired.

 
17
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
30 JUNE 2010
 
CONTENTS

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
FINANCIAL STATEMENTS
 
Balance Sheets
 
Statements of Operations
 
Statements of Stockholders' Deficit
 
Statements of Cash Flows
 
Notes to Financial Statements
 

 
18
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Foodfest International 2000 Inc.
 
We have audited the accompanying balance sheets of Foodfest International 2000 Inc. as of 30 June 2010 and 2009 and the related statements of operations, stockholders' deficit and cash flows for each of the years in the two-year period ended 30 June 2010.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, based on our audits, these financial statements present fairly, in all material respects, the financial position of Foodfest International 2000 Inc. as of 30 June 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two-year period ended 30 June 2010, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ DNTW Chartered Accountants, LLP
Licensed Public Accountants
 
Markham, Canada
31 October 2010

 
 
19
 


 
FOODFEST INTERNATIONAL 2000 INC.
 
BALANCE SHEETS
 
AS OF 30 JUNE
 
(Expressed in United States Dollars)

   
2010
2009
 
ASSETS
Current Assets
           
Accounts receivable, less allowance of $151,601 (2009 - $138,770)
  $ 1,606,855     $ 923,455  
Inventory
    1,418,891       1,332,613  
Prepaid expenses
    93,185       4,914  
Income taxes recoverable
    205       -  
Advances to related party
    350,184       262,862  
Total Current Assets
    3,469,320       2,523,844  
Long Term Assets
               
Property and equipment, net
    331,400       175,164  
Deferred income taxes
    39,484       27,275  
Total Long Term Assets
    370,884       202,439  
Total Assets
  $ 3,840,204     $ 2,726,283  
 
The accompanying notes are an integral part of these financial statements.

 
20
 

 
FOODFEST INTERNATIONAL 2000 INC.
 
BALANCE SHEETS
 
AS OF 30 JUNE
 
(Expressed in United States Dollars)

   
2010
2009
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
           
Bank indebtedness
  $ 1,060,398     $ 761,262  
Accounts payable and accrued liabilities
    1,621,735       1,539,520  
Income taxes payable
    -       6,087  
Loan payable
    31,001       61,000  
Long term debt - current portion
    61,008       76,608  
Obligations under capital lease - current portion
    63,850       21,965  
Total Current Liabilities
    2,837,992       2,466,442  
Long Term Liabilities
               
Long term debt
    45,533       97,523  
Obligations under capital lease
    83,021       35,915  
Advances from related parties
    1,621,955       919,334  
Advances from shareholders
    83,238       76,193  
Total Long Term Liabilities
    1,833,747       1,128,965  
Commitments
               
 
Stockholders' Deficit
Preferred stock - no par value, non-cumulative, non-voting, redeemable at amount paid thereon, unlimited shares authorized, none issued and outstanding
 (2009 - none issued and outstanding)
    -       -  
Common stock - no par value, unlimited shares authorized, 667 issued and outstanding
(2009 - 667 issued and outstanding)
    30,804       30,804  
Accumulated other comprehensive loss
    (214,341 )     (173,098 )
Accumulated deficit
    (647,998 )     (726,830 )
Total Stockholders' Deficit
    (831,535 )     (869,124 )
Total Liabilities and Stockholders' Deficit
  $ 3,840,204     $ 2,726,283  
 
The accompanying notes are an integral part of these financial statements.

 
21
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
STATEMENTS OF OPERATIONS
 
FOR THE YEARS ENDED 30 JUNE
 
(Expressed in United States Dollars)

   
2010
   
2009
 
SALES
  $ 12,970,385     $ 9,424,872  
COST OF GOODS SOLD
    10,449,687       7,750,249  
GROSS PROFIT
    2,520,698       1,674,623  
EXPENSES
               
Salaries and wages
    803,035       568,649  
Vehicle and travel
    472,181       318,481  
Rent and occupancy costs
    185,110       222,991  
Advertising and promotion
    164,191       116,884  
Interest and bank charges
    153,504       167,637  
Professional fees
    131,775       43,541  
Office and general
    101,496       73,703  
Utilities
    82,883       74,320  
Telecommunications
    78,807       53,171  
Management fees
    70,085       180,638  
Repairs and maintenance
    68,844       41,209  
Insurance
    59,374       39,954  
Meals and entertainment
    52,180       43,183  
Bad debts
    23,036       138,447  
(Gain) loss on foreign exchange
    (63,163 )     56,729  
Depreciation
    68,216       152,145  
TOTAL EXPENSES
    2,451,554       2,291,682  
EARNINGS (LOSS) FROM OPERATIONS
    69,144       (617,059 )
Gain on settlement of advance to related party
    -       527,764  
EARNINGS (LOSS) BEFORE TAXES
    69,144       (89,295 )
Current income taxes
    -       6,072  
Deferred income taxes (recovery)
    (9,688 )     (170 )
NET EARNINGS (LOSS)
    78,832       (95,197 )
OTHER COMPREHENSIVE INCOME (LOSS)
               
Foreign currency translation
    (81,338 )     97,515  
Unrealized gain (loss) on foreign exchange
    40,095       (77,147 )
COMPREHENSIVE INCOME (LOSS)
  $ 37,589     $ (269,859 )
EARNINGS (LOSS) PER WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    118       (143 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    667       667  

The accompanying notes are an integral part of these financial statements.

 
22
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
STATEMENTS OF STOCKHOLDERS' DEFICIT
 
FOR THE YEARS ENDED 30 JUNE
 
(Expressed in United States Dollars)

   
Shares
   
Capital Stock
   
Accumulated Other Comprehensive Loss
   
Accumulated Deficit
   
Total Stockholders' Deficit
 
Balance, 30 June 2008
    667     $ 30,804     $ (193,466 )   $ (631,633 )   $ (794,295 )
Net loss
    -       -       -       (95,197 )     (95,197 )
Foreign currency translation
    -       -       97,515       -       97,515  
Unrealized loss on foreign exchange
    -       -       (77,147 )     -       (77,147 )
Balance, 30 June 2009
    667       30,804       (173,098 )     (726,830 )     (869,124 )
Net earnings
    -       -       -       78,832       78,832  
Foreign currency translation
    -       -       (81,338 )     -       (81,338 )
Unrealized gain on foreign exchange
    -       -       40,095       -       40,095  
Balance, 30 June 2010
    667     $ 30,804     $ (214,341 )   $ (647,998 )   $ (831,535 )

The accompanying notes are an integral part of these financial statements.

 
23
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
STATEMENTS OF CASH FLOWS
 
FOR THE YEARS ENDED 30 JUNE
 
(Expressed in United States Dollars)

   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net earnings (loss)
  $ 78,832     $ (95,197 )
Items not requiring an outlay of cash:
               
Depreciation
    68,216       152,145  
Gain on forgiveness of advance from related party
    -       (527,764 )
Changes in non-cash working capital:
               
Accounts receivable
    (602,981 )     (50,182 )
Inventory
    37,247       (222,943 )
Prepaid expenses
    (88,546 )     (1,881 )
Accounts payable and accrued liabilities
    (42,260 )     591,313  
Income taxes payable and deferred income taxes
    (16,679 )     (11,148 )
CASH USED IN OPERATING ACTIVITIES
    (566,171 )     (165,657 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from bank indebtedness
    230,646       225,354  
Repayment of loan payable
    (28,413 )     -  
Repayment of long term debt
    (84,387 )     (74,093 )
Advances from (to) related party
    583,402       (13,761 )
Obligations under capital lease
    85,803       57,880  
CASH PROVIDED BY FINANCING ACTIVITIES
    787,051       195,380  
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisition of property and equipment
    (213,069 )     (29,723 )
CASH USED IN INVESTING ACTIVITIES
    (213,069 )     (29,723 )
FOREIGN CURRENCY TRANSLATION
    (7,811 )     -  
NET CHANGE IN CASH
    -       -  
CASH, BEGINNING OF YEAR
    -       -  
CASH, END OF YEAR
  $ -     $ -  

SUPPLEMENTAL CASH FLOW INFORMATION
           
  INTEREST PAID
  $ 153,504     $ 167,637  
  INCOME TAXES PAID
  $ 18,062     $ 6,072  

The accompanying notes are an integral part of these financial statements.

 
24
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
NOTES TO THE FINANCIAL STATEMENTS
 
FOR THE YEARS ENDED 30 JUNE 2010 AND 2009
 
(Expressed in United States Dollars)

 
1.
NATURE OF OPERATIONS
 
Foodfest International 2000 Inc. (the "Company" or "Foodfest") has been operating since 25 June 1987 when it was first incorporated under the laws of the Province of Ontario as The Seafood Warehouse Inc. On 7 April 1999, the Company changed its name to Foodfest International 2000 Inc.
 
The Company imports, markets, and distributes kosher, vegetarian, and organic food products to grocery stores in Canada and the United States.
 
2.
SIGNIFICANT ACCOUNTING POLICIES
 
The following is a summary of significant accounting policies followed in the preparation of these financial statements.
 
Revenue Recognition
 
Revenue is recognized once products are delivered to the customer and the transfer of ownership risks and benefits inherent to the property occurs. Revenue is recognized if persuasive evidence of an agreement exists, the sales price is fixed or determinable, and collectability is reasonably assured.
 
Inventory
 
Inventory is comprised of finished goods that the Company intends to resell to its customers. It is valued at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis. Import cost components include customs duties and charges for freight and handling.
 
Trade receivables
 
The Company's accounts receivable and related allowance for doubtful accounts are analyzed in detail on a quarterly basis and all significant customers with delinquent balances are reviewed to determine future collectability. Reserves are established in the quarter in which the Company makes the determination that the account is deemed uncollectible. As at 30 June 2010 and 2009, the allowance for doubtful accounts was assessed as $151,601 and $138,770, respectively.
 
Cost of Products Sold
 
Included in cost of sales are cost of purchases (FOB cost) and cost associated with the import of the products. Import cost components are customs entry fees levied by the country of import and the freight and handling cost to unload containers.
 
 
25
 
 
Income Taxes
 
The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") No. 740 Income Taxes which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates.  The effects of future changes in tax laws or rates are not anticipated.
 
Under ASC No. 740 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.
 
Co-operative Advertising Allowances
 
The Company is granted advertising allowances from its suppliers in exchange for promoting the supplier's products. In accordance with ASC No. 605-50 Revenue Recognition for Customer Payments and Incentives , the consideration received from these suppliers is accounted for as a reduction of the costs of promoting the vendor's products.
 
Use of Estimates
 
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from these estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. For fiscal 2010, the allowance for doubtful accounts of $151,601 (2009 - $138,770) and allowance for inventory impairment of $16,767 (2009 - $Nil) are significant estimates inherent in the financial statements.
 
Earnings or Loss Per Share
 
The Company accounts for earnings per share pursuant to ASC No. 260 Earnings Per Share , which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. There were no dilutive financial instruments for the years ended 30 June 2010 and 2009.

 
26
 
 
Foreign Currency Translation
 
The Company's accounts have been translated into U.S. dollars in accordance with the provisions of ASC No. 830 Foreign Currency Matters . Management has determined that the functional currency of the Company is the Canadian dollar. Certain assets of the Company are denominated in U.S. dollars. In accordance with the provisions of ASC No. 830, transaction gains and losses on these assets and liabilities are included in the determination of income for the relevant years. Adjustments resulting from the translation of the financial statements from their functional currencies to U.S. dollars are accumulated as a separate component of accumulated other comprehensive income and have not been included in the determination of income for the relevant years.
 
Available-for-Sale Securities
 
Available-for-sale securities are reported at fair value and consist of securities not classified as held-for-trading securities or held-to-maturity securities. Unrealized holding gains and losses on available-for-sale securities, net of deferred income taxes, are reported as a net amount in accumulated other comprehensive income (loss) within stockholder's equity. Gains and losses on the sale of available-for-sale securities are determined based on the weighted average cost.
 
Declines in the fair-value of individual held-to-maturity and available-for-sale securities below their cost that are other than temporary would result in write-downs of the individual securities to their fair value. Such write-downs would be included in earnings.
 
Comprehensive Income
 
The Company adopted ASC No. 220 Comprehensive Income that establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income is presented in the statements of changes in stockholders' equity, and consists of foreign currency translation adjustments and unrealized losses on available-for-sale securities. ASC No. 220 requires only additional disclosures in the financial statements and does not affect the Company's financial position or results of operations.
 
Leases
 
The Company leases property and equipment in the ordinary course of business. Significant lease obligations relate to vehicles, equipment, and premises. These leases have varying terms and may or may not include purchase or buyout options and guaranteed residuals. The terms of these leases are considered when determining whether a lease is classified as operating or capital.
 
Assets under capital lease are capitalized using interest rates appropriate at the inception of each lease and are amortized over their estimated useful lives, using the same method as similar assets that the Company owns. The present value of the lease payments is recorded as a debt obligation.

 
27
 
 
Other leases are classified as operating when lease terms are significantly shorter than the assets' economic useful lives, or minimum lease payments are significantly lower than the purchase cost of the asset. Management expects that in the normal course of business, these leases will be renewed, replaced with new leases, or replaced with fixed asset expenditures. Minimum lease payments for the next five years are disclosed in note 15.
 
Property and Equipment
 
Property and equipment are recorded at historical cost less accumulated depreciation. Depreciation, based on the estimated useful lives of the assets, is provided using the under noted annual rates and methods:
 
Equipment                                                                                   20% declining balance
Furniture and fixtures                                                                20% declining balance
Vehicles                                                                                       30% declining balance
Computer hardware                                                                   30% declining balance
Leasehold improvements                                                          5 years straight line
 
Valuation of Long-Lived Assets
 
In accordance with ASC No. 360 Property, Plant, and Equipment , long-lived assets to be held and used are analyzed for impairment whenever events or changes incircumstances indicated that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of the asset less costs to sell. Management has assessed that there is no impairment of long-lived assets as of 30 June 2010 and 2009.
 
Recent Accounting Pronouncements
 
In March 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-11, Derivative and Hedging (Topic 815) . All entities that enter into contracts containing an embedded credit derivative feature related to the transfer of credit risk that is not only in the form of subordination of one financial instrument to another will be affected by the amendments in this Update because the amendments clarify that the embedded credit derivative scope exception in paragraph 815-15-15-8 through 15-9 does not apply to such contracts. ASU 2010-11 is effective at the beginning of the reporting entity's first fiscal quarter beginning after June 15, 2010. The adoption of this update did not have any material impact on the Company's financial statements.

 
28
 
 
In April 2010, the FASB issued ASU 2010-13, Compensation - Stock Compensation (Topic 718) . This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The adoption of this update did not have any material impact on the Company's financial statements.
 
In April 2010, the FASB issued ASU 2010-17 Revenue Recognition: Milestone Method . This update provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010, with early adoption permitted. The adoption of this update did not have any material impact on the Company's financial statements.
 
In July 2010, the FASB issued ASU 2010-20 relating to the disclosure of the credit quality of financing receivables and the allowance for credit losses. The objective of the amendments in this Update is for an entity to provide disclosures that facilitate financial statement users' evaluation of the following: 1. The nature of credit risk inherent in the entity's portfolio of financing receivables. 2. How that risk is analyzed and assessed in arriving at the allowance for credit losses. 3. The changes and reasons for those changes in the allowance for credit losses. To achieve this objective, an entity should provide disclosures on a disaggregated basis, which requires a portfolio segment defining the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and classes of financing receivables which are disaggregations of portfolio segments. the disclosures  are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in this Update encourage, but do not require, comparative disclosures for earlier periods that ended before initial adoption.
 
3.
PROPERTY AND EQUIPMENT
 

   
Cost
   
Depreciation
   
Net
2010
   
Net
2009
 
                         
Equipment
    513,397       307,113       206,284       62,772  
Furniture and fixtures
    245,430       158,701       86,729       89,289  
Vehicles
    17,345       14,813       2,532       3,311  
Computer hardware
    61,646       46,135       15,511       12,300  
Leasehold improvements
    734,021       713,677       20,344       7,492  
    $ 1,571,839     $ 1,240,439     $ 331,400     $ 175,164  

 
29
 
 
 
4. ADVANCES TO RELATED PARTY
 
The following advances were made to companies controlled by the Company's shareholders. These advances are unsecured, non-interest bearing and are repayable on demand. Their balances are as follows:

   
2010
   
2009
 
             
Foodfest International 2000 (Nevada) Inc.
  $ 153,087     $ -  
Strubs Food Corp.
    197,097       262,862  
    $ 350,184     $ 262,862  
 
 
5. BANK INDEBTEDNESS
 
The Company has available a $939,300 revolving operating line which bears interest at the Royal Bank of Canada prime rate plus 2.75% and is repayable on demand. This revolving loan is secured under a general security agreement covering all of the Company's assets and also secured by limited personal guarantees from the shareholders of the Company.
 
 
6. INCOME TAXES
 
Reconciliation of the effective combined federal and provincial statutory rate of 16.5% (2009 - 16.5%) to current income tax expense:
 
   
2010
   
2009
 
             
Income taxes on accounting income
  $ 11,409     $ (14,734 )
Tax effect of adjustments for presentation under US GAAP
    -       15,943  
Tax effect of expenses that are not deductible for income tax purposes
    4,305       3,563  
Tax effect of differences in the timing of deductibility of items for income tax purposes
    (13,182 )     1,300  
Income taxes
  $ 2,532     $ 6,072  
 
The components of deferred income taxes have been determined at the combined Canadian federal and provincial statutory rate of 16.5% (2009 - 16.5%) and are as follows:

 
30
 
 
   
2010
   
2009
 
             
Deferred income tax assets:
           
Property and equipment
    5,028       16,083  
Unrealized loss on available-for-sale securities
    4,619       4,228  
Other temporary income tax differences
    7,064       6,964  
Deferred income taxes
  $ 16,711     $ 27,275  
 
7. LOAN PAYABLE
 
On 30 June 2010 and 2009, the Company had advances from a private company totalling $31,001 and $61,000, respectively. These advances are unsecured, non-interest bearing and are due on demand.
 
 
8. ADVANCES FROM RELATED PARTIES
 
Each of the below loans bear interest at the Royal Bank of Canada prime rate plus 1.5% and are repayable in monthly instalments of interest only. These loans have been postponed in favour of the Royal Bank of Canada in respect of the Company's line of credit. Other than Triloon Corp. which was received this year, changes in the balances from year-to-year are due to changes in foreign exchange rates.
 

   
2010
   
2009
 
             
Coastal Water Seafoods Ltd. - a company controlled by one of the Company's shareholders
  $ 235,603     $ 208,856  
Canadian Triloon Corporation - a company controlled by the spouse of one of the Company's shareholders
    279,396       264,748  
Yael Ender - the spouse of one of the Company's shareholders
    482,684       445,730  
Triloon Corp. - a company controlled by shareholders of the Company
    624,272       -  
    $ 1,621,955     $ 919,334  
 
 

 
31
 

9. LONG-TERM DEBT

   
2010
   
2009
 
             
Loan payable to Business Development Bank of Canada ("BDC") secured by a general security agreement and limited guarantees from the shareholders of the Company and Coastal Water Seafood Ltd. (the related party described in note 8). It bears interest at a daily floating bank prime plus 1.5%, repayable monthly by principal payments of $2,150 plus interest maturing on February 23, 2013.
  $ 64,625     $ 81,337  
Loan payable to BDC secured by a general security agreement and limited guarantees from the shareholders of the Company and Coastal Water Seafood Ltd. It bears interest at a daily floating bank prime plus 4.0%, repayable monthly by principal payments of $3,450 plus interest maturing on November 23, 2010.
    16,203       50,427  
Loan payable to BDC secured by a general security agreement and limited guarantees from the shareholders of the Company and Coastal Water Seafood Ltd. It bears interest at a daily floating bank prime plus 4.0%, repayable monthly by principal payments of $1,825 plus interest maturing on September 23, 2011.
    25,713       42,367  
      106,541       174,131  
Less: current portion
    61,008       76,608  
    $ 45,533     $ 97,523  
 
The Company's future commitments under this long-term debt are summarized as follows:

   
2011
$                       61,008
 
   
2012
                     29,377
 
   
2013
                     16,156
 
     
$                     106,541
 
 
 
10. OBLIGATIONS UNDER CAPITAL LEASE
 
On 1 May 2009 the Company entered into direct financing leases with Equilease Corporation and Blue Chip Leasing Corporation for computer equipment. Under the lease agreements, the Company is obligated to make monthly payments of $2,054 for a term of 36 months. Implicit interest is calculated at the Company's incremental borrowing rate of 5%. The financing has been secured by the leased computer equipment.

 
32
 
 
On 7 January 2010 the Company entered into a direct financing lease with Gould Leasing Ltd. for freezer equipment. Under the lease agreement, the Company is obligated to make monthly payments of $3,376 for a term of 39 months. Implicit interest calculated for the lease is 9%. The financing has been secured by the leased freezer equipment.
 
The Company's future commitments under these capital leases are summarized as follows:

   
2011
  $ 76,086    
   
2012
    69,863    
   
2013
    34,130    
          180,079    
   
Less: imputed interest
    (33,208 )  
          146,871    
   
Less: current portion
    (63,850 )  
        $ 83,021    
 
 
11. ADVANCES FROM SHAREHOLDERS
 
On 30 June 2010 and 2009, the Company had advances from its shareholders totalling $83,238 and $76,193, respectively. These advances are unsecured, non-interest bearing, and have been postponed in favour of the Royal Bank of Canada in respect of the Company's line of credit. Changes in the balances from year-to-year are due to changes in foreign exchange rates.
 
 
12. COMMITMENTS
 
The Company's future commitments under various lease agreements including vehicles, equipment, and premises are summarized as follows:
 
 
2011
$                     535,126
 
 
2012
                       515,249
 
 
2013
                       471,687
 
 
2014
                       462,365
 
 
2015
                       485,276
 
 
Thereafter
                    2,499,184
 
   
$                   4,968,887
 
 
 
13. RELATED PARTY TRANSACTIONS
 
The following transactions with related parties were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the parties.

 
33
 
 
During the year, the Company paid expenses of approximately $Nil (2009 - $75,004) on behalf of Coastal Water Seafoods Ltd. (the related party described in note 8). As of 30 June 2010 accounts payable were due to Coastal Water Seafoods Ltd. in the amount of $140,573 (2009 - $126,414) and are subject to normal trade terms.
 
The Company transacted with Foodfest International 2000 (Nevada) Inc. (the related party described in note 4) as follows:
 
 ●   
brokerage and other fees paid $153,087 (2009 - $180,157)
●  
management fees and expense recovery $Nil (2009 - $175,150)
 
The Company paid management fees of $71,033 (2009 - $85,780) to Henderson Holdings Investment Corp. (a company controlled by one of Foodfest's shareholders).
 
Interest payments totalling $42,813 (2009 - $126,111) were made to related parties throughout the year on the advances described in note 8.
 
Rental payments totalling $298,139 (2009 - $341,012) were made during the year to Triloon Corp. (the related party described in note 8).
 
Rental payments totalling $11,365 (2009 - $18,014) were received during the year and purchases totalling $1,368,087 (2009 - $1,120,858) were made during the year from Strubs Food Corp (the related party described in note 4).
 
 
14. FINANCIAL INSTRUMENTS
 
Fair Values
 
The Company's financial instruments include available-for-sale securities, accounts receivable and payable, bank indebtedness, income taxes payable, loan payable, obligations under capital lease, long-term debt, advances to and from related parties, and advances from shareholders.
 
The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgement is required to estimate fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. At 30 June 2010 and 2009, the carrying amounts of the above financial instruments approximate their fair values due to the short term maturities of these instruments.
 
Credit Risk Management
 
The Company is exposed to credit risk on the accounts receivable from its customers. In order to reduce its credit risk, the Company has adopted credit policies which include the analysis of the financial position of its customers and the regular review of their credit terms. During fiscal 2010, the Company's three largest customers made up 66% of total revenues and 49% of total receivables (2009 - 66% of total revenues and 56% of total receivables).

 
34
 
 
Foreign Currency Risk
 
Foreign currency risk arises from fluctuations in foreign exchange rates and the degree of volatility of these rates relative to the Canadian dollar, the Company's functional currency. Consequently, some assets, liabilities, revenues and purchases are exposed to foreign exchange fluctuations.  The Company does not use derivative instruments to hedge its foreign exchange risk.  However, the Company actively monitors changes in foreign exchange rates to determine if a derivative instrument may be appropriate to hedge its foreign currency risk.
 
 
Interest Rate Risk
 
Interest rate risk is the risk that fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk arising from fluctuations in interest rates on its bank indebtedness, advances from shareholders and related parties, and long term debt.
 
 
15. SUBSEQUENT EVENTS
 
Events that have occurred subsequent to 30 June 2010 have been evaluated through the date of this audit report. There have been no subsequent events that occurred during such period that would require disclosure in these financial statements or would be required to be recognized in the financial statements as of or for the year ended 30 June 2010.
 
FOODFEST INTERNATIONAL 2000 INC.
 
FINANCIAL STATEMENTS
Unaudited
30 September 2010
 

 
35
 
 
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
BALANCE SHEETS
 
AS AT 30 SEPTEMBER 2010 AND 30 JUNE 2010
 
(Expressed in United States Dollars)

 
   
30 September
2010
(Unaudited)
30 June
 2010
(Audited)
 
ASSETS
Current Assets
           
Accounts receivable, less allowance of $156,846 (30 June 2010 - $150,745)
  $ 1,904,134     $ 1,606,855  
Inventory
    2,128,433       1,418,891  
Prepaid and sundry assets
    5,554       93,185  
Taxes recoverable
    -       205  
Advances to related parties
    160,849       350,184  
Total Current Assets
    4,198,970       3,469,320  
Long Term Assets
               
Property and equipment, net
    371,773       331,400  
Deferred income taxes
    40,851       39,484  
Total Long Term Assets
    412,624       370,884  
Total Assets
  $ 4,611,594     $ 3,840,204  

The accompanying notes are an integral part of these financial statements.

 
36
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
BALANCE SHEETS
 
AS AT 30 SEPTEMBER 2010 AND 30 JUNE 2010
 
(Expressed in United States Dollars)
 

   
30 September
2010
(Unaudited)
30 June
2010
(Audited)
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
           
Bank indebtedness
  $ 1,161,797     $ 1,060,398  
Accounts payable and accrued liabilities
    2,430,601       1,621,735  
Income taxes payable
    13,500       -  
Loan payable
    13,000       31,001  
Long term debt - current portion
    70,127       61,008  
Obligations under capital lease - current portion
    62,438       63,850  
Total Current Liabilities
    3,751,463       2,837,992  
Long Term Liabilities
               
Long term debt
    115,633       45,533  
Obligations under capital lease
    66,506       83,021  
Advances from shareholders
    86,118       83,238  
Advances from related parties
    1,357,802       1,621,955  
Total Long Term Liabilities
    1,626,059       1,833,747  
                 
Commitments
               
                 
Stockholders' Deficit
               
Preferred stock - no par value, non-cumulative, non-voting, redeemable at amount paid thereon, unlimited shares authorized, none issued and outstanding
(2009 - none issued and outstanding)
    -       -  
Common stock - no par value, unlimited shares authorized, 667 issued and outstanding
(2009 - 667 issued and outstanding)
    30,804       30,804  
Accumulated other comprehensive loss
    (222,971 )     (214,341 )
Acumulated deficit
    (573,761 )     (647,998 )
Total Stockholders' Deficit
    (765,928 )     (831,535 )
Total Liabilities and Stockholders' Deficit
  $ 4,611,594     $ 3,840,204  

The accompanying notes are an integral part of these financial statements.

 
37
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
STATEMENT OF EARNINGS
Unaudited
 
FOR THE THREE MONTHS ENDED 30 SEPTEMBER
 
(Expressed in United States Dollars)

   
2010
   
2009
 
SALES
  $ 3,697,883     $ 3,065,262  
COST OF GOODS SOLD
    2,916,273       2,602,915  
GROSS PROFIT
    781,610       462,347  
EXPENSES
               
Salaries and wages
    229,621       173,610  
Travel
    121,798       102,715  
Management fees
    82,812       71,670  
Rent and occupancy costs
    75,362       6,147  
Interest and bank charges
    52,361       28,867  
Office and general
    40,691       28,518  
Advertising and promotion
    27,696       57,735  
Utilities
    25,585       16,969  
Insurance
    21,315       17,813  
Telecommunications
    17,208       16,370  
Meals and entertainment
    11,394       11,672  
Repairs and maintenance
    8,066       12,807  
Professional fees
    6,165       55,679  
Gain on foreign exchange
    (49,447 )     (62,765 )
Depreciation
    23,172       16,583  
TOTAL EXPENSES
    693,799       554,390  
EARNINGS (LOSS) BEFORE TAXES
    87,811       (92,043 )
Current income tax expense
    13,574       -  
NET EARNINGS (LOSS)
  $ 74,237     $ (92,043 )
OTHER COMPREHENSIVE LOSS
               
Foreign currency translation
    (27,678 )     (76,375 )
Unrealized gain on foreign exchange
    19,048       38,339  
COMPREHENSIVE INCOME (LOSS)
    65,607       (130,079 )
INCOME (LOSS) PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED
  $ 111.30     $ (138.00 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED
    667       667  

The accompanying notes are an integral part of these financial statements.

 
38
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
STATEMENTS OF CASH FLOWS
Unaudited
 
FOR THE THREE MONTHS ENDED 30 SEPTEMBER
 
(Expressed in United States Dollars)

   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net earnings (loss)
  $ 74,237     $ (92,043 )
Items not requiring an outlay of cash:
               
Depreciation
    23,172       16,583  
Changes in non-cash working capital:
               
Accounts receivable
    (239,244 )     (453,078 )
Inventory
    (653,788 )     (70,382 )
Prepaid and sundry assets
    89,939       -  
Accounts payable and accrued liabilities
    755,987       499,824  
Income taxes payable
    13,574       -  
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    63,877       (99,096 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from bank indebtedness
    64,059       137,467  
Repayment of loan payable
    (17,316 )     -  
Proceeds from (repayment of) long-term debt
    75,533       (20,286 )
Advances to related parties
    (109,512 )     (8,424 )
Obligations under capital lease
    (22,776 )     -  
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
    (10,012 )     108,757  
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisition of property and equipment
    (51,789 )     (9,661 )
CASH USED IN INVESTING ACTIVITIES
    (51,789 )     (9,661 )
FOREIGN CURRENCY TRANSLATION
    (2,076 )     -  
NET CHANGE IN CASH
    -       -  
CASH, BEGINNING OF PERIOD
    -       -  
CASH, END OF PERIOD
  $ -     $ -  

The accompanying notes are an integral part of these financial statements.

 
39
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
NOTES TO THE FINANCIAL STATEMENTS
Unaudited
 
FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2010
 
(Expressed in United States Dollars)
 
1.
NATURE OF OPERATIONS
 
Foodfest International 2000 Inc. (the "Company" or "Foodfest") has been operating since 25 June 1987 when it was first incorporated under the laws of the Province of Ontario as The Seafood Warehouse Inc. On 7 April 1999, the Company changed its name to Foodfest International 2000 Inc.
 
The Company imports, markets, and distributes kosher, vegetarian, and organic food products to grocery stores in Canada and the United States.
 
2.
BASIS OF PRESENTATION
 
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended 31 July 2010 are not necessarily indicative of the results that may be expected for the year ending 31 October 2010.
 
3.
 PROPERTY AND EQUIPMENT
 
   
Cost
   
Depreciation
   
Net
30 September
2010
(Unaudited)
   
Net
30 June
2010
(Audited)
 
                         
Equipment
    523,572       328,932       194,640       206,284  
Furniture and fixtures
    259,562       168,204       91,358       86,729  
Vehicles
    63,052       17,214       45,838       2,532  
Computer hardware
    63,779       48,556       15,223       15,511  
Leasehold improvements
    768,576       743,862       24,714       20,344  
    $ 1,678,541     $ 1,306,768     $ 371,773     $ 331,400  

 
40
 
 
4. 
ADVANCES TO RELATED PARTIES
 
The following advances were made to companies controlled by the Company's shareholders. These advances are unsecured, non-interest bearing and are repayable on demand. Their balances are as follows:

   
30 September
2010
(Unaudited)
   
30 June
2010
(Audited)
 
             
Foodfest International 2000 (Nevada) Inc.
  $ 160,849     $ 153,087  
Strubs Food Corp.
    -       197,097  
    $ 160,849     $ 350,184  
 
5.
BANK INDEBTEDNESS
 
The Company has available a $971,800 ($1,000,000 Canadian dollars) revolving operating line which bears interest at the Royal Bank of Canada prime rate plus 2.75% and is repayable on demand. This revolving loan is secured under a general security agreement covering all of the Company's assets and also secured by limited personal guarantees from the shareholders of the Company.
 
6.   LOAN PAYABLE
 
On 30 September 2010, the Company had advances from a private company totalling $13,000 (30 June 2010 - $31,001). These advances are unsecured, non-interest bearing and are repayable on demand.
 
 
41
 
 
7.   LONG-TERM DEBT
 
Each of the below loans is payable to the Business Development Bank of Canada ("BDC"), is secured by a general security agreement and limited guarantees from the shareholders of the Company and Coastal Water Seafoods Ltd (the related party described in note 10).

   
30 September
2010
(Unaudited)
   
30 June
2010
(Audited)
 
             
Term loan bearing interest at a daily floating bank prime plus 1.5%, repayable monthly by principal payments of $2,150 CAD plus interest maturing on February 23, 2013.
  $ 60,592     $ 64,625  
Term loan bearing interest at a daily floating bank prime plus 4.0%, repayable monthly by principal payments of $3,450 CAD plus interest maturing on November 23, 2010.
    6,705       16,203  
Term loan bearing interest at a daily floating bank prime plus 4.0%, repayable monthly by principal payments of $1,825 CAD plus interest maturing on September 23, 2011.
    21,283       25,713  
Term loan bearing interest at a daily floating bank prime plus 1.5%, repayable monthly by principal payments of $1,754 CAD plus interest maturing on August 23, 2015.
    97,180       -  
      185,760       106,541  
Less: current portion
    70,127       61,008  
    $ 115,633     $ 45,533  
 
The Company's future commitments under this long-term debt are summarized as follows:

 
2011 (Nine months)
$                     53,425
 
 
2012
                       50,847
 
 
2013
                       37,169
 
 
2014
                       20,454
 
 
2015
                       20,454
 
 
Thereafter
                         3,409
 
   
$                   185,758
 
 
8.
OBLIGATIONS UNDER CAPITAL LEASE
 
On 1 January 2010 the Company entered into a direct financing lease with Gould Leasing to construct a walk-in freezer. Under the lease agreement, the Company is obligated to make monthly payments of $4,678 for a term of 39 months. Interest is calculated at the rate implicit in the lease of 7.5%. The financing has been secured by the constructed asset.
 
On 1 May 2009 the Company entered intor direct financing leases with Equilease Corporation and Blue Chip Leasing Corporation for computer equipment. Under these lease agreements, the Company is obligated to make monthly payments of $2,187 for a term of 36 months. Implicit interest is calculated at the Company's incremental borrowing rate of 5%. The financing has been secured by the leased computer equipment.
 
The Company's future commitments under these capital leases are summarized as follows:

 
2011   (Nine months)
$                      56,096
 
 
2012
                        68,357
 
 
2013
                        32,696
 
   
                      157,149
 
 
Less: imputed interest
                       (28,205)
 
   
                      128,944
 
 
Less: current portion
                       (62,438)
 
   
$                      66,506
 

 
42
 
 
9. 
ADVANCES FROM SHAREHOLDERS
 
On 30 September 2010, the Company had advances from its shareholders totalling $86,118 (30 June 2010 - $83,238). These advances are unsecured, non-interest bearing, and have been postponed in favour of the Royal Bank of Canada in respect of the Company's line of credit. Changes in the balances from year-to-year are due to changes in foreign exchange rates.
 
10. 
ADVANCES FROM RELATED PARTIES
 
Each of the below loans bear interest at the Royal Bank of Canada prime rate plus 1.5% and are repayable in monthly instalments of interest only. These loans have been postponed in favour of the Royal Bank of Canada in respect of the Company's line of credit. Changes in the balances from year-to-year are due to changes in foreign exchange rates.

   
30 September
2010
(Unaudited)
   
30 June
2010
(Audited)
 
             
Coastal Water Seafoods Ltd. - a company controlled by one of the Company's shareholders
  $ 243,755     $ 235,603  
Canadian Triloon Corporation - a company controlled by the spouse of one of the Company's shareholders
    284,271       279,396  
Yael Ender - the spouse of one of the Company's shareholders
    497,309       482,684  
Triloon Corporation - a company controlled by shareholders of the Company
    332,467       624,272  
    $ 1,357,802     $ 1,621,955  
 
11.
COMMITMENTS
 
The Company's future commitments under various lease agreements including vehicles, equipment, and premises are summarized as follows:
 
 
2011 (Nine months)
$                    439,289
 
 
2012
                      568,002
 
 
2013
                      519,440
 
 
2014
                      478,363
 
 
2015
                      502,067
 
 
Thereafter
                   2,585,657
 
   
$                 5,092,818
 
 
43
 
 
 
12. 
RELATED PARTY TRANSACTIONS
 
The following transactions with related parties were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the parties.
 
As of 30 September 2010 accounts payable of $145,437 (30 June 2010 - $140,573) were due to Coastal Water Seafoods Ltd. (the related party described in note 10) and are subject to normal trade terms.
 
The Company paid various operating expenses of Foodfest International 2000 Inc. totalling $11,774 during the three months ended 30 September 2010 (three months ended 30 September 2009 - $8,990). The Company had balances outstanding to this related party as described in note 4.
 
Management fees of $36,075 were paid to Canadian Endernational Ltd (a company controlled by one of Foodfest's shareholders) during the three months ended 30 September 2010 (three months ended 30 September 2009 - $11,875).
 
Interest payments totalling $32,014 were made to related parties during the three months ended 30 September 2010 (three months ended 30 September 2009 - $67,214) on the advances described in note 10.
 
Rental payments totalling $75,707 were made to Triloon Corp. (the related party described in note 10) during the three months ended 30 September 2010 (three months ended 30 September 2009 - $74,763).
 
The Company transacted with Strubs Food Corp (the related party described in note 4) during the three months ended  30 September 2010 as follows:
 
●   
Rental payments received of $2,915 (three months ended 30 September 2009 - $2,915)
●  
Management fees received of $41,686 (three months ended 30 September 2009 - $18,950)
●  
Purchases made of $253,609 (three months ended 30 September 2009 - $276,466)
 
(b)  Pro Forma Financial Information.

 
44
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Unaudited)

 
CanCo
30 September
2010
Foodfest USA
30 September
 2010
 
 
Pro Forma Adjustments
 
 
Note Ref.
Pro Forma Consolidated
30 September
2010
 
ASSETS
Current Assets
                         
Cash
  $ -     $ 450     $ -       $ 450  
Accounts receivable
    1,904,134       -       -         1,904,134  
Inventory
    2,128,433       -       -         2,128,433  
Prepaid and sundry assets
    5,554       -       -         5,554  
Advances to related parties
    160,849       -       (160,849 )
(a)
    -  
Total Current Assets
    4,198,970       450       (160,849 )       4,038,571  
Long Term Assets
                                 
Property and equipment, net
    371,773       -       -         371,773  
Deferred income taxes
    40,851       -       -         40,851  
Total Long Term Assets
    412,624       -       -         412,624  
Total Assets
  $ 4,611,594     $ 450     $ (160,849 )     $ 4,451,195  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
                         
Bank indebtedness
  $ 1,161,797     $ -     $ -       $ 1,161,797  
Accounts payable and accrued liabilities
    2,430,601       308,506       -         2,739,107  
Income taxes payable
    13,500       -       -         13,500  
Loan payable
    13,000       81,146       -         94,146  
Long term debt - current
    70,127       -       -         70,127  
Obligations under capital lease - current
    62,438       -       -         62,438  
Advances from related parties
    -       160,849       (160,849 )
(a)
    -  
Total Current Liabilities
    3,751,463       550,501       (160,849 )       4,141,115  
Long Term Liabilities
                                 
Long term debt
    115,633       -       -         115,633  
Obligations under capital lease
    66,506       -       -         66,506  
Advances from shareholders
    86,118       -       (47,289 )
(a)
    38,829  
Advances from related parties
    1,357,802       -       -         1,357,802  
Total Long Term Liabilities
    1,626,059       -       (47,289 )       1,578,770  
Stockholders' Deficit
Preferred stock
    -       -       -         -  
Common stock
    30,804       3,951       17,596  
(b)
    52,351  
Additional paid-in capital
    -       618,894       (17,596 )
(b)
    12,701,298  
Subscription receivable
    -       (47,289 )     47,489  
(a)
    -  
Deferred stock based compensation
    -       (62,500 )     -         (62,500 )
Accumulated other comprehensive loss
    (222,971 )     -       -         (222,971 )
Accumulated deficit
    (573,761 )     (1,063,107 )     -         (1,636,868 )
Total Stockholders' Deficit
    (765,928 )     (550,051 )     (160,849 )       10,831,310  
Total Liabilities and Stockholders' Deficit
  $ 4,611,594     $ 450     $ (160,849 )     $ 16,551,195  

 
45
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

   
CanCo
Three Months Ended
30 September
2010
   
Foodfest USA
Eleven Months Ended
30 September
 2010
   
 
 
Pro Forma Adjustments
 
 
 
 
Note Ref.
 
Pro Forma Consolidated Period Ending
30 September
2010
 
SALES
  $ 3,697,883     $ 1,884     $ -       $ 3,699,767  
COST OF GOODS SOLD
    2,916,273       -       -         2,916,273  
GROSS PROFIT
    781,610       1,884       -         783,494  
EXPENSES
                                 
Salaries and wages
    229,621       -       -         229,621  
Travel
    121,798       -       -         121,798  
Management fees
    82,812       -       -         82,812  
Rent and occupancy costs
    75,362       -       -         75,362  
Interest and bank charges
    52,361       17,517       -         69,878  
Office and general
    40,691       7,639       -         48,330  
Advertising and promotion
    27,696       -       -         27,696  
Utilities
    25,585       -       -         25,585  
Insurance
    21,315       -       -         21,315  
Telecommunications
    17,208       -       -         17,208  
Meals and entertainment
    11,394       -       -         11,394  
Repairs and maintenance
    8,066       -       -         8,066  
Professional fees
    6,165       112,356       -         118,521  
Gain on foreign exchange
    (49,447 )     -       -         (49,447 )
Depreciation
    23,172       -       -         23,172  
Consulting
    -       68,770       -         68,770  
Stock based compensation
    -       62,500       -         62,500  
TOTAL EXPENSES
    693,799       236,653       -         962,581  
EARNINGS (LOSS) BEFORE TAXES
    87,811       (234,769 )     -         (179,087 )
Current income tax expense
    13,574       -       -         13,574  
NET EARNINGS (LOSS)
  $ 74,237     $ (234,769 )   $ -       $ (192,661 )
LOSS PER WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC AND DILUTED
                            $ (0.00 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC AND DILUTED
                              52,350,509  
 
 
46
 
 
FOODFEST INTERNATIONAL 2000 INC.
 
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
 
1.
BASIS OF PRESENTATION
 
On 20 December 2010, pursuant to a Share Exchange Agreement, Foodfest International 2000 Inc. (“Foodfest USA” or the “Company”) completed the acquisition of all the issued and outstanding shares of Foodfest Acquisition Corp (“AcquisitionCo”) and consequently its interests in its fully-owned subsidiary Foodfest International 2000 Inc. (“CanCo”), a private company incorporated under the laws of Ontario, Canada. CanCo is in the business of processing and distributing kosher, natural, and organic food and drink.
 
These unaudited pro forma consolidated financial statements (“pro forma statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America and are expressed in US dollars. These pro forma statements do not contain all the information required for annual financial statements. Accordingly, they should be read in conjunction with the most recent annual and interim financial statements of Foodfest USA.
 
These pro forma statements have been compiled from and include:
 
        1.  
An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of CanCo as at 30 September 2010 with the unaudited balance sheet of Foodfest USA as at 30 September 2010, giving effect to the transaction as if it occurred on 30 September 2010.
 
         2.  
An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of CanCo for the three month period ending 30 September 2010 with the unaudited statement of operations of Foodfest USA for the eleven month period ending 30 September 2010, giving effect to the transaction as if it occurred on 30 September 2010.
 
The acquisition by Foodfest USA of CanCo is accounted for under the purcahse method as a reorganization of entities under common control, as both companies were managed by the same individuals prior to the transaction. The results are similar to a pooling of interests whereby the assets and liabilities were transferred at historical cost. The outstanding common stock of Foodfest USA will be accounted at its net book value and no goodwill will be recognized.
 
It is management's opinion that these pro forma financial statements include all adjustments  necessary for the fair presentation,  in all material respects,  of the proposed transaction described above in accordance with US GAAP applied on a basis  consistent with CanCo's  accounting  policies.  No adjustments have been made to reflect potential cost savings that may occur subsequent to completion of the  transaction.  The pro forma statements  of  operations  do not  reflect non-recurring  charges or credits directly  attributable to the transaction,  of which none are currently anticipated.
 
The unaudited pro forma  consolidated  financial  statements are not intended to reflect the results of  operations  or the  financial  position of CanCo which would have actually  resulted had the proposed  transaction been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future.

 
47
 

 
2.
PRO FORMA ADJUSTMENTS
 
The unaudited  pro forma  consolidated  financial  statements  incorporate  the following pro forma adjustments:

(a) Intercompany loan accounts presented as advances to/from related parties have been reclassified to eliminate upon consolidation.  Subscriptions receivable owing from shareholders of the Company have been offset against advances from shareholders as these amounts are owing to/from the same individuals.

(b) Common stock has been reduced by $30,804 to eliminate the shares of CanCo upon consolidation and increased by $48,400 to record the shares of Foodfest USA reserved for issuance as part of the reorganization.
 
None
 
(c)  Shell Company Transactions.
 
Reference is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein which are incorporated herein by reference.
  
(d)  Exhibits.
 
Exhibit No.
 
Description
2.1
 
Share Exchange Agreement by and between Acquisitionco and the CanCo Shareholders, dated December 20, 2010
2.2
 
Voting and Exchange Trust Agreement by and between the Company, CanCo, Exchangeco, the Trustee, and the CanCo Shareholders, dated December 20, 2010
2.3
 
Support Agreement by and between the Company, CanCo and Acquisitionco, dated December 20, 2010
2.4
 
Provisions of Exchange Shares
2.5
 
Certificate of Designation
3.1
 
Certificate of Incorporation (1)
3.2
 
By Laws (1)
99.1
 
Press Release
 
(1) Incorporated herein by reference to Form SB-2 filed with the SEC on May 7, 2007.
 
 
 

 
48
 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Foodfest International 2000 Inc.
   
Date: December 22, 2010
By:  
/s/ Henry Ender
   
Henry Ender
Chief Executive Officer, Secretary and Director


 
 
 
 
 
 49
Exhibit 2.1
 
3A
 
1.       Exchangeable shares
 
The Exchangeable shares (the “Exchangeable Shares”) in the capital of the Corporation shall have attached thereto the following rights, privileges, restrictions and conditions:
 
ARTICLE 1
 
INTERPRETATION
 
1.1       For the purposes of these share provisions:
 
“ Act ” means the Business Corporations Act (Ontario) and includes the regulations made pursuant thereto and any statute substituted therefor, as amended from time to time;
 
“ Aggregate Equivalent Vote Amount ” means, with respect to any matter, proposition or question on which holders of USCo Common Stock are entitled to vote, consent or otherwise act, the product of (i) the number of Exchangeable Shares then issued and outstanding and held by holders other than USCo, Callco and their respective Subsidiaries multiplied by (ii) the number of votes to which a holder of one share of USCo Common Stock is entitled with respect to such matter, proposition or question, disregarding fractional votes in the aggregate and in respect of any registered holder of Exchangeable Shares;
 
“ Automatic Redemption Date ” means the date for the automatic redemption by the Corporation of Exchangeable Shares pursuant to ARTICLE 5 of these share provisions, which date shall be the first to occur of (a) the 5th anniversary of the Effective Date, (b) the Business Day prior to the record date for any meeting or vote of the shareholders of the Corporation to consider any matter on which the holders of Exchangeable Shares would be entitled to vote as shareholders of the Corporation but excluding any meeting or vote as described in clause (c) below, or (c) the Business Day following the day on which the holders of Exchangeable Shares fail to take the necessary action at a meeting or other vote of holders of Exchangeable Shares, if and to the extent such action is required, to approve or disapprove, as applicable, any change to, or in the rights of the holders of Exchangeable Shares, if the approval or disapproval, as applicable, of such change would be required to maintain the economic and legal equivalence of the Exchangeable Shares and the USCo Common Stock, or (e) a USCo Control Transaction or a Corporation Control Transaction occur, in which case, provided the Board of Directors determines, in good faith and in its sole discretion, that it is not reasonably practicable in the circumstances of such USCo Control Transaction or Corporation Control Transaction to substantially replicate the terms and conditions of the Exchangeable Shares in connection with such USCo Control Transaction or Corporation Control Transaction and that the redemption of all but not less than all of the outstanding Exchangeable Shares is necessary to enable the completion of such USCo Control Transaction or Corporation Control Transaction in accordance with its terms, the Board of Directors may accelerate such redemption date to such date prior to the 5th anniversary of the Effective Date as they may determine, upon such number of days’ prior written notice to the registered holders of the Exchangeable Shares as the Board of Directors may determine to be reasonably practicable in such circumstances;
 
 
 
 
 
 
3B
 
“ Board of Directors ” means the Board of Directors of the Corporation and any committee thereof acting within its authority;
 
“ Business Day ” means any day on which commercial banks are generally open for business in Toronto, Ontario, other than a Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the Province of Ontario or the federal laws of Canada;
 
“ CallCo ” means Foodfest Call Corp., a corporation incorporated under the Act, and where the context requires, its successors;
 
“ Call Rights ” means the Liquidation Call Right, the Redemption Call Right and the Retraction Call Right, collectively;
 
“ Canadian Dollar Equivalent ” means in respect of an amount expressed in a foreign currency (the "Foreign Currency Amount") at any date the product obtained by multiplying (a) the Foreign Currency Amount by, (b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollar as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors to be appropriate for such purpose;
 
“ Common Shares ” means the common shares in the capital of the Corporation;
 
“ Corporation ” means Foodfest Acquisition Corp., a corporation incorporated under the Act, and where the context requires, its successors;
 
“ Corporation Control Transaction ” means any sale of a majority of the outstanding voting shares of the Corporation by USCo, CallCo or any affiliate of USCo or Callco to an arm’s length third party, or any proposal to do so;
 
“ Current Market Price ” means, in respect of a share of USCo Common Stock on any date, the weighted average trading price of a share of USCo Common Stock on the OTCBB or OTCQB for 5 trading days preceding that date or, if the USCo Common Stock is not then traded on the OTCBB or OTCQB, on such other principal stock exchange or automated quotation system on which the USCo Common Stock is listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if in the opinion of the Board of Directors the public distribution or trading activity of USCo Common Stock during such period does not result in a weighted average trading price which reflects the fair market value of a share of USCo Common Stock, then the Current Market Price of a share of USCo Common Stock shall be determined by the Board of Directors based upon the advice of such qualified independent financial advisors as the Board of Directors may deem to be appropriate, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding;
 
" Dividend Record Date " has the meaning given to that term in Section 3.4 of these share provisions;
 
 
 
 
 
3C
 
" Effective Date " means the date of incorporation of the Corporation/means November 1, 2010, or such other date may be designated by the Board of Directors;
 
“ Exchange Put Date ” has the meaning given to that term in Section 9.2; “ Exchange Put Right ” has the meaning given to that term in Section 9.1(a) ;
 
“ Exchangeable Shares ” mean the non-voting Exchangeable shares in the capital of the Corporation, having the rights, privileges, restrictions and conditions set forth herein;
 
“ Exchangeable Share Consideration ” means, for any acquisition of or redemption of or distribution of assets of the Corporation in respect of or purchase pursuant to the Exchange Put Right of Exchangeable Shares pursuant to these share provisions, the Support Agreement or the Voting and Exchange Trust Agreement:
 
(a)  
certificates representing the aggregate number of whole shares of USCo Common Stock deliverable in connection with such action (provided that any fractional interests in USco Common Stock otherwise deliverable shall be satisfied in accordance with paragraph (b) below);
 
(b)  
a cheque or cheques payable at par at any branch of the bankers of the payor in an amount representing all fractional interests in USCo Common Stock referred to in paragraph (a) above and all declared and unpaid and undeclared but payable cash dividends deliverable in connection with such action, in each case disregarding fractional cents; and
 
(c)  
such stock or property constituting any declared and unpaid non-cash dividends deliverable in connection with such action;
 
provided that (i) that part of the consideration which is the Current Market Price of a share of USCo Common Stock shall be fully paid and satisfied by the delivery of one share of USCo Common Stock, (ii) that part of the consideration which represents non-cash dividends reaming unpaid shall be fully paid and satisfied by delivery of such non-cash items, (iii) any such stock shall be duly issued as fully paid and non-assessable and any such property shall be delivered free and clear of any lien, claim, encumbrance, security interest or adverse claim or interest and (iv) such consideration shall be paid less any tax required to be deducted or withheld therefrom and without interest;
 
“ Exchangeable Share Price ” means, for each Exchangeable Share, an amount equal to the aggregate of:
 
(a)  
the Current Market Price of a share of USCo Common Stock; plus
 
(b)  
an additional amount equal to the full amount of cash dividends declared and unpaid on such Exchangeable Share; plus
 
 
 
 

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(c)  
an additional amount equal to all dividends declared on USCo Common Stock which have not been declared on Exchangeable Shares in accordance herewith; plus
 
(d)  
an additional amount representing non-cash dividends declared and unpaid on such Exchangeable Shares.
 
“ Governmental Entity ” means any: (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (b) any subdivision, agent, commission, board, or authority of any of the foregoing; or (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;
 
“ Liquidation Price ” has the meaning given to that term in Section 6.1 of these share provisions;
 
“ Liquidation Call Right ” has the meaning ascribed thereto in Section 6.5 of these share provisions;
 
“ Liquidation Date ” has the meaning given to that term in Section 6.1 of these share provisions;
 
“ Liquidation Offer ” has the meaning given to that term in Section 6.5 of these share provisions;
 
“ OTCBB ” means the Over the Counter Bulletin Board;
 
“ OTCQB ” means the Over the Counter Quote Board;
 
“ Person ” includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status;
 
“ Purchase Price ” has the meaning given to that term in Section 4.3 of these share provisions;
 
“ Redemption Call Right ” has the meaning given to that term in Section 5.5 of these share provisions;
 
“ Redemption Offer ” has the meaning given to that term in Section 5.5 of these share provisions;
 
“ Retracted Shares ” has the meaning given to that term in Section 4.1(a) of these share provisions;
 
" Retraction Call Right " has the meaning given to that term in Section 4.1(c) of these share provisions;
 
 
 
 
 
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“ Retraction Date ” has the meaning provided in Section 4.1(b);
 
“ Retraction Offer ” has the meaning given to that term in Section 4.1(c)) of these share provisions;
 
“ Retraction Price ” has the meaning given to that term in Section 4.1 of these share provisions;
 
“ Retraction Request ” has the meaning given to that term in Section 4.1 of these share provisions;
 
“ Subsidiary ”, in relation to any person, means any body corporate, partnership, joint venture, association or other entity of which more than 50% of the total voting power of shares of stock or units of ownership or beneficial interest entitled to vote in the election of directors (or members of a comparable governing body) is owned or controlled, directly or indirectly, by such person;
 
“ Support Agreement ” means the support agreement made among USCo, CallCo, the Corporation and the Trustee and dated as of the Effective Date;
 
“ Transfer Agent ” means the person as may from time to time be appointed by the Corporation as the registrar and transfer agent for the Exchangeable Shares, and if there is more than one such agent then the principal Canadian agent;
 
“ Trustee ” means the trustee appointed under the Voting and Exchange Trust Agreement, and any successor trustee;
 
“ United States ” or “ US ” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia;
 
“ USCo ” means Foodfest International 2000, Inc., a corporation organized and existing under the laws of the State of Delaware, including its successors;
 
“ USCo Common Stock ” means the shares of common stock of USCo, having voting rights of one vote per share, and any other securities resulting form the application of section 2.7 of the Support Agreement;
 
“ USCo Control Transaction ” means any merger, amalgamation, tender offer, material sale or capital distribution of shares or assets or rights or interests therein or any similar transaction involving USCo, or any proposal to do so;
 
“ US Person ” means a US Person as defined in Rule 902(k) of Regulation S under the US Securities Act;
 
“ US Securities Act ” means the United States Securities Act of 1933 , as amended; and
 
" Voting and Exchange Trust Agreement " means the voting and exchange trust agreement made among USCo, CallCo, the Corporsation and the Trustee and adted as of the Effective Date.
 
 
 
 
 
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ARTICLE 2
 
AUTHORIZED NUMBER OF EXCHANGEABLE SHARES AND RANKING OF
 
EXCHANGEABLE SHARES
 
2.1       The Corporation is authorized to issue an unlimited number of Exchangeable Shares without nominal or par value.
 
2.2       The Exchangeable Shares shall, subject to the following, be entitled to a preference over the Common shares and any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs.
 
2.3       Upon issuance of Exchangeable Shares to any person or group of persons, within a three day period, the Corporation shall not be permitted to issue any additional Exchangeable Shares without the written consent of two-thirds of the issued and outstanding Exchangeable Shares, except to satisfy any liability under a price adjustment clause entered into as a condition of an issuance of Exchangeable Shares.
 
ARTICLE 3
 
DIVIDENDS
 
3.1       The holder of an Exchangeable Share, in priority to the Common shares and any class of shares of the Corporation ranking junior to the Exchangeable Shares with respect to the payment of dividends, shall be entitled to receive, and the Board of Directors shall pay on each Exchangeable Share if, as and when declared by the Board of Directors from to time out of the moneys, assets or property of the Corporation properly applicable to the payment of dividends or out of authorized but unissued shares of the Corporation, (a) in the case of a cash dividend declared on the USCo Common Stock, in an amount in cash for each Exchangeable Share in U.S. dollars, or the Canadian Dollar Equivalent thereof on the Dividend Record Date, in each case, corresponding to the cash dividend declared on each share of the USCo Common Stock disregarding fractional cents; or (b) in the case of a stock dividend declared on the USCo Common Stock to be paid in USCo Common Stock, in such number of Exchangeable Shares for each Exchangeable Share as is equal to the number shares of the USCo Common Stock to be paid on each share of the USCo Common Stock; or (c) in the case of a dividend declared on the USCo Common Stock in property other than cash or USCo Common Stock, in such type and amount of property for each Exchangeable Share as is the same as the type and amount of property declared as a dividend on each share of the USCo common Stock. Such dividends shall be cumulative from and after the Effective Date and shall accrue to the extent that a distribution has been declared on the USCo Common Stock but a corresponding dividend has not been declared on the Exchangeable Shares.

 
 
 
 
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3.2       Any such dividends on the Exchangeable Shares shall, to the full extent permitted, be “eligible dividends” under the Income Tax Act (Canada), and the Corporation shall, if permitted by law, make an election under subsection 191.2(1) of the Income Tax Act (Canada).
 
3.3       Cheques of the Corporation payable at par at any branch of the bankers of the Corporation shall be issued in respect of any cash dividends contemplated by subsection 3.1(a) hereof and the sending of such a cheque to each holder of an Exchangeable Share shall satisfy the cash dividends represented thereby unless the cheque is not paid on presentation. Certificates registered in the name of the registered holder of Exchangeable Shares shall be issued or transferred in respect of any stock dividends contemplated by subsection 3.1(b) hereof and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend represented thereby. Such other type and amount of property in respect of any dividends contemplated by subsection 3.1(c) hereof shall be issued, distributed or transferred by the Corporation in such manner as it shall determine and the issuance, distribution or transfer thereof by the Corporation to each holder of an Exchangeable Share shall satisfy the dividend represented thereby. In all cases any such dividends shall be subject to any reduction or adjustment for tax required to be deducted and withheld from such dividends paid or credited by the Corporation. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Corporation any dividend which is represented by a cheque that has not been duly presented to the Corporation’s bankers for payment or which otherwise remains unclaimed for a period of 5 years from the date on which such dividend was payable.
 
3.4       The record date (a “ Dividend Record Date ”) for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend declared on the Exchangeable Shares under Section 3.1 of these share provisions shall be the same date as the record date for the determination of the holders of USCo Common Stock entitled to receive payment of, and the payment date for, any corresponding dividend declared on the USCo Common Stock, respectively.
 
3.5       If on any payment date for any dividends on the Exchangeable Shares under Section 3.1 of these share provisions the dividends are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which the Corporation shall have sufficient moneys, assets or property properly applicable to the payment of such dividends.
 
3.6       Except as provided in this Article 3, the holders of Exchangeable Shares shall not be entitled to receive dividends in respect thereof.
 
3.7       Under the Support Agreement, USCo agrees to take all actions to ensure that the Corporation will have the financial ability to make payments on the Exchangeable Shares as required under this Article 3.
 
 
 
 
 
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ARTICLE 4
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
 
4.1       Subject to applicable law, and provided CallCo has exercised the Retraction Call Right, a holder of Exchangeable Shares shall be entitled at any time, upon compliance with the provisions of this Article 4, to require the Corporation to redeem any or all of the Exchangeable Shares registered in the name of such holder for an amount per share (the “ Retraction Price ”) equal to the Exchangeable Share Price applicable on the last Business Day prior to the Retraction Date. In connection with payment of the Retraction Price, the Corporation shall be entitled to liquidate some of the USCo Common Stock that would otherwise be deliverable to the particular holder of Exchangeable Shares in order to fund any statutory withholding tax obligation. To effect such redemption, the holder shall present and surrender at the registered office of the Corporation or any office of the Transfer Agent as may be specified by the Corporation in Schedule A hereto or by notice to the holders of Exchangeable Shares the certificate or certificates representing the Exchangeable Shares which the holder desires to have the Corporation redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and instruments as the Corporation or the Transfer Agent may reasonably require, and together with a duly executed statement (the “ Retraction Request ”) in the form of Schedule A hereto or in such other form as may be acceptable to the Corporation from time to time:
 
(a)  
specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate or certificates (the “ Retracted Shares ”) redeemed by the Corporation;
 
(b)  
stating the Business Day on which the holder desires to have the Corporation redeem the Retracted Shares (the “ Retraction Date ”) provided that the Retraction Date shall be not less than 5 Business Days nor more than 10 Business Days after the date on which the Retraction Request is received by the Corporation and further provided that, in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date shall be deemed to be the 10th Business Day after the date on which the Retraction Request is received by the Corporation; and
 
(c)  
appointing the Corporation as its agent for the purpose of offering its Retracted Shares for sale to CallCo (the “ Retraction Offer ”), and acknowledging the overriding right (the CallCo’s right to accept the Retraction Offer and to complete the purchase of the Retracted Shares pursuant to the Retraction Offer is referred to as the “ Retraction Call Right ”) of CallCo to purchase all but not less than all of the Retracted Shares directly from the holder and that the Retraction Request shall be deemed to be a revocable offer by the holder to sell the Retracted Shares in accordance with the Retraction Call Right on the terms and conditions set out in Section 4.3 below.

 
 
 
 
 
 
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4.2       Subject to the exercise by CallCo of the Retraction Call Right, upon receipt by the Corporation or the Transfer Agent in the manner specified in Section 4.1 hereof of documents including, without limitation, a certificate or certificates representing the number of Retracted Shares, together with a Retraction Request, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 4.7, the Corporation shall redeem the Retracted Shares effective at the close of business on the Retraction Date and shall cause to be delivered to such holder the Retraction Price with respect to such shares in accordance with Section 4.4 hereof. If part only of the Exchangeable Shares represented by any certificate is redeemed or purchased by CallCo pursuant to the Retraction Call Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Corporation.
 
4.3       Upon receipt by the Corporation of a Retraction Request, the Corporation shall immediately provide CallCo a copy of the Retraction Request and, as agent for the holder who submitted the Retraction Request, shall be deemed to have made the Retraction Offer to CallCo in respect of the holder’s Retracted Shares by providing to CallCo a copy of the Retraction Request as aforesaid. In order to exercise the Retraction Call Right and accept the Retraction Offer, CallCo must notify the Corporation in writing of its determination to do so (the “ Call Notice ”) within 2 business days of such notification. If CallCo does not so notify the Corporation within 2 Business Days of the day of notification by the Corporation of the receipt by the Corporation of the Retraction Request, the Corporation will notify the holder as soon as possible thereafter that CallCo will not exercise the Retraction Call Right and accept the Retraction Offer. If CallCo delivers the Call Notice within such 2 Business Days of the date of notification by the Corporation of the receipt by the Corporation of the Retraction Request and provided that the Retraction Offer is not revoked by the holder in the manner specified in Section 4.7, the Retraction Request shall thereupon be considered only the Retraction Offer by the holder to sell the Retracted Shares to CallCo in accordance with the Retraction Call Right, and all other aspects of the Retraction Request will be null and void. In such event, the Corporation shall not redeem the Retracted Shares and CallCo shall purchase from such holder and such holder shall sell to CallCo on the Retraction Date the Retracted Shares for an amount per share (the " Purchase Price ") equal to the Retraction Price. For the purposes of completing a purchase pursuant to the Retraction Call Right, CallCo shall deposit with the Corporation or the Transfer Agent, on or before the Retraction Date the Exchangeable Share Consideration representing the total Purchase Price. Provided that such Exchangeable Share Consideration has been so deposited with the Corporation or the Transfer Agent, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by the Corporation of such Retracted Shares shall take place on the Retraction Date. In the event that CallCo does not deliver a Call Notice within 2 Business Days of the date of notification by the Corporation of the receipt by the Corporation of the Retraction Request or otherwise comply with these Exchangeable Share provisions in respect thereto and provided that Retraction Request is not revoked by the holder in the manner specified in Section 4. , the Corporation shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in this ARTICLE 4.

 
 
 
 
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4.4       The Corporation, or CallCo, as the case may be, shall deliver or cause the Transfer Agent to deliver to the relevant holder, at the address of the holder recorded in the register of shareholders of the Corporation for the Exchangeable Shares or at the address specified in the holder’s Retraction Request, or by holding for pick-up by the holder at the register office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, the Exchangeable Share Consideration representing the total Retraction Price or the total Purchase Price, as the case may be, and such delivery of such Exchangeable Share Consideration by the Corporation or the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the total Retraction Price or total Purchase Price, as the case may be, except as to any cheque included therein which is not paid on due presentation.
 
4.5       On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive his proportionate part of the total Retraction Price or total Purchase Price, as the case may be, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the total Retraction Price or the total Purchase Price, as the case may be, shall not be made as provided in Section 4.4, in which case the rights of such holder shall remain unaffected until the Exchangeable Share Consideration representing the total Retraction Price or the total Purchase Price, as the case may be, has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of the Exchangeable Share Consideration representing the total Retraction Price or the total Purchase Price, as the case may be, has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by the Corporation or purchased by CallCo shall thereafter be considered and deemed for all purposes to be a holder of the USCo Common Stock delivered to it. Notwithstanding the foregoing, until payment of such Exchangeable Share Consideration to the holder, the holder shall be deemed to still be a holder of Exchangeable Shares for purposes of all voting rights with respect thereto under the Voting and Exchange Trust Agreement.

 
 
 
 
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4.6       Notwithstanding any other provision of this ARTICLE 4, the Corporation shall not be obligated to redeem the Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to liquidity or solvency requirements or other provisions of applicable law. If the Corporation believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and provided that CallCo shall not have exercised the Retraction Call Right with respect to the Retracted Shares, the Corporation shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such liquidity or solvency requirements or other provisions of applicable law and shall notify the holder at least 2 Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by the Corporation. In any case in which the redemption by the Corporation of Retracted Shares would be contrary to liquidity or solvency requirements or other provisions of applicable law, the Corporation shall redeem Retracted Shares in accordance with Section 4.2 of these share provisions on a pro rata basis and shall issue to each holder of Retracted Shares a new certificate, at the expense of the Corporation, representing the Retracted Shares not redeemed by the Corporation pursuant to Section 4.2 hereof. Provided that the Retraction Request is not revoked by the holder in the manner specified in section 4.7, the holder of any such Retracted Shares not redeemed by the Corporation pursuant to Section 4.2 of these share provisions as a result of liquidity or solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to require CallCo to purchase such Retracted Shares from such holder on the Retraction Date or as soon as practical thereafter on payment by CallCo to such holder of the Purchase Price for each such Retracted Share, all as more specifically provided in the Voting and Exchange Trust Agreement, and CallCo shall make such purchase.
 
4.7       A holder of the Retracted Shares may, by notice in writing given by the holder to the Corporation before the close of business on the Business Day immediately preceding the Retraction Date, revoke its Retraction Request or Retraction Offer, as applicable, in which event such Retraction Request or Retraction Offer shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to CallCo shall be deemed to have been revoked.
 
ARTICLE 5
 
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
 
5.1       Subject to applicable law, and provided CallCo has exercised the Redemption Call Right, the Corporation shall, on the Automatic Redemption Date, redeem all but not less than all of the then outstanding Exchangeable Shares for an amount per share equal to the Exchangeable Share Price applicable on the last Business Day prior to the Automatic Redemption Date (the “ Redemption Price ”) (such redemption being an “ Automatic Redemption ”). In connection with payment of the Redemption Price, the Corporation shall be entitled to liquidate some of the USCo Common Stock which would otherwise be deliverable to the particular holder of Exchangeable Shares in order to fund any statutory withholding tax obligation.

 
 
 
 
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5.2       In any case of a redemption of Exchangeable Shares under this ARTICLE 5, the Corporation or the Transfer Agent on behalf of the Corporation, shall, at least 30 days before an Automatic Redemption Date or before a possible Automatic Redemption Date which may result from a failure of the holders of Exchangeable Shares to take necessary action as described in clause (c) of the definition of Automatic Redemption Date, send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption or possible redemption by the Corporation or the purchase by CallCo under the Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder. Such notice shall set out the formula for determining the Redemption Price, as the case may be, the Automatic Redemption Date and, if applicable, particulars of the Redemption Call Right. In the case of any notice given in connection with a possible Automatic Redemption Date, such notice will be given contingently and will be withdrawn if the contingency does not occur.
 
5.3       On or after the Automatic Redemption Date and subject to the exercise by CallCo of the Redemption Call Right, the Corporation shall deliver or cause the Transfer Agent to deliver to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share upon presentation and surrender at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of the Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and instruments as the Corporation or the Transfer Agent may reasonably require. Payment of the total Redemption Price for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the register of holders of the Exchangeable Shares maintained by or on behalf of the Corporation or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, of the Exchangeable Share Consideration representing the total Redemption Price. On and after the Automatic Redemption Date, the holders of the Exchangeable Shares called for redemption shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price, unless payment of the total Redemption Price for such Exchangeable Shares shall not be made upon presentation and surrender of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Redemption Price has been paid in the manner hereinbefore provided.

 
 
 
 
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5.4       The Corporation shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the Exchangeable Shares Consideration with respect to the Exchangeable Shares so called for redemption, or of such of the said Exchangeable Shares represented by certificates that have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, in a custodial account or for safe keeping, in the case of non-cash items, with any chartered bank or trust company in Canada named in such notice. Upon the later of such deposit being made and the Automatic Redemption Date, the Exchangeable Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the holders thereof after such deposit or Automatic Redemption Date, as the case may be, shall be limited to receiving their proportionate part of the total Redemption Price for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of such Exchangeable Share Consideration, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the USCo Common Stock delivered to them. Notwithstanding the foregoing, until such payment or deposit of such Exchangeable Share Consideration is made, the holder shall be deemed to still be a holder of Exchangeable Shares for purposes of all voting rights with respect thereto under the Voting and Exchange Trust Agreement. If part only of the Exchangeable Shares represented by any certificate is redeemed or purchased by CallCo pursuant to the Redemption Call Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Corporation.
 
5.5       Subject to the limitations set forth in Section 5.6 of these share provisions, the Corporation is appointed as agent for the holders of Exchangeable Shares for the purpose of offering to CallCo (the “ Redemption Offer ”) the overriding right (CallCo’s right to accept the Redemption Offer and complete the purchase of the Exchangeable Shares is referred to as the “ Redemption Call Right ”), in the event of any proposed redemption of Exchangeable Shares by the Corporation pursuant to this ARTICLE 5, to purchase from all but not less than all of the holders of Exchangeable Shares other than CallCo on the applicable Redemption Date all but not less than all of the Exchangeable Shares held by each such holder on payment by CallCo to each such holder of an amount per Exchangeable Share equal to the Redemption Price, which payment of the Redemption Price shall be satisfied in full by the Exchangeable Share Consideration representing the total Redemption Price. In the case of a redemption of Exchangeable Shares under this ARTICLE 5, the Corporation, as agent for the holders of Exchangeable Shares, shall immediately make the Redemption Offer to CallCo by sending or causing to be sent to CallCo a notice in writing of the redemption by the Corporation of the Exchangeable Shares. In the event of the exercise of the Redemption Call Right and the acceptance of the Redemption Offer, each holder of Exchangeable Shares shall be obligated to sell all of the Exchangeable Shares held by that holder to CallCo on the Automatic Redemption Date on payment by CallCo to such holder of the Redemption Price for each such share, and the Corporation shall have no obligation to redeem, or to pay any amount in respect of, such shares so purchased by CallCo.

 
 
 
 
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5.6       To exercise the Redemption Call Right and accept the Redemption Offer, CallCo must notify the Corporation or the Transfer Agent, as agent for the holders of Exchangeable Shares, of its intention to exercise such right (and accept such offer) at least 30 days before the Automatic Redemption Date. The Corporation shall notify or cause the Transfer Agent to notify the holders of the Exchangeable Shares as to whether or not CallCo has exercised the Redemption Call Right forthwith after the expiry of the period during which such right may be exercised. If CallCo exercises its Redemption Call Right, CallCo shall on the Automatic Redemption Date purchase, and each of the holders of Exchangeable Shares shall sell, all of the Exchangeable Shares then outstanding for a price per Exchangeable Share equal to the Redemption Price.
 
5.7       For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Redemption Call Right, CallCo shall deposit with the Corporation or the Transfer Agent, on or before the Automatic Redemption Date, the Exchangeable Share Consideration representing the total Redemption Price. Provided that the total Redemption Price has been so deposited with the Corporation or the Transfer Agent, on and after the Automatic Redemption Date the rights of each holder of Exchangeable Shares other than CallCo shall be limited to receiving such holder’s proportionate part of the total Redemption Price payable by CallCo upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after that Automatic Redemption Date be considered and deemed for all purposes to be the holder of the USCo Common Stock to which it is entitled. Upon presentation and surrender to the Corporation or the Transfer Agent of a certificate or certificates representing the Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and instruments as the Corporation and the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Corporation shall deliver or cause the Transfer Agent to deliver on behalf of CallCo to such holder, Exchangeable Share Consideration representing the total Redemption Price in accordance with Section 5.3 of these share provisions. If CallCo does not exercise the Redemption Call Right in the manner described above, on the Automatic Redemption Date the holders of the Exchangeable Shares shall be entitled to receive in exchange therefor the total Redemption Price otherwise payable by the Corporation in connection with the redemption of the Exchangeable Shares pursuant to Section 5.1 of these share provisions.
 
 
 
 
 
 
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ARTICLE 6
DISTRIBUTION ON LIQUIDATION
 
6.1       In the event of the liquidation, dissolution or winding-up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares shall be entitled, subject to applicable law, to receive from the assets of the Corporation in respect of each Exchangeable Share held by such holder on the effective date (the “ Liquidation Date ”) of such liquidation, dissolution or winding-up, before any distribution of any part of the assets of the Corporation among the holders of the Common Shares or any other shares ranking junior to the Exchangeable Shares, an amount per share (the “ Liquidation Price ”) equal to the Exchange Share Price applicable on the last Business Day prior to the Liquidation Date. In connection with payment of the Liquidation Price, the Corporation shall be entitled to liquidate some of the USCo Common Stock which would otherwise be deliverable to the particular holder of Exchangeable Shares in order to fund any statutory withholding tax obligation.
 
6.2       On or promptly after the Liquidation Date, and subject to the exercise by CallCo of the Liquidation Call Right, the Corporation shall deliver or cause the Transfer Agent to deliver to the holders of the Exchangeable Shares the Liquidation Price for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and instruments as the Corporation and the Transfer Agent may reasonably require, at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of the Exchangeable Shares. Payment of the total Liquidation Price for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the register of holders of the Exchangeable Shares maintained by or on behalf of the Corporation or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, of the Exchangeable Share Consideration representing the total Liquidation Price. On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Liquidation Price, unless payment of the total Liquidation Price for such Exchangeable Shares shall not be made upon presentation and surrender of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Liquidation Price has been paid in the manner hereinbefore provided.

 
 
 
 
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6.3       The Corporation shall have the right at any time after the Liquidation Date to deposit or cause to be deposited the total Liquidation Price in respect of the Exchangeable Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof in a custodial account or for safe keeping, in the case of non-cash items, with any chartered bank or trust company in Canada. Upon such deposit being made, the rights of the holders of Exchangeable Shares after such deposit shall be limited to receiving their proportionate part of the total Liquidation Price for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of such Exchangeable Share Consideration, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the USCo Common Stock delivered to them or the custodian on their behalf. Notwithstanding the foregoing, until such payment or deposit of such Exchangeable Share Consideration, the holder shall be deemed to still be a holder of Exchangeable Shares for purposes of all voting rights with respect thereto under the Voting and Exchange Trust Agreement.
 
6.4       After the Corporation has satisfied its obligations to pay the holders of the Exchangeable Shares the Liquidation Price per Exchangeable Share pursuant to Section 6.1 of these share provisions, such holders shall not be entitled to share in any further distribution of the assets of the Corporation.
 
6.5       Subject to the limitations set forth in Section 6.6 of these share provisions, the Corporation is appointed as agent for the holders of Exchangeable Shares for the purpose of offering to Callco (the “ Liquidation Offer ”) the overriding right (CallCo’s right to accept the Liquidation Offer and complete the purchase of the Exchangeable Shares is referred to as the “ Liquidation Call Right ”), in the event of and notwithstanding any proposed liquidation, dissolution or winding-up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, to purchase from all but not less than all of the holders of Exchangeable Shares other than CallCo on the Liquidation Date all but not less than all of the Exchangeable Shares held by each such holder, on payment by Callco to each such holder of an amount per Exchangeable Share equal to the Liquidation Price, which payment of the Liquidation Price shall be satisfied in full by the Exchangeable Share Consideration representing the total Liquidation Price. In the event of the exercise of the Liquidation Call Right and the acceptance of the Liquidation Offer by Callco, each holder of the Exchangeable Shares shall be obligated to sell all of the Exchangeable Shares held by that holder to Callco on the Liquidation Date on payment by Callco Party to such holder of the Liquidation Price for each such share, and the Corporation shall have no obligation to pay any amount on account of the Liquidation Price in respect of such shares so purchased by Callco.

 
 
 
 
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6.6       In the event of any proposed liquidation, dissolution or winding-up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the Corporation or the Transfer Agent, as agent for the holders of Exchangeable Shares, shall immediately make the Liquidation Offer by sending or causing to be sent to CallCo a notice in writing of the Liquidation Offer. To exercise the Liquidation Call Right and accept the Liquidation Offer, Callco must notify the Corporation or the Transfer Agent as agent for the holders of Exchangeable Shares, as applicable, of its intention to exercise such right (and accept such offer) at least 30 days before the Liquidation Date, in the case of a voluntary liquidation, dissolution or winding-up of the Corporation, and at least 5 Business Days before the Liquidation Date, in the case of an involuntary liquidation, dissolution or winding-up of the Corporation. The Corporation shall notify or cause the Transfer Agent to notify the holders of the Exchangeable Shares as to whether or not CallCo has exercised the Liquidation Call Right forthwith after the expiry of the period during which such right may be exercised. If Callco exercises its Liquidation Call Right, Callco will on the Liquidation Date purchase, and each of the holders of Exchangeable Shares will sell, all of the Exchangeable Shares then outstanding for a price per Exchangeable Share equal to the Liquidation Price.
 
6.7       For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Liquidation Call Right, Callco shall deposit with the Corporation or the Transfer Agent, on or before the Liquidation Date, the Exchangeable Share Consideration representing the total the total Liquidation Price. Provided that the total Liquidation Price has been so deposited with the Corporation or the Transfer Agent, on and after the Liquidation Date the rights of each holder of Exchangeable Shares other than Callco shall be limited to receiving such holder’s proportionate share of the total Liquidation Price payable by Callco upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the holder of the USCo Common Stock to which it is entitled. Upon presentation and surrender to the Corporation or the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and instruments as the Corporation or the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Corporation shall deliver or cause the Transfer Agent to deliver on behalf of Callco to such holder, Exchangeable Share Consideration representing the total Redemption Price in accordance with Section 6.3 of these share provisions. If Callco does not exercise the Liquidation Call Right in the manner described above, on the Liquidation Date the holders of the Exchangeable Shares shall be entitled to receive in exchange therefor the Liquidation Price otherwise payable by the Corporation in connection with the liquidation, dissolution or winding-up of the Corporation pursuant to Section 6.1 of these share provisions.
 
 
 
 
 
 
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ARTICLE 7
CERTAIN RESTRICTIONS
 
7.1       So long as any of the Exchangeable Shares are outstanding, the Corporation shall not at any time without, but may at any time with, the approval of the holders of the Exchangeable Shares given as specified in Section 11.2 of these share provisions:
 
(a)  
pay any dividends on the Common Shares or any other shares ranking junior to the Exchangeable Shares, other than stock dividends payable in Common Shares or any such other shares ranking junior to the Exchangeable Shares, as the case may be;
 
(b)  
redeem or purchase or make any capital distribution in respect of the Common Shares or any other shares ranking junior to the Exchangeable Shares;
 
(c)  
redeem or purchase any other shares of the Corporation ranking equally with the Exchangeable Shares with respect to the payment of dividends or on any liquidation distribution; or
 
(d)  
issue any shares which rank superior to the Exchangeable Shares with respect to the payment of dividends or on any liquidation distribution.
 
The restrictions in Sections 7.1(a), (b) and (c) above shall only be applicable if all dividends on the outstanding Exchangeable Shares corresponding to dividends declared with a record date on or following the Effective Date on the USCo Common Stock shall been declared on the Exchangeable Shares and paid in full.
 
 
 
 
 
 
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ARTICLE 8
PURCHASE FOR CANCELLATION
 
8.1       Subject to applicable law, the Corporation may at any time and from time to time purchase for cancellation all or any part of the outstanding Exchangeable Shares at any price per share by tender to all the holders of record of Exchangeable Shares then outstanding. If in response to an invitation for tenders under the provisions of this Section 8.1, more Exchangeable Shares are tendered at a price or prices acceptable to the Corporation than the Corporation is prepared to purchase, the Exchangeable Shares to be purchased by the Corporation shall be purchased as nearly as may be pro rata according to the number of shares tendered by each holder who submits a tender to the Corporation, provided that when shares are tendered at different prices, the pro rating shall be effected (disregarding fractions) only with respect to the shares tendered at the price at which more shares were tendered than the Corporation is prepared to purchase after the Corporation has purchased all the shares tendered at lower prices. If part only of the Exchangeable Shares represented by any certificate shall be purchased, a new certificate for the balance of such shares shall be issued at the expense of the Corporation.
 
8.2       Subject to applicable law, the Corporation by notice from time to time to CallCo, shall be entitled at any time to redeem all or any part of the Exchangeable Shares held by CallCo which were acquired by them pursuant to the Call Rights or Exchange Put Right in exchange for the delivery of USCo Common Stock (the " Delivered Stock ") to or for the account of a holder(s) of Exchangeable Shares. The Exchangeable Shares to be redeemed as set forth in this Section 8.2 shall be acquired by the Corporation in exchange for the issue by the Corporation to CallCo of a promissory note in the principal amount equal to the Current Market Price of the Delivered Stock. All Exchangeable Shares which are redeemed by the Corporation as set forth in this Section 8.2 shall be cancelled by the Corporation.
 
 
 
 
 
 
 
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ARTICLE 9
 
EXCHANGE PUT RIGHT
 
9.1       Upon and subject to the terms and conditions contained in these share provisions and the Voting and Exchange Trust Agreement:
 
(a)  
a holder of Exchangeable Shares shall have the right (the “ Exchange Put Right ”) at any time to require CallCo to purchase all or any part of the Exchangeable Shares of the holder; and
 
(b)  
upon the exercise by the holder of the Exchange Put Right, the holder shall be required to sell to CallCo, and CallCo shall be required to purchase from the holder, that number of Exchangeable Shares in respect of which the Exchange Put Right is exercised, in consideration of the payment by CallCo of an amount per share (the “ Exchange Price ”) equal to the Exchange Share Price applicable on the last Business Day prior to the Exchange Put Date and delivery by or on behalf of CallCo of the Exchangeable Share Consideration representing the total applicable total Exchange Price.
 
9.2       The Exchange Put Right provided in Section 9.1 hereof may be exercised at any time by notice in writing given by the holder to and received by Callco (the date of such receipt, the “ Exchange Put Date ”) accompanied by presentation and surrender of the certificate or certificates representing such Exchangeable Shares, together with such documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of the Corporation and such additional documents and Instruments as CallCo may reasonably require, at the registered office of Callco, or at such other office or offices of Callco or of other persons designated by Callco for that purpose as may from time to time be maintained by Callco for that purpose. Such notice may be (i) in the form of the panel, if any, on the certificates representing Exchangeable Shares, (ii) in the form of the notice and election contained in any letter of transmittal distributed or made available by the Corporation for that purpose, or (iii) in other form satisfactory to Callco (or such other persons aforesaid), shall stipulate the number of Exchangeable Shares in respect of which the right is exercised (which may not exceed the number of shares represented by certificates surrendered to Callco), shall be irrevocable unless the exchange is not completed in accordance herewith and with the Voting and Exchange Trust Agreement and shall constitute the holder’s authorization to Callco (and such other persons aforesaid) to effect the exchange on behalf of the holder.
 
9.3       The completion of the sale and purchase referred to in section 9.1 shall be required to occur, and CallCo shall be required to take all actions on its part necessary to permit it to occur not later than the close of business on the 5th Business Day following the Exchange Put Date.
 
9.4       The presentation and surrender by the holder of Exchangeable Shares under section 9.2 shall constitute the representation, warranty and covenant of the holder that the Exchangeable Shares so purchased are sold free and clear of any lien, encumbrance, security interest or adverse claim or interest.

 
 
 
 
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9.5       If part only of the Exchangeable Shares represented by any certificate are to be sold and purchased pursuant to the exercise of the Exchange Put Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Corporation.
 
9.6       Upon receipt by Callco of the notice, certificates and other documents or instruments as required by ARTICLE 9, Callco shall deliver or cause to be delivered, to the relevant holder at the address of the holder specified in the notice or by holding for pick-up by the holder at the registered office of the Corporation, or at the registered officer of Callco, or at such other office or offices of the Callco or of other persons designated by Callco for that purpose as may from time to time be maintained by Callco, the Exchangeable Share Consideration representing the total applicable Exchange Price, within the time stipulated in Section 9.3. Delivery by CallCo of such Exchangeable Share Consideration shall be deemed to be payment of and shall satisfy and discharge all liability for the total Exchange Price, except as to any cheque included therein which is not paid on due presentation.
 
9.7       On and after the close of business on the Exchange Put Date, the holder of the Exchangeable Shares in respect of which the Exchange Put Right is exercised shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive the total Exchange Price, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the Exchangeable Share Consideration shall not be made, in which case the rights of such holder shall remain unaffected until such payment has been made in the manner hereinbefore provided. On and after the close of business on the Exchange Put Date provided that presentation and surrender of certificate and payment of the Exchangeable Share Consideration has been made in accordance with the foregoing provisions, the holder of the Exchangeable Shares so purchased by CallCo shall thereafter be considered and deemed for all purposes to be a holder of the USCo Common Stock delivered to it. Notwithstanding the foregoing, until payment of the Exchangeable Share Consideration to the bolder, the holder shall be deemed to still be a holder of Exchangeable Shares for purposes of all voting rights with respect thereto under the Voting and Exchange Trust Agreement.
 
ARTICLE 10
 
VOTING RIGHTS
 
10.1       Except as required by applicable law and by ARTICLE 10 hereof, the holders of the Exchangeable Shares shall not be entitled to receive notice or to attend at any meeting of the shareholders of the Corporation and shall not be entitled to vote at any such meeting (except where the holders of a specified class are entitled to vote separately as a class as provided in the in the Act). Notwithstanding the aforesaid restrictions, conditions or prohibitions on the right to vote, the holders of the Exchangeable Shares shall be entitled to notice of meetings of shareholders called for the purpose of authorizing the dissolution of the Corporation or the sale, or lease or exchange of all or substantially all of the property of the Corporation other than in the ordinary course of business of the Corporation.
 
 
 
 
 
 
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ARTICLE 11
AMENDMENT AND APPROVAL
 
11.1       The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed but, except only with the approval of the holders of the Exchangeable Shares given as hereinafter specified.
 
11.2       Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law subject to a minimum requirement that such approval be evidenced by resolution passed by not less than two-thirds (or such higher percentage as may be required by law) of the votes cast on such resolution by persons represented in person or by proxy at a meeting of the holders of Exchangeable Shares duly called and held at which the holders of at least 80% of the outstanding Exchangeable Shares at that time are present or represented by proxy, excluding Exchangeable Shares beneficially owned by US, CallCo or any of their respective Subsidiaries; provided that if at any such meeting the holders of at least 80% of the outstanding Exchangeable Shares at that time are not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such place and time (not less than 10 days thereafter) as may be designated by the Chairman of such meeting. At such adjourned meeting the holders of Exchangeable Shares present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than two-thirds (or such higher percentage as may be required by law) of the votes cast on such resolution by persons represented in person or by proxy at such meeting (other than votes cast in respect of Exchangeable Shares beneficially held by USCo or CallCo or any of their respective Subsidiaries) shall constitute the approval or consent of the holders of the Exchangeable Shares. For the purpose of this section, any spoiled votes, illegible votes, defective votes and abstinences shall be deemed to be votes not cast.
 
 
 
 
 
 
 
 
 
 
 
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ARTICLE 12
 
RECIPROCAL CHANGES, ETC. IN RESPECT OF USCO COMMON STOCK
 
12.1       The Corporation and each holder of an Exchangeable Share acknowledge that the Support Agreement provides, in part, that USCo will not:
 
(a)  
issue or distribute USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) to the holders of all or substantially all of the then outstanding USCo Common Stock by way of stock distribution or other distribution, other than an issue of USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) to holders of USCo Common Stock who exercise an option to receive distributions in USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) in lieu of receiving cash distributions; or
 
(b)  
issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding USCo Common Stock entitling them to subscribe for or to purchase USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock); or
 
(c)  
issue or distribute to the holders of all or substantially all of the then outstanding USCo Common Stock:
 
(i)  
shares or securities of USCo of any class other than USCo Common Stock (other than securities convertible into or exchangeable for or carrying rights to acquire USCo Common Stock);
 
(ii)  
rights, options or warrants other than those referred to in Section (b) (b)above;
 
(iii)  
evidences of indebtedness of USCo; or
 
(iv)  
assets of USCo (other than dividends on the USCo Common Stock in respect of which a corresponding dividend is concurrently paid on the Exchangeable Shares in accordance with section 3.1 hereof);
 
unless one or both of the Corporation and USCo is permitted under applicable law to issue and distribute the economic equivalent on a per share basis of such rights, options, warrants, securities, evidences or indebtedness or assets and the items referred to in clauses (a) (b) and (c) above, as applicable, are issued or distributed simultaneously to holders of Exchangeable Shares.
 
Each holder of an Exchangeable Share further acknowledges that the Support Agreement further provides, in part, that USCo will not:
 
 
 
 
 
3X

 
 
(a)  
subdivide, redivide or change the then outstanding USCo Common Stock into a greater number of USCo Common Stock; or
 
(b)  
reduce, combine, consolidate or change the then outstanding USCo Common Stock into a lesser number of USCo Common Stock; or
 
(c)  
reclassify or otherwise change the rights, privileges or other terms of the USCo Common Stock or effect an amalgamation, merger, reorganization or other transaction involving or affecting the USCo Common Stock.
 
unless the Corporation is permitted under applicable law to simultaneously make the same or an economically equivalent change to, or in the rights of the holders of, the Exchangeable Shares and the same or an economically equivalent change is simultaneously made to, or in the rights of the holder of, the Exchangeable Shares.
 
The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with ARTICLE 11 of these share provisions.
 
ARTICLE 13
 
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
 
13.1       The Corporation shall take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to ensure performance and compliance by USCo, CallCo and the Corporation with all provisions of the Support Agreement, the Voting and Exchange Trust Agreement, and USCo’s Certificate and Articles of Incorporation, as amended, applicable to USCo, CallCo and the Corporation, respectively, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Corporation all rights and benefits in favour of the Corporation thereunder or pursuant thereto.
 
13.2       The Corporation shall not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement, the Voting and Exchange Trust Agreement, and USCo’s Certificate and Articles of Incorporation, as amended, without the approval of the holders of the Exchangeable Shares given in accordance with ARTICLE 11 of these share provisions other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of:
 
(a)  
adding to the covenants of the other parties to such agreement for the protection of the Corporation or the holders of the Exchangeable Shares thereunder;
 

 
 
 
 
 
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(b)  
making such provisions or modifications not inconsistent with such agreement or certificate as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or
 
(c)  
making such changes in or corrections to such agreement or certificate which, on the advice of counsel to the Corporation, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares.
 
ARTICLE 14
 
LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS
 
14.1       The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Call Rights, the Exchange Put Right, the Support Agreement, and the Voting and Exchange Trust Agreement (including the provisions with respect to the voting rights thereunder).
 
14.2       Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of CallCo and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Corporation or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of CallCo as therein provided.
 
14.3       The Corporation, CallCo and the Transfer Agent shall be entitled to deduct and withhold from any dividend or consideration otherwise payable to any holder of Exchangeable Shares such amounts as the Corporation, CallCo or the Transfer Agent is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada) or any provision of provincial, local or foreign tax law, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the holder of the Exchangeable Shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash consideration otherwise, if any, payable to the holder, the Corporation, CallCo and the Transfer Agent are hereby authorized to sell or otherwise dispose of such portion of the dividends or consideration as is necessary to provide sufficient funds to the Corporation, CallCo or the Transfer Agent, as the case may be, to enable it to comply with such deduction or withholding requirement and the Corporation, CallCo or the Transfer Agent shall notify the holder thereof and remit any unapplied balance of the net proceeds of such sale.
 
 
 
 
 
 
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ARTICLE 15
CERTAIN NON-RESIDENT HOLDERS
 
15.1       Notwithstanding anything contained in these share provisions, the obligation of the Corporation or CallCo to pay the Retraction Price, Purchase Price, Liquidation Price, Redemption Price or Exchange Price in respect of Exchangeable Shares held by a Person (referred to in this Article 15 as the " Affected Holder ") whom the Transfer Agent reasonably believes is located in the United States, is a US Person or is holding the Exchangeable Shares for the account or benefit of a US Person, shall be satisfied by delivering the USCo Common Stock which would, but for this ARTICLE 15, have been received by the Affected Holder to the Transfer Agent who shall sell such USCo Common Stock on the Canadian or United Stated stock exchange on which the USCo Common Stock are then listed and, upon such sale, the rights of the Affected Holder shall be limited to receiving the net proceeds of sale (net of applicable taxes) upon presentation and surrender of the certificates representing such Exchangeable Shares; provided, however, that the provisions of this ARTICLE 15 shall not apply with respect to any particular Affected Holder of Exchangeable Shares if such Affected Holder shall have provided an opinion of counsel of recognized standing to the Transfer Agent, the Corporation and CallCo, in form and substance satisfactory to the Corporation, the Transfer Agent or CallCo, as the case may be, to the effect that the issuance to such Affected Holder of USCo Common Stock in payment of the Retraction Price, Purchase Price, Liquidation Price, Redemption Price, or Exchange Price, as applicable, does not require registration under the US Securities Act or applicable state securities laws.
 
ARTICLE 16
 
SPECIFIED AMOUNT
 
16.1       The amount specified in respect of each Exchangeable Share for the purposes of subsection 191(4) of the Income Tax Act (Canada) shall be an amount equal to the fair market value of one USCo Common Stock on the Effective Date.
 
ARTICLE 17
 
NO FRACTIONAL ENTITLEMENTS
 
17.1       Notwithstanding anything contained in these share provisions, no holder of an Exchangeable Share shall be entitled to and neither the Corporation, the Transfer Agent, CallCo nor the Trustee shall deliver fractions of USCo Common Stock. Where the application of the provisions of these share provisions would otherwise result in a holder of Exchangeable Shares receiving a fraction of a USCo Common Stock, such holder of Exchangeable Shares shall only be entitled to receive the nearest whole number of the USCo Common Stock (with fractions equal to exactly 0.5 being rounded up).
 
 
 
 
 
 
 
3AA
ARTICLE 18
SATISFACTION OF UNPAID DIVIDEND AMOUNTS
 
18.1       Notwithstanding anything contained in these share provisions, if the Corporation, or CallCo is prohibited by applicable law, contract or otherwise from paying in cash the amount of accrued but unpaid dividends due to holders of Exchangeable Shares on any redemption, retraction or exchange of Exchangeable Shares or in the event of the liquidation, dissolution or winding-up of the Corporation or any other proposed distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, then such amount shall be satisfied by the Corporation or CallCo, as the case may be, by the delivery of that number of USCo Common Stock equal in value (based on the Current Market Price of the USCo Common Stock at the time) to the amount of such accrued but unpaid dividends.
 
ARTICLE 19
 
UNPAID DIVIDENDS ON RETRACTION, REDEMPTION, PURCHASE OR
 
EXCHANGE
 
19.1       For greater certainty, the amount of any accrued but unpaid dividends on the Exchangeable Shares payable to a holder of Exchangeable Shares by the Corporation or CallCo, whether under these share provisions or under the Voting and Exchange Trust Agreement, on any retraction, redemption, purchase or exchange of such holder’s Exchangeable Shares hereunder or thereunder, shall not include the amount of any cash dividend that has been declared on the Exchangeable Shares and is payable by the Corporation to the holders of Exchangeable Shares determined as of a record date that is prior to the applicable Redemption Date, Retraction Date, Liquidation Date, Exchange Put Date, or such other date of closing of the purchase and sale of such Exchangeable Shares , as the case may be.
 
ARTICLE 20
 
NOTICES
 
20.1       Any notice, request or other communication to be given to the Corporation by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or by delivery to the registered office of the Corporation and addressed to the attention of the President of the Corporation. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Corporation.
 
 
 
 
 
 
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20.2       Any presentation and surrender by a holder of Exchangeable Shares to the Corporation or the Transfer Agent of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of the Corporation or the retraction, redemption, or exchange of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of the Corporation or to such office of the Transfer Agent as may be specified by the Corporation by notice to the holders of the Exchangeable Shares, in each case, addressed to the attention of the President of the Corporation. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by the Corporation or the Transfer Agent, as the case may be, and the method of any such presentation and surrender of certificates shall be at the sole risk of the holder.
 
20.3       Any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of the Corporation or Callco shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the register of shareholders of the Corporation or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the 5th Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Corporation pursuant thereto.
 
20.4       For greater certainty, the Corporation shall not be required for any purpose under these share provisions to recognize or take account of person who are not so recorded in such register of the holders of the Exchangeable Share of the Corporation.
 
20.5       All Exchangeable Shares acquired by the Corporation upon the redemption or retraction thereof shall be cancelled.
 
 
 
 
 
 
 
 
 
3CC
SCHEDULE A
RETRACTION REQUEST
 
TO:Foodfest Acquisition Corp. (the “Corporation” )
 
AND TO:Foodfest Call Corp. ( “CallCo” )
 
This notice is given pursuant to Article 4 of the provisions (the " Share Provisions ") attaching to the Exchangeable Shares of the Corporation represented by the enclosed certificate and all capitalized words and expressions used in this notice that are defined in the Share Provisions have the meanings ascribed to such words and expressions in such Share Provisions.
 
The undersigned hereby notifies the Corporation that, subject to the Retraction Call Right referred to below, the undersigned desires to have the Corporation redeem in accordance with Article 4 of the Share Provisions:
 
o
     all share(s) represented by the accompanying certificate(s); or
   
  o      _________share(s) of the shares represented by the accompanying certificate(s)
 
NOTE: The Retraction Date must be a Business Day and must be less than 5 Business Days nor more than 10 Business Days after the date upon which this notice and the accompanying shares are received by the Corporation. In the event that no such business day is correctly specified above, the Retraction Date shall be deemed to be the 10th Business Day after the date on which this notice is received by the Corporation.
 
The undersigned acknowledges the overriding Retraction Call Right of CallCo to purchase all but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable Retraction Offer by the undersigned to sell the Retracted Shares to CallCo in accordance with the Retraction Call Right on the Retraction Date for the Retraction Price and on the other terms and conditions set out in Section 4.3 of the Share Provisions. If CallCo determines not to exercise the Retraction Call Right, the Corporation will notify the undersigned of such fact as soon as possible. This Retraction Request, and this Retraction Offer to sell the Retracted Shares to CallCo, may be revoked and withdrawn by the undersigned only by notice in writing given to the Corporation and CallCo at any time before the close of business on the Business Day immediately preceding the Retraction Date.
 
The undersigned acknowledges that if, as a result of liquidity or solvency provisions of applicable law, the Corporation is unable to redeem all Retracted Shares, the undersigned will be deemed to have exercised the Exchange Rights (as defined in the Voting and Exchange Trust Agreement) so as to require CallCo to purchase the unredeemed Retracted Shares.
 
The undersigned hereby represents and warrants to the Corporation and CallCo that the undersigned has good title to, and owns, the share(s) represented by the accompanying certificate(s) free and clear of all liens, claims, encumbrances, security interests and adverse claims or interests.
 
The undersigned hereby represents and warrants to the Corporation and CallCo that the undersigned
 
o
is
(select one)
o
is not

 
a non-resident of Canada for purposes of the Income Tax Act (Canada) ( “ITA” ) (a "non-resident" being a: (i) Person who is not a resident of Canada for the purposes of ITA; or (ii) a partnership that is not a Canadian partnership for the purposes of ITA). The undersigned acknowledges that in the absence of an indication that the undersigned is not a non-resident of Canada, withholding on account of Canadian tax may be made from amounts payable to the undersigned on the redemption or purchase of the Retracted Shares.
 
 
 
 
 
 
3DD
 
The undersigned hereby represents and warrants to the Corporation and CallCo that the undersigned
 
 
o
is
(select one)
o
is not
 
in the United States, a U.S. Person or holding the Exchangeable Shares for the account or benefit of a U.S. Person (as defined in Rule 902(k) of Regulation S under the United States Securities Act of 1933 , as amended). The undersigned acknowledges that in the absence of (i) confirmation that the undersigned is not in the United States, a U.S. Person or holding the Exchangeable Shares for the account or benefit of a U.S. Person, or (ii) the delivery by the undersigned to the Transfer Agent, the Corporation and CallCo of an opinion of counsel in form and substance as contemplated in Article 15 of the Share Provisions, the obligation of the Corporation or CallCo to pay the Retraction Price or the Purchase Price, as the case may be, in respect of the Retracted Shares, shall be satisfied by delivering the USCo Common Stock which would have been received by the undersigned to the Transfer Agent who shall sell such USCo Common Stock on the stock exchange on which the USCo Common Stock is listed and, upon such sale, the rights of the undersigned shall be limited to receiving the net proceeds of sale (net of applicable taxes).
 
The undersigned hereby represents and warrants to the Corporation and CallCo that the undersigned has good title to, and owns, the share(s) represented by the accompanying certificate(s) free and clear of all liens, claims, encumbrances, security interests and adverse claims or interests.
 
         
(Date)    (Signature of Shareholder)   (Guarantee of Signature)
                                      
 
o
Please check box if the securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares are to be held for pick-up by the shareholder from the Transfer Agent, failing which the securities and any cheque(s) will be mailed to the last address of the shareholder as it appears on the register.
 
NOTE: This panel must be completed and the accompanying certificate(s), together with such additional documents as the Transfer Agent may require, must be deposited with the Transfer Agent at its principal place of business in Toronto, Ontario. The securities and any cheque(s) or other non-cash assets resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to, or transferred into, respectively, the name of the shareholder as it appears on the register of the Corporation and the securities, cheque(s), and other non-cash assets resulting from such retraction or purchase will be delivered to such shareholder in accordance with the Share Provisions.
 
 
 
     
  Please Print the Name of Person in Whose Name  
Date
Securities or Cheque(s) or Other Non-Cash Assets
are to be Registered, Issued or Delivered.
   
     
     
Name of Shareholder   
Signature of Shareholder
     
     
City, Province   
Signature Guarantee by
 
 
NOTE: If this Retraction Request is for less than all of the shares represented by the enclosed certificate, a certificate representing the remaining share(s) of the Corporation will be issued and registered in the name of the shareholder as it appears on the register of the Corporation or its lawful transferee.

 
 
 
 
3EE
 
 
2.       Common shares
 
The Common shares (the “Common Shares”) in the capital of the Corporation shall have attached thereto the following rights, privileges, restrictions and conditions:
 
1.1       Dividends
 
Subject to the prior rights of the Exchangeable Shares and any other shares ranking above the Common shares but always in preference and priority to any other shares ranking junior to the Common Shares, the holder of the Common Shares shall, be entitled, out of the moneys of the Corporation properly applicable to the payment of dividends, to dividends in such amount per share as shall be determined by the directors from time to time in their absolute discretion.
 
1.2       Liquidation, Dissolution & Winding-Up
 
Subject to the prior rights of the holders of the Exchangeable Shares and any other shares ranking above the Common Shares, in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or other distribution of the assets of the Corporation of the purpose of winding-up its affairs, the holders of the Common Shares shall be entitled to receive the remaining property and assets of the Corporation.
 
1.3       Voting Rights
 
The holders of the Common shares shall be entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Corporation (except where the holders of another class of shares are entitled to vote separately as a class as provided in the Act) and each Common Share shall confer the right to 1 vote in person or by proxy in respect thereof.
 
1.4       Restrictions
 
So long as any of the Exchangeable Shares of the Corporation are outstanding, the Corporation shall not, at any time without, but may at any time with, the approval of the Board of Directors and of the holders of the Common Shares issue any further Exchangeable Shares of the Corporation, except as specifically required in accordance with the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares of the Corporation.
 
 
 
 
 
 
Exhibit 2.2
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 12th day of November, 2010. AMONG:

FOODFEST INTERNATIONAL 2000, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "USCo")
 

-and-
 

FOODFEST CALL CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "Calico")
 

-and-
 

FOODFEST ACQUISITION CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "AcquisitionCo")
 

-and-
 

PATRIQUIN LAW PROFESSIONAL CORPORATION, a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "Trustee")
 

WHEREAS the articles of AcquisitionCo set forth the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares;
 

WHEREAS the parties hereto have agreed to execute and deliver a voting and exchange trust agreement which would govern the relationship among the parties as it related to the issuance and existence of the Exchangeable Shares, and give effect to the exchange rights and voting rights created for the benefit of the holders of Exchangeable Shares; and
 

WHEREAS the foregoing recitals and the statements of facts contained therein are made by USCo, AcquisitionCo and Calico, and not by the Trustee;
 

NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows:


 
 
 

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ARTICLE 1

1.1                     Definitions

"Act" means the Business Corporations Act (Ontario), as amended; "Affiliate" has the meaning given to that term in the Securities Act;

"Aggregate Equivalent Vote Amount" means, with respect to any matter, proposition or question on which USCo Common Stockholder are entitled to vote, consent or otherwise act, the product of (i) the number of USCo Common Stock issuable from time to time upon the redemption, retraction or exchange of all Exchangeable Shares issued and outstanding and held by Beneficiaries on the record date of any meeting multiplied by (ii) the Equivalent Vote Amount;
 
"Automatic Exchange Rights" means the benefit of the obligation of USCo and Calico to effect the automatic exchange of Exchangeable Shares for USCo Common Stock as defined in Section 5.12(c);
 

"Beneficiary Votes" has the meaning given to that term in Section 4.2;
 

"Beneficiaries" means the registered holders from time to time of Exchangeable Shares, other than USCo and Calico;
 

"Board of Directors" means the Board of Directors of AcquisitionCo and/or Calico, as the case may be, from time to time;
 

"Business Day" means any day on which commercial banks are generally open for business in Toronto, Ontario, other than a Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the Province of Ontario or the federal laws of Canada;

"Call Rights" has the meaning given to that term in the Share Provisions; "Current Market Price" has the meaning given to that term in the Share Provisions;

"Equivalent Vote Amount" means, with respect to any matter, proposition or question on which USCo Common Stockholder are entitled to vote, consent or otherwise act, the number of votes to which a holder of one USCo Common Stock is entitled with respect to such matter, proposition or question;

"Exchange Ratio" has the meaning given to that term in the Share Provisions;
"Exchange Rights" has the meaning given to that term in Section 5.1 (a);
"Exchange Rights Trigger Event" has the meaning given to that term in Section 5.1 (a);

 
 
 

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"Exchangeable Shares" means the non-voting exchangeable shares of AcquisitionCo, having the rights, privileges, restrictions and conditions set out in the Share Provisions;
 

"USCo Consent" has the meaning given to that term in Section 4.2;
 
"USCo Liquidation Event" has the meaning given to that term in Section 5.12(b);
 

"USCo Liquidation Event Effective Date" has the meaning given to that term in Section 5.12(c);

"USCo Meeting" has the meaning given to that term in Section 4.2;
"USCo Successor" has the meaning given to that term in Section 10.1 (a);
"USCo Common Stocks" means the trust units of USCo as constituted on the date hereof;

"USCo Common Stockholder" means the registered holders of USCo Common Stocks from time to time;
 

"Indemnified Parties" has the meaning given to that term in Section 8.1 ;
 

"Insolvency Event" means the institution by AcquisitionCo of any proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the consent of AcquisitionCo to the institution of bankruptcy, insolvency, dissolution or winding-up proceedings against it, or the filing of a petition, answer or consent seeking dissolution or winding-up under any bankruptcy, insolvency or analogous laws, including without limitation the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by AcquisitionCo to contest in good faith any such proceedings commenced in respect of AcquisitionCo within 15 days of becoming aware thereof, or the consent by AcquisitionCo to the filing of any such petition or to the appointment of a receiver, or the making by AcquisitionCo of a general assignment for the benefit of creditors, or the admission in writing by AcquisitionCo of its inability to pay its debts generally as they become due, or AcquisitionCo not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to Section 4.6 of the Share Provisions;

"Liquidation Call Right" has the meaning given to that term in the Share Provisions; "List" has the meaning given to that term in Section 4.6;

"Officer's Certificate" means, with respect to AcquisitionCo, a certificate signed by any officer or director of AcquisitionCo.
 

"person" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, government body, syndicate or other entity, whether or not having legal status;


 
 
 

-4-
 

"Plan of Arrangement" means the Plan of Arrangement substantially in the form set out in Schedule A to the Arrangement Agreement, as amended or supplemented from time to time;
 

"Redemption Call Right" has the meaning given to that term in the Share Provisions; "Retracted Shares" has the meaning given to that term in Section 5.7;
 
"Retraction Call Right" has the meaning given to that term in the Share Provisions; "Securities Act" means the Securities Act (Ontario), as amended; 
"Share Provisions" means the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares, all as set forth in the articles of AcquisitionCo;
 

"Special Voting Unit" means the one special voting unit of USCo, issued by USCo to and deposited with the Trustee, which entitles the holders of record of Exchangeable Shares who are Beneficiaries to a number of votes at meetings of USCo Common Stockholder equal to the Aggregate Equivalent Vote Amount;
 

"Support Agreement" means that certain support agreement made as of even date herewith among USCo, AcquisitionCo and Calico;
 

"Trust" means the trust created by this Agreement;
 

"Trust Estate" means the Voting Rights, the Exchange Rights, the Automatic Exchange Rights and any money or other property which may be held by the Trustee from time to time pursuant to this Agreement;
 

"Trustee" means Patriquin Law Professional Corporation as trustee hereunder and, subject to the provisions of Article 9, includes any successor trustee; and
 

"Voting Rights" means the voting rights attached to the Special Voting Unit.
 

1.2                     Interpretation Not Affected by Headings, etc.
 

The division of this Agreement into Articles, Sections and other portions and the insertion of headings are for convenience of reference only and should not affect the construction or interpretation of this Agreement. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number and/or a letter refer to the specified Article or Section of this Agreement. The terms "this Agreement", "hereof, "herein" and "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.
 

1 .3                     Number, Gender, etc.
 

Words importing the singular number only shall include the plural and vice versa. Words importing any gender shall include all genders.


 
 
 

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1.4                    Date for any Action
 

If any date on which any action is required to be taken under this Agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
 

ARTICLE 2

PURPOSE OF AGREEMENT
3.1                    Establishment of the Trust

The purpose of this Agreement is to create the Trust in respect of the Trust Estate for the benefit of the Beneficiaries, as herein provided. The Trustee will hold the Special Voting Unit and its attached Voting Rights and the Exchange Rights and the Automatic Exchange Rights in order to enable the Trustee to exercise such rights, in each case as trustee for and on behalf of the Beneficiaries as provided in this Agreement.
 

ARTICLE 3
SPECIAL VOTING UNIT
3.1                     Issuance and Ownership of the Special Voting Unit
 
 
 

 
USCo has issued to and has deposited with the Trustee the Special Voting Unit to be hereafter held of record by the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries and in accordance with the provisions of this Agreement. USCo hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereof) for the issuance of the Special Voting Unit by USCo to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Special Voting Unit and shall be entitled to exercise all of the rights and powers of an owner with respect to the Special Voting Unit, provided that the Trustee shall:
 

(a)  
hold the Special Voting Unit and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this Agreement; and
 

(b)  
except as specifically authorized by this Agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with the Special Voting Unit, and the Special Voting Unit shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this Agreement.
 

3.2                       Legended Share Certificates


 
 
 

-6-
 

AcquisitionCo will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of their right to instruct the Trustee with respect to the exercise of the Voting Rights with respect to the Exchangeable Shares held by a Beneficiary.
 

3.3                     Safe Keeping of Certificate
 

The certificate representing the Special Voting Unit shall at all times be held in safe keeping by the Trustee or its agent.
 

ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1                       Voting Rights
 

The Trustee, as the holder of record of the Special Voting Unit, shall be entitled to all of the Voting Rights, including the right to consent to or to vote in person or by proxy the Special Voting Unit, on any matter, question or proposition whatsoever that may properly come before the USCo Stockholders at a USCo Meeting or in connection with a USCo Consent. The Voting Rights shall be and remain vested in and exercised by the Trustee. Subject to Section 6.IS hereof, the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 4 from Beneficiaries entitled to instruct the Trustee as to the voting thereof at the time at which a USCo Consent is sought or a USCo Meeting is held. To the extent that no instructions are received from a Beneficiary with respect to the Voting Rights to which such Beneficiary is entitled, the Trustee shall not exercise or permit the exercise of such Beneficiary's Voting Rights.
 

4.2                      Number of Votes
 

With respect to all meetings of USCo Stockholders at which Beneficiaries of USCo Common Stock are entitled to vote (a "USCo Meeting") and with respect to all written consents sought by USCo from USCo Stockholder (a "USCo Consent"), each Beneficiary shall be entitled to instruct the Trustee to cast and exercise, in the manner instructed, the number of votes comprised in the Special Voting Unit that relate to each Exchangeable Share owned of record by such Beneficiary on the record date established by USCo or by applicable law for such USCo Meeting or USCo Consent, as the case may be, (the "Beneficiary Votes") in respect of each matter, question or proposition to be voted on at such USCo Meeting or to be consented to in connection with such USCo Consent.
 

4.3                     Mailings to Stockholders
 

With respect to each USCo Meeting and USCo Consent, the Trustee will mail or cause to be mailed (or otherwise communicate in the same manner as USCo utilizes in communications to USCo Stockholders, subject to the Trustee's ability to provide this method of communication and upon being advised in writing of such method) to each of the Beneficiaries named in the List on the same day as the initial mailing or notice (or other communication) with respect thereto is given by USCo to USCo Stockholders:

 

 
 
 

-7-
 

     (a)   a copy of such notice, together with any proxy or information statement and related materials (but excluding proxies to vote USCo common stock) to be provided to USCo Stockholders;
 

     (b)   a statement of the current Exchange Ratio;
 

     (c)   a statement that such Beneficiary is entitled to instruct the Trustee as to the exercise of the Beneficiary Votes with respect to such USCo Meeting or USCo Consent, as the case may be, or, pursuant to Section 4.7 hereof, to attend such USCo Meeting and to exercise personally the Beneficiary Votes thereat;
 
     (d)   a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give:
 

         (i)      a proxy to such Beneficiary or such Beneficiary's designee to exercise personally the Beneficiary Votes; or
 

         (ii)      a proxy to a designated agent or other representative of the management of USCo to exercise such Beneficiary Votes;
 

     (e)   a statement that if no such instructions are received from the Beneficiary, the Beneficiary Votes to which such Beneficiary is entitled will not be exercised;
 

     (f)   a form of direction whereby the Beneficiary may so direct and instruct the Trustee as contemplated herein; and
 

     (g)   a statement of (i) the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of a USCo Meeting shall not be earlier than 48 hours prior to such meeting, and (ii) the method for revoking or amending such instructions.
 

The materials referred to above are to be provided by USCo to the Trustee, but shall be subject to review and comment by the Trustee. USCo will ensure that such materials are provided to the Trustee in sufficient time to permit the Trustee to: (i) review and comment on such material as aforesaid; and (ii) send such materials to each Beneficiary at the same time as such materials are first sent to the USCo Stockholders.
 

For the purposes of determining Beneficiary Votes to which a Beneficiary is entitled in respect of any such USCo Meeting or USCo Consent, the number of Exchangeable Shares owned as of record by the Beneficiary shall be determined at the close of business on the record date established by USCo or by applicable law for purposes of determining USCo Stockholders entitled to vote at such USCo Meeting or to give written consent in connection with such USCo Consent. USCo will notify the Trustee in writing of any decision of the Board of Directors of AcquisitionCo with respect to the calling of any such USCo Meeting or the seeking of such USCo Consent and shall provide all necessary information and materials to the Trustee in each case promptly and in any event in sufficient time to enable the Trustee to perform its obligations contemplated by this Section 4.3.


 
 
 

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4.4                     Copies of Stockholder Information
 

USCo will deliver to the Trustee copies of all proxy materials, (including notices of USCo Meetings, but excluding proxies to vote USCo Trust Units), information statements, reports (including without limitation all interim and annual financial statements) and other written communications that are to be distributed from time to time to USCo Stockholders in sufficient quantities and in sufficient time so as to enable the Trustee to send those materials to each Beneficiary at the same time as such materials are first sent to USCo Stockholders. The Trustee will mail or otherwise send to each Beneficiary, at the expense of USCo, copies of all such materials (and all materials specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by USCo) received by the Trustee from USCo at the same time as such materials are first sent to USCo Stockholders. The Trustee will make copies of all such materials available for inspection by any Beneficiary at the Trustee's principal place of business in the City of Toronto.
 

4.5                     Other Materials
 

Immediately after receipt by USCo or any USCo Stockholers of any material sent or given generally to the USCo Stockholders by or on behalf of a third party, including without limitation dissident proxy and information circulars (and related information and material) and tender and exchange offer circulars (and related information and material), USCo shall use its reasonable efforts to obtain and deliver to the Trustee copies thereof in sufficient quantities so as to enable the Trustee to forward such material (unless the same has been provided directly to Beneficiaries by such third party) to each Beneficiary as soon as possible thereafter. As soon as practicable after receipt thereof, the Trustee will mail or otherwise send to each Beneficiary, at the expense of USCo, copies of all such materials received by the Trustee from USCo. The Trustee will also make copies of all such materials available for inspection by any Beneficiary at the Trustee's principal place of business in the City of Toronto.
 

4.6                     List of Persons Entitled to Vote
 

AcquisitionCo shall: (i) prior to each annual, general or special USCo Meeting or the seeking of any USCo Consent and (ii) forthwith upon each request made at any time by the Trustee in writing, prepare or cause to be prepared a list (a "List") of the names and addresses of the Beneficiaries arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Beneficiary, in each case at the close of business on the date specified by the Trustee in such request or, in the case of a List prepared in connection with a USCo Meeting or a USCo Consent, at the close of business on the record date established by USCo or pursuant to applicable law for determining the USCo Stockholders entitled to receive notice of and/or to vote at such USCo Meeting or to give consent in connection with such USCo Consent. Each such List shall be delivered to the Trustee promptly after receipt by AcquisitionCo of such request on the record date for such meeting or seeking of consent, as the case may be, and in any event within sufficient time as to enable the Trustee to perform its obligations under this Agreement. USCo agrees to give AcquisitionCo written notice (with a copy to the Trustee) of the calling of any USCo Meeting or the seeking of any USCo Consent, together with the record dates therefor, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable AcquisitionCo to perform its obligations under this Section 4.6.


 
 
 

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4.7                     Entitlement to Direct Votes
 

Any Beneficiary named in a List prepared in connection with any USco Meeting or any USCo Consent will be entitled: (i) to instruct the Trustee in the manner described in Section 4.3 hereof with respect to the exercise of the Beneficiary Votes to which such Beneficiary is entitled; or (ii) to attend such meeting and personally to exercise thereat (or to exercise with respect to any written consent), as the proxy of the Trustee, the Beneficiary Votes to which such Beneficiary is entitled.
 

4.8                     Voting by Trustee, and Attendance of Trustee Representative, at Meeting
 

     (a)     In connection with each USCo Meeting and USCo Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Beneficiary pursuant to Section 4.3 hereof, the Beneficiary Votes as to which such Beneficiary is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Beneficiary prior to the time and date fixed by it for receipt of such instructions in the notice given by the Trustee to the Beneficiary pursuant to section 4.3 hereof;
 
     (b)     Subject to receipt of instructions contemplated by Section 4.3(f), the Trustee shall cause such representatives as are empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend each USCo Meeting. Upon submission by a Beneficiary (or its designee) of identification satisfactory to the Trustee's representatives, and at the Beneficiary's request, such representatives shall sign and deliver to such Beneficiary (or its designee) a proxy to exercise personally the Beneficiary Votes as to which such Beneficiary is otherwise entitled hereunder to direct the vote, if such Beneficiary either:
 

         (i)   has not previously given the Trustee instructions pursuant to Section 4.3 hereof in respect of such meeting; or
 

         (ii)   submits to the Trustee's representatives written revocation of any such previous instructions.
 

At such meeting, the Beneficiary exercising such Beneficiary Votes shall have the same rights as the Trustee to speak at the meeting in respect of any matter, question or proposition, to vote by way of ballot at the meeting in respect of any matter, question or proposition and to vote at such meeting by way of a show of hands in respect of any matter, question or proposition.
 

4.9                     Distribution of Written Materials
 

Any written materials to be distributed by the Trustee to the Beneficiaries pursuant to this Agreement shall be delivered or sent by mail (or otherwise communicated in the same manner as USCo utilizes in communications to USCo Stockholders subject to the Trustee's ability to provide this method of communication and upon being advised in writing of such method) to each Beneficiary at its address as shown on the books of AcquisitionCo. AcquisitionCo shall provide or cause to be provided to the Trustee for this purpose, on a timely basis and without charge or other expense:
 

     (a)    current lists of the Beneficiaries; and
 

     (b)    on the request of the Trustee, mailing labels to enable the Trustee to carry out it duties under this agreement.
 

The materials referred to above are to be provided by AcquisitionCo to the Trustee, but shall be subject to review and comment by the Trustee.


 
 
 

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4.10                   Termination of Voting Rights
 

Except as otherwise provided herein or in the Share Provisions, all of the rights of a Beneficiary with respect to the Beneficiary Votes exercisable in respect of the Exchangeable Shares held by such Beneficiary, including the right to instruct the Trustee as to the voting of or to vote personally such Beneficiary Votes, shall be deemed to be surrendered by the Beneficiary to USCo, and such Beneficiary Votes and the Voting Rights represented thereby shall cease immediately, upon the delivery by such Beneficiary to the Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Beneficiary of the Exchange Rights or the occurrence of the Automatic Exchange Rights (unless in any case USCo or CallCo shall not have delivered the consideration deliverable in exchange therefor to the Trustee for delivery to the Beneficiaries), or upon the retraction or redemption of Exchangeable Shares pursuant to Article 4 or Article 5 of the Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of AcquisitionCo or any other distribution of the assets of AcquisitionCo among its shareholders for the purpose of winding up its affairs pursuant to Article 6 of the Share Provisions, or upon the purchase of Exchangeable Shares from the Beneficiary thereof by CallCo pursuant to the exercise by Calico of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.
 

ARTICLE 5

EXCHANGE RIGHTS AND AUTOMATIC EXCHANGE
5. 1                   Grant and Ownership of the Exchange Rights

Each of USCo and CallCo grants to the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries:
 
     (a)     the  right  (the  "Exchange  Rights"),  upon  the  occurrence  and  during the continuance of (any such occurrence being an "Exchange Rights Trigger Event"):
 

         (i)      an Insolvency Event; or
 

         (ii)      circumstances in which USCo or CallCo are entitled to exercise any of the Call Rights, but elect not to exercise such Call Rights,
 

to require USCo or CallCo to purchase from each or any Beneficiary all or any part of the Exchangeable Shares held by that Beneficiary; and


 
 
 

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     (b)    the Automatic Exchange Rights,
 

all in accordance with the provisions of this Agreement. Each of USCo and CallCo hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereof) for the grant of the Exchange Rights and the Automatic Exchange Rights by USCo and CallCo to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Exchange Rights and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Exchange Rights and the Automatic Exchange Rights, provided that the Trustee shall:
 

     (c)    hold the Exchange Rights and the Automatic Exchange Rights and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this Agreement; and
 
     (d)     except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Exchange Rights or the Automatic Exchange Rights, and the Trustee shall not exercise any such rights for any purpose other than the purposes for which the Trust is created pursuant to this Agreement.
 

5.2                     Legended Share Certificates
 

AcquisitionCo will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of:
 

     (a)    their right to instruct the Trustee with respect to the exercise of the Exchange Rights in respect of the Exchangeable Shares held by a Beneficiary; and
 

     (b)     the Automatic Exchange Rights.
 

5.3                     General Exercise of Exchange Rights
 

The Exchange Rights shall be and remain vested in and exercisable by the Trustee. Subject to Section 6.15, the Trustee shall exercise the Exchange Rights only on the basis of instructions received pursuant to this Article 5 from Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To the extent that no instructions are received from a Beneficiary with respect to the Exchange Rights, the Trustee shall not exercise or permit the exercise of the Exchange Rights.
 

5.4                     Purchase Price
 

The purchase price payable by USCo or Calico, as applicable, for each Exchangeable Share to be purchased by ExhcangeCo or CallCo, as applicable, under the Exchange Rights shall be an amount per share equal to the amount determined by multiplying the Exchange Ratio on the last Business Day prior to the date of closing of the purchase and sale of such Exchangeable Shares under the Exchange Rights (as provided for in Section 5.6) by the Current Market Price of a share of the US Common Stock on the last Business Day prior to such date.


 
 
 

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In connection with each exercise of the Exchange Rights, USCo and CallCo shall provide to the Trustee an Officer's Certificate setting forth the calculation of the purchase price for each Exchangeable Share. The purchase price for each such Exchangeable Share so purchased may be satisfied only by USCo or CallCo, as applicable, delivering or causing to be delivered to the Trustee, on behalf of the relevant Beneficiary, a certificate or certificates representing that number of US Common Stock (which securities shall be duly issued as fully paid and non­assessable and shall be free and clear of any lien, claim or encumbrance) equal to the Exchange Ratio as at the last Business Day prior to the date of closing of the purchase and sale of such Exchangeable Shares under the Exchange Rights, such purchase price to be paid in accordance with Section 5.6 (but less any amounts withheld pursuant to Section 5.13). Upon payment by ExchangCo or CallCo, as applicable, of such purchase price, the relevant Beneficiary shall cease to have any right to be paid any amount in respect of accrued and unpaid dividends (but not in respect of dividends which have been declared and are unpaid) on each such Exchangeable Share by AcquisitionCo.
 

5.5                     Exercise Instructions
 

Subject to the terms and conditions herein set forth, a Beneficiary shall be entitled, upon the occurrence and during the continuance of an Exchange Rights Trigger Event, to instruct the Trustee to exercise the Exchange Rights with respect to all or any part of the Exchangeable Shares registered in the name of such Beneficiary on the books of AcquisitionCo. To cause the exercise of the Exchange Rights by the Trustee, the Beneficiary shall deliver to the Trustee, in person or by certified or registered mail, at its principal place of business in the City of Toronto or at such other places in Canada as the Trustee may from time to time designate by written notice to the Beneficiaries, the certificates representing the Exchangeable Shares which such Beneficiary desires USCo or CallCo to purchase, duly endorsed in blank for transfer, and accompanied by such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the by-laws of AcquisitionCo and such additional documents and instruments as the Trustee, USCo, CallCo and AcquisitionCo may reasonably require, together with:
 

(a)  
a duly completed form of notice of exercise of the Exchange Rights, contained on the reverse of or attached to the Exchangeable Share certificates, stating: (i) that the Beneficiary thereby instructs the Trustee to exercise the Exchange Rights so as to require USCo or CallCo to purchase from the Beneficiary the number of Exchangeable Shares specified therein; (ii) that such Beneficiary has good title to and owns all such Exchangeable Shares to be acquired by USCo or CallCo, as applicable, free and clear of all liens, claims and encumbrances; (iii) the names in which the certificates representing USCo Common Stock issuable in connection with the exercise of the Exchange Rights are to be issued; and (iv) the names and addresses of the persons to whom such new certificates should be delivered; and
 

(b)  
payment  (or  evidence   satisfactory  to  the  Trustee,   USCo,   CallcoCo  and AcquisitionCo of payment) of the taxes (if any) payable as contemplated by Section 5.8 of this Agreement.
 


 
 
 

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If only a part of the Exchangeable Shares represented by any certificate or certificates delivered to the Trustee are to be purchased by USCo or CallCo under the Exchange Rights, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of AcquisitionCo.
 

5.6                     Delivery of USCo Common Stock; Effect of Exercise
 

Promptly after the receipt of the certificates representing the Exchangeable Shares which the Beneficiary desires USCo or CallCo to purchase under the Exchange Rights, together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Exchange Rights (and payment of taxes, if any, payable as contemplated by Section S.8 or evidence thereof), duly endorsed for transfer to USCo or CallCo, as applicable, the Trustee shall notify USCo, CallCo and AcquisitionCo of its receipt of the same, which notice to USCo, CallCo and AcquisitionCo shall constitute exercise of the Exchange Rights by the Trustee on behalf of the holder of such Exchangeable Shares, and USCo or CallCo, as applicable, shall promptly thereafter deliver or cause to be delivered to the Trustee, for delivery to the holder of such Exchangeable Shares (or to such other persons, if any, properly designated by such holder) the number of US Common Stock issuable in connection with the exercise of the Exchange Rights, provided, however, that no such delivery shall be made unless and until the Beneficiary requesting the same shall have paid (or provided evidence satisfactory to the Trustee, USCo, CallCo and AcquisitionCo of the payment of) the taxes (if any) payable as contemplated by Section 5.8 of this Agreement. Immediately upon the giving of notice by the Trustee to USCo, CallCo and AcquisitionCo of the exercise of the Exchange Rights as provided in this Section 5.6, the closing of the transaction of purchase and sale contemplated by the Exchange Rights shall be deemed to have occurred and the holder of such Exchangeable Shares shall be deemed to have transferred to USCo or CallCo, as determined by USCo at the time, all of such holder's right, title and interest in and to such Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than: (i) the right to receive its proportionate part of the total purchase price therefor, unless the requisite number of US Common Stock is not delivered by USCo or CallCo, as applicable, to the Trustee within 5 Business Days of the date of the giving of such notice by the Trustee, in which case the rights of the Beneficiary shall remain unaffected until such US Common Stock are so delivered, by USCo or CallCo, as applicable; and (ii) the right to receive declared but unpaid dividends in respect of such Exchangeable Shares. Upon delivery to the Trustee of such US Common Stock, the Trustee shall deliver such US Common Stock to such Beneficiary (or to such other persons, if any, properly designated by such Beneficiary). Concurrently with such Beneficiary ceasing to be a holder of Exchangeable Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the US Common Stock delivered to it pursuant to the Exchange Rights.
 

5.7                     Exercise of Exchange Rights Subsequent to Retraction
 

In the event that a Beneficiary has exercised its right under Article 4 of the Share Provisions to require AcquisitionCo to redeem any or all of the Exchangeable Shares held by the Beneficiary (the "Retracted Shares") and is notified by AcquisitionCo pursuant to Section 4.6 of the Share Provisions that AcquisitionCo will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, and provided that neither USCo nor CallCo shall have exercised the Retraction Call Right with respect to the Retracted Shares and that the


 
 
 

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Beneficiary has not revoked the retraction request delivered by the Beneficiary to AcquisitionCo pursuant to Section 4.1 of the Share Provisions and provided further that the Trustee has received written notice of same from USCo, CallCo or AcquisitionCo, the retraction request will constitute and will be deemed to constitute notice from the Beneficiary to the Trustee instructing the Trustee to exercise the Exchange Rights with respect to those Retracted Shares that AcquisitionCo is unable to redeem. In any such event, AcquisitionCo hereby agrees with the Trustee and in favour of the Beneficiary promptly to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Beneficiary to AcquisitionCo or to the transfer agent of the Exchangeable Shares (including without limitation, a copy of the retraction request delivered pursuant to Section 4.1 of the Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Trustee will thereupon exercise the Exchange Rights with respect to the Retracted Shares that AcquisitionCo is not permitted to redeem and will require USCo or CallCo to purchase such shares in accordance with the provisions of this Article 5.
 

5.8                     Stamp or Other Transfer Taxes
 

Upon any sale of Exchangeable Shares to USCo or CallCo pursuant to the Exchange Rights or the Automatic Exchange Rights, the certificate or certificates representing USCo Common Stock to be delivered in connection with the payment of the total purchase price therefor shall be issued in the name of the Beneficiary of the Exchangeable Shares so sold or in such names as such Beneficiary may otherwise direct in writing without charge to the holder of the Exchangeable Shares so sold; provided, however, that such Beneficiary: (i) shall pay (and none of USCo, CallCo, AcquisitionCo or the Trustee shall be required to pay) any documentary, stamp, transfer or other taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Beneficiary, or (ii) shall have evidenced to the satisfaction of the Trustee, USCo, CallCo and AcquisitionCo that such taxes, if any, have been paid.
 

5.9                     Notice of Insolvency Event, Call Rights not Exercised
 

As soon as practicable following the occurrence of: (i) an Insolvency Event; (ii) any event that with the giving of notice or the passage of time or both would be an Insolvency Event; or (iii) the election by USCo or CallCo not to exercise a Call Right which is then exercisable by USCo or CallCo, USCo, CallCo or AcquisitionCo shall give written notice thereof to the Trustee. As soon as practicable following the receipt of notice from USCo, CallCo or AcquisitionCo of the occurrence of an Exchange Right Trigger Event, or upon the Trustee becoming aware of an Exchange Right Trigger Event, the Trustee will mail to each Beneficiary, at the expense of USCo, a notice of such Exchange Rights Trigger Event in the form provided by USCo, which notice shall contain a brief statement of the rights of the Beneficiaries with respect to the Exchange Rights.
 

5.10                   Qualification of USCo Common Stock
 

USCo and CallCo covenant that if any USCo Common Stock to be issued and delivered pursuant to the Exchange Rights or the Automatic Exchange Rights require registration or qualification with or approval of or the filing of any document, including any prospectus or similar document, or the taking of any proceeding with or the obtaining of any order, ruling or consent from any


 
 
 

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governmental or regulatory authority under any Canadian, federal or provincial law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfillment of any other Canadian federal or provincial legal requirement before such securities may be issued and delivered by or on behalf of USCo or CallCo to the initial holder thereof or in order that such securities may be freely traded thereafter (other than any restrictions of general application on transfer by reason of a holder being a "control person" of USCo for purposes of Canadian provincial securities law), USCo and CallCo will in good faith expeditiously take all such actions and do all such things as are necessary or desirable to cause such USCo Common Stock to be and remain duly registered, qualified or approved. USCo and CallCo will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all USCo Common Stock to be delivered pursuant to the Exchange Rights or the Automatic Exchange Rights to be listed, quoted or posted for trading on the OTCBB or OTCQB or such other stock exchanges or quotation systems on which outstanding USCo Common Stock are then principally listed, quoted or posted for trading at such time.
 

5.11                   USCo Common Stock
 

USCo and CallCo hereby represent, warrant and covenant that the USCo Common Stock issuable as described herein will be duly authorized and validly issued as fully paid and non­assessable and shall be free and clear of any lien, claim or encumbrance.
 

5.12                   Automatic Exchange on Liquidation of USCo
 

     (a)    USCo will give the Trustee written notice of each of the following events at the time set forth below:
 

         (i) in the event of any determination by the Board of Directors of AcquisitionCo to institute voluntary liquidation, dissolution or winding-up proceedings with respect to USCo or to effect any other distribution of assets of USCo among its stockholders for the purpose of winding up its affairs, at least 30 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and
 

         (ii) as soon as practicable following the earlier of: (A) receipt by USCo or AcquisitionCo of notice of; and (B) USCo or AcquisitionCo otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of USCo or to effect any other distribution of assets of USCo among its unitholders for the purpose of winding up its affairs, in each case where USCo has failed to contest in good faith any such proceeding commenced in respect of USCo within 30 days of becoming aware thereof.
 

     (b)    As soon as practicable following receipt by the Trustee from USCo of notice of any event (a "USCo Liquidation Event") contemplated by Section 5.12(a)(i) or 5.12(a)(ii) above, the Trustee will give notice thereof, in the form provided by USCo, to the Beneficiaries. Such notice shall include a brief description of the Automatic Exchange Rights.
 


 
 
 

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     (c)    In order that the Beneficiaries will be able to participate on a pro rata basis with the holders of USCo Common Stock in the distribution of assets of USCo in connection with a USCo Liquidation Event, on the Sth Business Day prior to the effective date (the "USCo Liquidation Event Effective Date") of a USCo Liquidation Event all of the then outstanding Exchangeable Snares shall be automatically exchanged for USCo Common Stock (the benefit in favour of Beneficiaries of the obligation of USCo and CalICo to effect the automatic exchange of Exchangeable Shares for USCo Common Stock as aforesaid is defined as the "Automatic Exchange Rights"). To effect such automatic exchange, USCo or CalICo shall purchase on the 5th Business Day prior to the USCo Liquidation Event Effective Date each Exchangeable Share then outstanding and held by Beneficiaries, and each Beneficiary shall sell the Exchangeable Shares held by it at such time, for a purchase price per share determined by multiplying the Current Market Price of a share of the US Common Stock on the 6th Business Day prior to the USCo Liquidation Event Effective Date and the Exchange Ratio as at the 6th Business Day prior to the USCo Liquidation Event Effective Date. USCo or CalICo shall provide the Trustee with an Officer's Certificate in connection with each automatic exchange setting forth the calculation of the purchase price for each Exchangeable Share. The purchase price for each such Exchangeable Share so purchased may be satisfied only by USCo or CalICo, as applicable, delivering or causing to be delivered to the Trustee, on behalf of the relevant Beneficiary, that number of USCo Common Stock equal to the Exchange Ratio as at the sixth Business Day prior to the USCo Liquidation Event Effective Date, such purchase price to be paid in accordance with Section 5.12(d) (but less any amounts withheld pursuant to Section 5.13).
 

     (d)    On the 5th Business Day prior to the USCo Liquidation Event Effective Date:
 

         (i) the closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for USCo Common Stock shall be deemed to have occurred;
 

         (ii) each Beneficiary shall be deemed to have transferred to USCo or CalICo, as determined by USCo at that time, all of the Beneficiary's right, title and interest in and to such Beneficiary's Exchangeable Shares and the related interest in the Trust Estate;
 

         (iii) any right of each such Beneficiary to receive declared and unpaid dividends from AcquisitionCo shall be deemed to be satisfied and discharged;
 

         (iv) each such Beneficiary shall cease to be a holder of such Exchangeable Shares; and
 

         (v) USCo or CalICo, as applicable, shall deliver or cause to be delivered to the Trustee on behalf of such Beneficiary the USCo Common Stock issuable upon the automatic exchange of Exchangeable Shares for USCo Common Stock.
 

 
 
 

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     (e)    Concurrently with such Beneficiary ceasing to be a holder of Exchangeable Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the USCo Common Stock issued pursuant to the automatic exchange of Exchangeable Shares for USCo Common Stock and the certificates held by the Beneficiary previously representing the Exchangeable Shares exchanged by the Beneficiary with USCo or CalICo, as applicable, pursuant to such automatic exchange shall thereafter be deemed to represent USCo Common Stock issued to the Beneficiary pursuant to such automatic exchange. Upon the request of a Beneficiary and the presentation and surrender by the Beneficiary of Exchangeable Share certificates deemed to represent USCo Common Stock, duly endorsed in blank and accompanied by such instruments of transfer as USCo and CalICo may reasonably require, USCo or CalICo, as applicable, shall deliver or cause to be delivered to the Beneficiary certificates representing USCo Common Stock of which the Beneficiary is the holder.
 

5.13                     Withholding Rights
 

USCo, CalICo and the Trustee shall be entitled to deduct and withhold from any consideration otherwise payable under this Agreement to any holder of Exchangeable Shares or USCo Common Stock such amounts as USCo, CalICo or the Trustee is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada) or any provision of provincial, local or foreign tax law, in each case as amended or succeeded. The Trustee may act on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the Exchangeable Shares or the USCo Common Stock, as the case may be, in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, USCo, CalICo and the Trustee are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to USCo, CalICo or the Trustee, as the case may be, to enable it to comply with such deduction or withholding requirement and USCo, CalICo or the Trustee shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale.
 

5.14                     Non-Resident Holders
 

Notwithstanding anything contained in this Agreement, the obligation of USCo or CalICo to pay the purchase price for the Exchangeable Shares pursuant to the Exchange Rights or the Automatic Exchange Rights in respect of Exchangeable Shares held by a person whom the transfer agent of the Exchangeable Shares believes is located in the United States or a resident of any foreign country or is a partnership (other than a "Canadian partnership" within the meaning of the Income Tax Act (Canada)), shall be satisfied by delivering the USCo Common Stock which would have been received by the Trustee, on behalf of affected holder to the transfer agent and registrar for the Exchangeable Shares who shall sell such USCo Common Stock on the stock exchange on which the USCo Common Stock are then listed and, upon such sale, the rights of the affected holder shall be limited to receiving the net proceeds of sale (net of applicable taxes).
 


 
 
 

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5.15                     No Fractional Entitlements
 

Notwithstanding anything contained in this Agreement, including without limitation this Article 5, no Beneficiary (or the Trustee as trustee for and on behalf of, and for the use and benefit of a Beneficiary) shall be entitled to and USCo and CalICo will not deliver fractions of USCo Common Stock. Where the application of the provisions of this Agreement, including, without limitation, this Article 5, would otherwise result in a Beneficiary (or the Trustee, on behalf of the Beneficiary) receiving a fraction of the US Common Stock the Beneficiary (or the Trustee on behalf of the Beneficiary) shall be entitled to receive the nearest whole number of USCo Common Stock.
 

ARTICLE 6

CONCERNING THE TRUSTEE
6.1                       Powers and Duties of the Trustee

The rights, powers, duties and authorities of the Trustee under this Agreement, in its capacity as Trustee of the Trust, shall include:
 

     (a)       receipt and deposit of the Special Voting Unit as Trustee for and on behalf of the Beneficiaries in accordance with the provisions of this Agreement;
 

     (b)     delivery of proxies and distributing materials to Beneficiaries as provided in this Agreement;
 

     (c)     voting the Beneficiary Votes in accordance with the provisions of this Agreement;
 

     (d)      receiving the grant of the Exchange Rights and the Automatic Exchange Rights from USCo and CalICo as Trustee for and on behalf of the Beneficiaries in accordance with the provisions of this Agreement;
 

     (e)     exercising the Exchange Rights and enforcing the benefit of the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement,   and   in   connection   therewith   receiving   from   Beneficiaries Exchangeable Shares and other requisite documents and distributing to such Beneficiaries USCo Common  Stock and cheques,  if any, to which such Beneficiaries are entitled upon the exercise of the Exchange Rights or pursuant to the Automatic Exchange Rights, as the case may be;
 

     (f)      holding title to the Trust Estate;
 

     (g)      investing any moneys forming, from time to time, a part of the Trust Estate as provided in this Agreement;
 


 
 
 

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     (h)    taking action on its own initiative or at the direction of a Beneficiary or Beneficiaries to enforce the obligations of USCo, CalICo and AcquisitionCo under this Agreement; and
 

     (i)     taking such other actions and doing such other things as are specifically provided in this Agreement.
 

In the exercise of such rights, powers, duties and authorities the Trustee shall have (and is granted) such incidental and additional rights, powers, duties and authority not in conflict with any of the provisions of this Agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Trust. Any exercise of such discretionary rights, powers, duties and authorities by the Trustee shall be final, conclusive and binding upon all persons.
 

The Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Beneficiaries and shall exercise the care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances.
 

The Trustee shall not be bound to give notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall be specifically required to do so under the terms hereof; nor shall the Trustee be required to take any notice of, or to do, or to take any act, action or proceeding as a result of any default or breach of any provision hereunder, unless and until notified in writing of such default or breach, which notices shall distinctly specify the default or breach desired to be brought to the attention of the Trustee, and in the absence of such notice the Trustee may for all purposes of this Agreement conclusively assume that no default or breach has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein.
 

6.2                     No Conflict of Interest
 

The Trustee represents to the USCo, CalICo and AcquisitionCo that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within 90 days after it becomes aware that such material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Article 9. If, notwithstanding the foregoing provisions of this Section 6.2, the Trustee has such a material conflict of interest, the validity and enforceability of this Agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Trustee contravenes the foregoing provisions of this Section 6.2, any interested party may apply to the Superior Court of Ontario for an order that that the Trustee be replaced as trustee hereunder.
 

 


 
 
 

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6.3                     Dealings with Transfer Agents, Registrars, etc.
 

USCo, CalICo and AcquisitionCo irrevocably authorize the Trustee, from time to time, to:
 

(a)  
consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the Exchangeable Shares and the USCo Common Stock; and
 
(b)  
requisition, from time to time: (i) from any such registrar or transfer agent any information readily available from the records maintained by it which the Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement; and (ii) from the transfer agent of the USCo Common Stock, and any subsequent transfer agent of such USCo Common Stock, the USCo Common Stock certificates issuable upon the exercise from time to time of the Exchange Rights and pursuant to the Automatic Exchange Rights.
 

USCo and AcquisitionCo irrevocably authorize their respective registrars and transfer agents to comply with all such requests. USCo covenants that it will supply its transfer agent with duly executed trust unit certificates for the purpose of completing the exercise from time to time of the Exchange Rights and the Automatic Exchange Rights.
 

6.4                     Books and Records
 

The Trustee shall keep available for inspection by USCo, CallCo and AcquisitionCo at the Trustee's principal place of business in the City of Toronto correct and complete books and records of account relating to the Trust created by this Agreement, including without limitation, all relevant data relating to mailings and instructions to and from Beneficiaries and all transactions pursuant to the Special Voting Unit, the Exchange Rights and the Automatic Exchange Rights. On or before October 30, 2010, and on or before October 30 th in every year thereafter, so long as this Agreement has not been terminated, the Trustee shall transmit to USCo, CallCo and AcquisitionCo a brief report, dated as of the preceding October 30 th , with respect to:
 

(a)  
the property and funds comprising the Trust Estate as of that date;
 

(b)  
the number of exercises of the Exchange Rights, if any, and the aggregate number of Exchangeable Shares received by the Trustee on behalf of Beneficiaries in consideration of the issuance of USCo Common Stock in connection with the Exchange Rights, during the calendar year ended on such October 30; and
 

(c)  
any action taken by the Trustee in the performance of its duties under this Agreement which it had not previously reported and which, in the Trustee's opinion, materially affects the Trust Estate.
 

6.5                     Income Tax Returns and Reports
 

The Trustee shall, to the extent necessary, prepare and file on behalf of the Trust appropriate Canadian income tax returns and any other returns or reports as may be required by applicable law or pursuant to the rules and regulations of any securities exchange or other trading system through which the Exchangeable Shares are traded. In connection therewith, the Trustee may obtain the advice and assistance of such experts or advisors as the Trustee considers necessary or advisable (who may be experts or advisors to USCo, CallCo and AcquisitionCo). If requested by the Trustee, USCo, CalICo and AcquisitionCo shall retain qualified experts or advisors for the purpose of providing such tax advice or assistance.
 


 
 
 

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6.6                     Indemnification Prior to Certain Actions by Trustee
 

The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Beneficiary upon such Beneficiary furnishing to the Trustee reasonable funding, security or indemnity against the costs, expenses and liabilities which may be incurred by the Trustee therein or thereby, provided that no Beneficiary shall be obligated to furnish to the Trustee any such security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to the Voting Rights pursuant to Article 4, subject to Section 6.15, and with respect to the Exchange Rights pursuant to Article 5, subject to Section 6.15, and with respect to the Automatic Exchange Rights pursuant to Article 5.
 

None of the provisions contained in this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties, or authorities unless funded, given security and indemnified as aforesaid.
 

6.7                     Action of Beneficiaries
 

No Beneficiary shall have the right to institute any action, suit or proceeding or to exercise any other remedy authorized by this Agreement for the purpose of enforcing any of its rights or for the execution of any trust or power hereunder unless the Beneficiary has requested the Trustee to take or institute such action, suit or proceeding and furnished the Trustee with the funding, security or indemnity referred to in Section 6.6 and the Trustee shall have failed to act within a reasonable time thereafter. In such case, but not otherwise, the Beneficiary shall be entitled to take proceedings in any court of competent jurisdiction such as the Trustee might have taken; it being understood and intended that no one or more Beneficiaries shall have any right in any manner whatsoever to affect, disturb or prejudice the rights hereby created by any such action, or to enforce any right hereunder or the Voting Rights, the Exchange Rights or the Automatic Exchange Rights except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the Trustee, except only as herein provided, and in any event for the equal benefit of all Beneficiaries.
 

6.8                     Reliance Upon Declarations
 

The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon statutory declarations, certificates, opinions or reports furnished pursuant to the provisions hereof or required by the Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities hereunder if such statutory declarations, certificates, opinions or reports comply with the provisions of Section 6.9, if applicable, and with any other applicable provisions of this Agreement.
 

 

 
 
 

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6.9                     Evidence and Authority to Trustee
 
USCo, CallCo and/or AcquisitionCo shall furnish to the Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by USCo, CallCo and/or AcquisitionCo or the Trustee under this Agreement or as a result of any obligation imposed under this Agreement, including, without limitation, in respect of the Voting Rights, the Exchange Rights or the Automatic Exchange Rights and the taking of any other action to be taken by the Trustee at the request of or on the application of USCo, CallCo and/or AcquisitionCo promptly if and when:
 

(a)  
such evidence is required by any other Section of this Agreement to be furnished to the Trustee in accordance with the terms of this Section 6.9; or
 

(b)  
the Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement, gives USCo, CallCo and/or AcquisitionCo written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice.
 

Such evidence shall consist of an Officer's Certificate of CallCo and/or AcquisitionCo or a statutory declaration or a certiflcate made by persons entitled to sign an Officer's Certificate stating that any such condition has been complied with in accordance with the terms of this Agreement.
 

Whenever such evidence relates to a matter other than the Voting Rights, the Exchange Rights or the Automatic Exchange Rights or the taking of any other action to be taken by the Trustee at the request or on the application of USCo, CallCo and/or AcquisitionCo, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of CallCo and/or AcquisitionCo it shall be in the form of an Officer's Certificate or a statutory declaration.
 

Each statutory declaration, Officer's Certificate, opinion or report furnished to the Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence:
 

(c)  
declaring that he or she has read and understands the provisions of this Agreement relating to the condition in question;
 

(d)  
describing the nature and scope of the examination or investigation upon which he or she based the statutory declaration, certiflcate, statement or opinion; and
 

(e)  
declaring that he or she has made such examination or investigation as he or she believes is necessary to enable him or her to make the statements or give the opinions contained or expressed therein.
 

6.10                   Experts, Advisers and Agents
 

The Trustee may:
 


 
 
 

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(a)  
in relation to these presents act and rely on the opinion or advice of or information obtained from any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert, whether retained by the Trustee or by USCo, CalICo and/or AcquisitionCo or otherwise, and may retain or employ such assistants as may be necessary to the proper discharge of its powers and duties and determination of its rights hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid; and
 

(b)  
employ such agents and other assistants as it may reasonably require for the proper determination and discharge of its powers and duties hereunder, and may pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust.
 

6.11                   Investment of Moneys Held by Trustee
 

Unless otherwise provided in this Agreement, any moneys held by or on behalf of the Trustee which under the terms of this Agreement may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee may be invested and reinvested in the name or under the control of the Trustee, in trust for AcquisitionCo, in securities in which, under the laws of the Province of Ontario, trustees are authorized to invest trust moneys, provided that such securities are stated to mature within two years after their purchase by the Trustee, and the Trustee shall so invest such moneys on the written direction of AcquisitionCo. Pending the investment of any moneys as hereinbefore provided, such moneys may be deposited in the name of the Trustee in any chartered bank in Canada (including an affiliate of the Trustee) or, with the consent of AcquisitionCo, in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of Canada or any province thereof at the rate of interest then current on similar deposits, and the Trustee shall be entitled to receive a fee from such bank, loan or trust company for so depositing such moneys.
 

6.12                   Trustee Not Required to Give Security
 

The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement or otherwise in respect of the premises.
 

6.13                   Trustee Not Bound to Act on Request
 

Except as in this Agreement otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of USCo, CalICo and/or AcquisitionCo or of the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee, and the Trustee shall be empowered to act upon any such copy purporting to be authenticated and believed by the Trustee to be genuine.


 
 
 

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6.14                   Authority to Carry on Business
 

The Trustee represents to USCo, CallCo and/or AcquisitionCo that at the date of execution and delivery by it of this Agreement it is authorized to carry on the business of a trust company in each of the Provinces of Canada but if, notwithstanding the provisions of this Section 6.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Agreement and the Voting Rights, the Exchange Rights and the Automatic Exchange Rights shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in any Province of Canada, either become so authorized or resign in the manner and with the effect specified in Article 9.
 

6.15                   Conflicting Claims
 

If conflicting claims or demands are made or asserted with respect to any interest of any Beneficiary in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Beneficiary in any Exchangeable Shares, resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claims or demands. In so refusing, the Trustee may elect not to exercise any portion of the Voting Rights, Exchange Rights or Automatic Exchange Rights subject to such conflicting claims or demands and, in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until:
 

(a)  
the rights of all adverse claimants with respect to the Voting Rights, Exchange Rights or Automatic Exchange Rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or
 
(b)  
all differences with respect to the Voting Rights, Exchange Rights or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement certified to be in full force and effect.
 

If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands.
 

6.16                   Acceptance of Trust
 

The Trustee hereby accepts the Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Beneficiaries, subject to all the terms and conditions herein set forth.


 
 
 

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ARTICLE 7
 
COMPENSATION
 

7.1                     Fees and Expenses of the Trustee
USCo, CalICo and AcquisitionCo jointly and severally agree to pay the Trustee reasonable compensation for all of the services rendered by it under this Agreement and will reimburse the Trustee for all reasonable expenses (including, but not limited to, taxes other than taxes based on the net income of the Trustee, reasonable fees paid to legal counsel and other experts and advisors and travel expenses) and disbursements, including the cost and expense of any suit or litigation of any character and any proceedings before any governmental agency reasonably incurred by the Trustee in connection with its duties under this Agreement; provided that USCo, CalICo and AcquisitionCo shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered by the Trustee in any suit or litigation in which the Trustee is determined to have acted in bad faith or with gross negligence or willful misconduct.
 

ARTICLE 8

INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1                     Indemnification of the Trustee

USCo, CalICo and AcquisitionCo jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, employees, shareholders and agents (collectively, the "Indemnified Parties") against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Trustee's legal counsel) which, without fraud, gross negligence, willful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason or as a result of the Trustee's acceptance or administration of the Trust, its compliance with its duties set forth in this Agreement, or any written or oral instruction delivered to the Trustee by USCo, CalICo or AcquisitionCo pursuant hereto.
 

The Trustee shall notify USCo, CalICo and AcquisitionCo of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim, provided that the omission to so notify USCo, CalICo and AcquisitionCo shall not relieve USCo, CalICo and AcquisitionCo of any liability which any of them may have to any Indemnified Party except and only to the extent that any such delay in or failure to give notice as herein required prejudices the defence of such claim or action or results in any increase in the liability which USCo, CalICo and AcquisitionCo have under this indemnity. Subject to (ii) below, USCo, CalICo and AcquisitionCo shall be entitled to participate at their own expense in the defense and, if USCo, CalICo and AcquisitionCo so elect at any time after receipt of such notice, any of them may assume the defense of any suit brought to enforce any such claim in which case, the Trustee shall have the right to employ separate counsel in any such suit and participate in the defense


 
 
 

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thereof, but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by USCo, CallCo or AcquisitionCo; or (ii) the named parties to any such suit include both the Trustee and USCo, CallCo or AcquisitionCo and the Trustee shall have been advised by counsel acceptable to USCo, CallCo or AcquisitionCo that there may be one or more legal defenses available to the Trustee that are different from or in addition to those available to USCo, CallCo or AcquisitionCo and that, in the judgment of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case USCo, CallCo and AcquisitionCo shall not have the right to assume the defense of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Trustee). This indemnity shall survive the termination of this Agreement and the resignation or removal of the Trustee.
 

8.2                     Limitation of Liability
 

The Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement, except to the extent that such loss is principally and directly attributable to fraud, negligence, recklessness, willful misconduct or bad faith on the part of the Trustee.
 

ARTICLE 9
CHANGE OF TRUSTEE
 
9.1                     Resignation
 

The Trustee, or any trustee hereafter appointed, may at any time resign by giving written notice of such resignation to USCo, CallCo and AcquisitionCo specifying the date on which it desires to resign, provided that such notice shall not be given less than thirty (30) days before such desired resignation date unless USCo, CallCo and AcquisitionCo otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, USCo, CallCo and AcquisitionCo shall promptly appoint a successor trustee, which shall be a corporation organized and existing under the laws of Canada and authorized to carry on the business of a trust company in all provinces of Canada, by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing the appointment and acceptance of a successor trustee, a successor trustee may be appointed by order of a court of competent jurisdiction upon application of one or more of the parties to this Agreement. If the retiring trustee is the party initiating an application for the appointment of a successor trustee by order of a court of competent jurisdiction, USCo, CallCo and AcquisitionCo shall be jointly and severally liable to reimburse the retiring trustee for its legal costs and expenses in connection with same.
 

9.2                     Removal
 

The Trustee, or any trustee hereafter appointed, may (provided a successor trustee is appointed) be removed at any time on not less than 30 days' prior notice by written instrument executed by USCo, CallCo and AcquisitionCo, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee.


 
 
 

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9.3                     Successor Trustee
 

(a)  
Any successor trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to  USCo, CallCo and AcquisitionCo and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with the like effect as if originally named as trustee in this Agreement. However, on the written request of USCo, CallCo and AcquisitionCo or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any such successor trustee, USCo, CallCo, AcquisitionCo and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Notwithstanding the foregoing, any corporation to which all or substantially all of the business of the Trustee is transferred shall automatically become the successor trustee without any further act.
 

(b)  
Notwithstanding paragraph (a) above and Section 9.4, any corporation into or with which the Trustee may be merged or consolidated or amalgamated, or any corporation resulting therefrom to which the Trustee shall be a party, or any corporation succeeding to the trust business of the Trustee shall be the successor to the Trustee hereunder without any further act on its part or any of the parties hereto.
 

9.4                     Notice of Successor Trustee
 

Upon acceptance of appointment by a successor trustee as provided herein, USCo, CallCo or AcquisitionCo shall cause to be mailed notice of the succession of such trustee hereunder to each Beneficiary shown on the register of holders of Exchangeable Shares. If USCo, CallCo or AcquisitionCo shall fail to cause such notice to be mailed within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of USCo, CallCo and AcquisitionCo.
 

ARTICLE 10
USCO SUCCESSORS
 

10.1                  Certain Requirements in Respect of Combination, etc.

USCo shall not complete any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing entity resulting therefrom unless, but may do so if:


 
 
 

-28-
 

(a)  
such other person or continuing entity (herein called the "USCo Successor"), by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, a trust agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee are reasonably necessary or advisable to evidence the assumption by the USCo Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such USCo Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of USCo under this Agreement; and
 

(b)  
such transaction shall, to the satisfaction of the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee, be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the Trustee or of the Beneficiaries hereunder.
 

10.2                   Vesting of Powers in Successor
 

Whenever the conditions of Section 10.1 have been duly observed and performed, the Trustee, USCo Successor, CalICo and AcquisitionCo shall, if required by Section 10.1, execute and deliver the supplemental trust agreement provided for in Article 11 and thereupon USCo Successor shall possess and from time to time may exercise each and every right and power of USCo under this Agreement in the name of USCo or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of AcquisitionCo or any officers of AcquisitionCo on behalf of USCo may be done and performed with like force and effect by the directors or officers of such USCo Successor.
 

10.3                   Wholly-Owned Subsidiaries
 

Nothing herein shall be construed as preventing the combination of any wholly-owned direct or indirect subsidiary of USCo with or into USCo or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of USCo provided that all of the assets of such subsidiary are transferred to USCo or another wholly-owned direct or indirect subsidiary of USCo and any such transactions are expressly permitted by this Article 10.
 

ARTICLE 11

AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
 

11.1                   Amendments, Modifications, etc.
This Agreement may not be amended or modified except by an agreement in writing executed by USCo, CalICo, AcquisitionCo and the Trustee and approved by the Beneficiaries in accordance with Section 10.2 of the Share Provisions.


 
 
 

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11.2                   Administrative Amendments
 

Notwithstanding the provisions of Section 11.1, the parties to this Agreement may in writing, at any time and from time to time, without the approval of the Beneficiaries, amend or modify this Agreement for the purposes of:
 

(a)  
adding to the covenants of any or all parties hereto for the protection of the Beneficiaries hereunder provided that the Board of Directors of each of CalICo and AcquisitionCo shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the Beneficiaries;
 

(b)  
making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Board of Directors of each of CalICo and AcquisitionCo and in the opinion of the Trustee, having in mind the best interests of the Beneficiaries it may be expedient to make, provided that such Boards of Directors and the Trustee, acting on the advice of counsel, shall be of the opinion that such amendments and modifications will not be prejudicial to the interests of the Beneficiaries; or
 
(c)  
making such changes or corrections which, on the advice of counsel to USCo, CalICo, AcquisitionCo and the Trustee, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Trustee, acting on the advice of counsel, and the Board of Directors of AcquisitionCo shall be of the opinion that such changes or corrections will not be prejudicial to the rights and interests of the Beneficiaries.
 

11.3                   Meeting to Consider Amendments
 

AcquisitionCo, at the request of USCo, shall call a meeting or meetings of the Beneficiaries for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of AcquisitionCo, the Share Provisions and all applicable laws.
 

11.4                   Changes in Capital of USCo and AcquisitionCo
 

At all times after the occurrence of any event contemplated pursuant to Section 2.6 or 2.7 of the Support Agreement or otherwise, as a result of which either USCo Common Stock or the Exchangeable Shares or both are in any way changed, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which USCo Common Stock or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver a supplemental trust agreement giving effect to and evidencing such necessary amendments and modifications.
 


 
 
 

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11.5                   Execution of Supplemental Trust Agreements
 

No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. From time to time AcquisitionCo (when authorized by a resolution of its Board of Directors), USCo (when authorized by a resolution of the Board of Directors of AcquisitionCo) and CalICo (when authorized by a resolution of the Board of Directors of CalICo) and the Trustee may, subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes:
 

(a)  
evidencing the succession of USCo Successors and the covenants of and obligations assumed by each such USCo Successor in accordance with the provisions of Article 10 and the successors of any successor trustee in accordance with the provisions of Article 9;
 

(b)  
making any additions to, deletions from or alterations of the provisions of this Agreement or the Exchange Rights or the Automatic Exchange Rights which, in the opinion of the Trustee, will not be prejudicial to the interests of the Beneficiaries or are, in the opinion of counsel to the Trustee, necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to USCo, CalICo, AcquisitionCo, the Trustee or this Agreement; and
 

(c)  
for any other purposes not inconsistent with the provisions of this Agreement, including without limitation, to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Trustee, the rights of the Trustee and Beneficiaries will not be prejudiced thereby.
 

ARTICLE 12
TERMINATION

12.1                   Term

The Trust created by this Agreement shall continue until the earliest to occur of the following events:
 

(a)  
no outstanding Exchangeable Shares are held by a Beneficiary;
 

(b)  
each of USCo, CalICo and AcquisitionCo elects in writing to terminate the Trust and such termination is approved by the Beneficiaries in accordance with Section 10.2 of the Share Provisions; and
 
 
 

 
 
(c)  
21 years after the death of the last survivor of the descendants of His Majesty King George VI of Canada and the United Kingdom of Great Britain and Northern Ireland living on the date of the creation of the Trust.
 

 
 
 

-31-
 
 

12.2                    Survival of Agreement
 

This Agreement shall survive any termination of the Trust and shall continue until there are no Exchangeable Shares outstanding held by a Beneficiary; provided, however, that the provisions of Article 7 and Article 8 shall survive any such termination of this Agreement.
 

ARTICLE 13
GENERAL
 

13.1                    Severability
 

If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and the agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.
 

13.2                    Enurement
 

This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns and to the benefit of the Beneficiaries.
 

13.3                    Notices to Parties
 

All notices and other communications between the parties hereunder shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for such party as shall be specified in like notice):
 

if to USCo, AcquisitionCo or CallCo, at:
 

Foodfest International 2000 Inc.
361 Connie Crescent Concord,
Ontario L4K5R2
 
Attention: Fred Farnden
Telecopier No.: 1.905.709.7116
 

if to the Trustee, at:

Patriquin Law Professional Corporation
 
112 Yorkville, 3 rd FL
Toronto, ON M5R 1B9
Canada
 

Attention: Scot Patriquin
Telecopier No.: 1.416.981.3434
 

Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of receipt thereof unless such day is not a Business Day in which case it shall be deemed to have been given and received upon the immediately following Business Day.
 

 
 
 
 

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13.4                    Notice to Beneficiaries
 

Any and all notices to be given and any documents to be sent to any Beneficiaries may be given or sent to the address of such Beneficiary shown on the register of holders of Exchangeable Shares in any manner permitted by the by-laws of AcquisitionCo from time to time in force in respect of notices to shareholders and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Beneficiaries.
 

13.5                    Counterparts
 

This Agreement may be executed in several counterparts each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.
 

13.6                    Assignment by and Successor to CallCo
 

Notwithstanding any other provision in this Agreement to the contrary, CallCo may transfer or assign its rights and interest in or under this agreement to any affiliate of AcquisitionCo or USCo ("successor corporation"); provided that the successor corporation shall expressly assume, by agreement satisfactory in form to the parties hereto and executed and delivered to the parties hereto, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by CallCo.
 

13.7                    Jurisdictions
 

This Agreement shall be construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
 

13.8                    Attornment
 

Each of the Trustee, USCo, CallCo and AcquisitionCo agrees that any action or proceeding arising out of or relating to this Agreement may be instituted in the courts of Ontario, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the such courts in any such action or proceeding, agrees
 


 
 
 
 
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to be bound by any judgment of the such courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction.
 

 
13.9                    Liability of the Trust

 
Liability of the Trust
 

The parties hereto acknowledge that Patriquin Law Professional Corporation is entering into this agreement solely in its capacity as authorized attorney on behalf of USCo and the obligations of USCo liereLinder shall not be personally binding upon Patriquin Law Professional Corporation or Scot Patriquin or any holder of USCo Common Slock and that any recourse against USCo, Patriquin Law Professional Corporation or any holder of USCo Common Stock in any manner in respect of any indebtedness, obligation or liability of USCo arising hereunder or arising in connection herewith or from the matters to which this agreement relates, if any, including without limitation claims based on negligence or otherwise tortious behaviour, shall be limited to, and satisfied only out of, a Trust Fund at the option of USco, at its exclusive cost.
 

                           IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as of the date first above written.
 
FOODFEST INTERNATIONAL 2000, INC.  
     
/s/ FRED FARNDRN  
By its authorizing attorney 
 
Name:  FRED FARNDRN  
Title: PRESIDENT  
 
 
 
 
 
FOODFEST ACQUISITION CORP.  
     
/s/ FRED FARNDRN  
By its authorizing attorney 
 
Name:  FRED FARNDRN  
Title: PRESIDENT  
 
 
FOODFEST CALL CORP  
     
/s/ FRED FARNDRN  
By its authorizing attorney 
 
Name:  FRED FARNDRN  
Title: PRESIDENT  
 
 
 
PATRIQUIN LAW PROFESSIONAL CORPORATION
     
By:    
Name:    
Title:    
 
 
 
 
 
Exhibit 2.3
 
SUPPORT AGREEMENT
 
                                MEMORANDUM OF AGREEMENT made as of the 12th day of November, 2010.
  AMONG:
 
                                 FOODFEST INTERNATIONAL 2000, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "USCo")
 
-and-
 
FOODFEST CALL CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "Calico")
 
-and-
 
FOODFEST ACQUISITION CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "AcquisitionCo")
 
WHEREAS the parties have agreed to execute and deliver a support agreement which would govern the relationship among the parties as it related to the issuance and existence of the Exchangeable Shares in the capital of AcquisitionCo; and
 
WHEREAS the articles of AcquisitionCo set forth the rights, privileges, restrictions and conditions (collectively, the "Share Provisions") attaching to the Exchangeable Shares; and
 
WHEREAS the parties hereto desire to make appropriate provision and to establish a procedure whereby USCo and CallCo will take certain actions and make certain payments and deliveries necessary to ensure that AcquisitionCo will be able to make certain payments and to deliver or cause to be delivered common stock in USCo ("USCo Common Stock") in satisfaction of the obligations of AcquisitionCo under the Share Provisions with respect to the payment and satisfaction of dividends, Liquidation Prices, Retraction Prices, Redemption Prices and Exchange Prices, all in accordance with the Share Provisions.
 
WHEREAS as of the date of this Agreement, there are 48,400,000 Exchangeable Shares issued and outstanding, and USCo agrees to reserve a number USCo Common Stock as required to satisfy the obligations of AcquisitionCo under the Share Provisions.
 
NOW THEREFORE in consideration of the respective covenants and agreements provided in this agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows:
 
 
 
 
 
-2-
 
ARTICLE 1
 
DEFINITIONS AND INTERPRETATION
 
1.1                    Defined Terms
 
Each term denoted herein by initial capital letters and not otherwise defined herein shall have the meaning attributed thereto in the Share Provisions, unless the context requires otherwise.
 
1.2                    Interpretation Not Affected by Headings, Etc.
 
The division of this agreement into Articles, Sections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this agreement. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number and/or a letter refer to the specified Article or Section of this agreement. The terms "this agreement", "hereof, "herein" and "hereunder" and similar expressions refer to this agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.
 
1.3                    Number, Gender, Etc.
 
Words importing the singular number only shall include the plural and vice versa. Words importing the use of any gender shall include all genders.
 
1.4                    Date for Any Action
 
If any date on which any action is required to be taken under this agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
 
ARTICLE 2
 
                          COVENANTS OF USCO, CALLCO AND ACQUISITIONCO
 
2.1                    Covenants of USCo and CalICo Regarding Exchangeable Shares
 
So long as any Exchangeable Shares are outstanding, USCo and CalICo each agree that:
 
(a)  
USCo will not declare or pay any dividend on USCo Common Stock unless (i) USCo has sufficient assets, funds and other property available to permit the due declaration and payment in accordance with applicable law, of an equivalent per share dividend on all of the Exchangeable Shares; and (ii) AcquisitionCo shall simultaneously declare or pay, as the case may be, an equivalent dividend on the Exchangeable Shares;
 
(b)  
AcquistionCo will declare simultaneously with the declaration of any dividend by USCo on USCo Common Stock, an equivalent per share dividend on the Exchangeable Shares (an "Equivalent Dividend"), and when such dividend is paid on the USCo Common Stock, AcquisitionCo will pay simultaneously therewith an Equivalent Dividend on the Exchangeable Shares, in each case in accordance with the Exchangeable Share Provisions;
 
 
 
 
 
-3-
 
(c)  
USCo will advise AcquisitionCo sufficiently in advance of the declaration by USCo of any dividend on USCo Common Stock and take all such other actions as necessary, in cooperation with AcquisitionCo, to ensure that the Dividend Record Date for a dividend on the Exchangeable Shares shall be the same as the record date for the corresponding dividend on the USCo Common Stock for the determination of the holders of USCo Common Stock entitled to receive payment of, and the payment date for, any corresponding dividend declared on the USCo Common Stock, respectively;
 
         (d)   USco will advance money to AcquisitionCo to pay Equivalent Dividends;
 
(e)  
USCo and CalICo will take all such actions and do all such things as are necessary or desirable to enable and permit AcquisitionCo, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Price in respect of each issued and outstanding Exchangeable   Share   upon   the   liquidation,   dissolution   or  winding-up  of AcquisitionCo or any other distribution of the assets of AcquisitionCo for the purpose of winding-up its affairs, including without limitation all such actions and all such things as are necessary or desirable to enable and permit AcquisitionCo to cause to be delivered USCo Common Stock to holders of Exchangeable Shares in accordance with the provisions of Article 6 of the Share Provisions;
 
(f)  
USCo and CalICo will take all such actions and do all such things as are necessary or desirable to enable and permit AcquisitionCo, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of a Retraction Request by a holder of Exchangeable Shares or a redemption  of Exchangeable  Shares  by  AcquisitionCo,   including  without limitation all such actions and all such things as are necessary or desirable to enable and permit AcquisitionCo to cause to be delivered USCo Common Stock to such holder, upon the retraction or redemption of the Exchangeable Shares in accordance with the provisions of Article 4 or Article 5 of the Share Provisions, as the case may be; and
 
(g)  
CalICo will not exercise its vote as a shareholder of AcquisitionCo to initiate the voluntary liquidation, dissolution or winding-up of AcquisitionCo nor take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding-up of AcquisitionCo.
 
2.2                     Segregation of Funds
 
Subject to the exercise by USCo or CalICo of any of the Call Rights, USCo will cause AcquisitionCo to, from time to time, deposit any funds advanced by USco under Section 2.1(d) above, a sufficient amount of funds in a separate account and segregate a sufficient amount of such assets and other property as is necessary to enable AcquisitionCo to pay or otherwise satisfy any Equivalent Dividends, Liquidation Price, Retraction Price, Redemption Price or Exchange Amount, in each case for the benefit of holders from time to time of the Exchangeable Shares, and AcquisitionCo will use such funds, assets and other property so segregated exclusively for the payment of dividends and the payment or other satisfaction of the Liquidation Price, the Retraction Price, the Redemption Price, or the Exchange Price, as applicable, net of any corresponding withholding tax obligations and for the remittance of such withholding tax obligations.
 
 
 
 
 
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2.3                     Notification of Certain Events
 
In order to assist USCo and CallCo to comply with their respective obligations hereunder, AcquisitionCo will give USCo and CallCo notice of each of the following events at the time set forth below:
 
(a)  
immediately, in the event of any determination by the Board of Directors of AcquisitionCo to take any action which would require a vote of the holders of Exchangeable Shares for approval;
 
(b)  
immediately, upon the earlier of: (i) receipt by AcquisitionCo of notice of; and (ii) AcquisitionCo otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of AcquisitionCo or to effect any other distribution of the assets of AcquisitionCo among its shareholders for the purpose of winding-up its affairs;
 
         (c)   immediately, upon receipt by AcquisitionCo of a Retraction Request;
 
         (d)   at least 30 days prior to any Automatic Redemption Date;
 
(e)  
as soon as practicable upon the issuance by AcquisitionCo of any Exchangeable Shares or any rights to acquire same; and
 
(f)  
in the event of any determination by the Board of Directors of AcquisitionCo to institute voluntary liquidation, dissolution or winding-up proceedings with respect to AcquisitionCo or to effect any other distribution of the assets of AcquisitionCo among its shareholders for the purpose of winding-up its affairs, at least 30 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution.
 
2.4                     Delivery of USCo Common Stock
 
In   furtherance of its obligations hereunder, upon notice of any event which requires AcquisitionCo to cause to be delivered USCo Common Stock to any holder of Exchangeable Shares, subject to the exercise by CallCo of any of the Call Rights, USCo shall forthwith issue and deliver the requisite USCo Common Stock to or to the order of the former holder of the surrendered Exchangeable Shares, as AcquisitionCo shall direct. All such USCo Common Stock shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim or interest.
 
 
 
 
 
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2.5                     Qualification of USCo Common Stock
 
USCo covenants that if any USCo Common Stock (or other securities into which USCo Common Stock may be reclassified or changed as contemplated by Section 2.6 hereof) to be issued and delivered hereunder (including for greater certainty, in payment of or pursuant to, as applicable, the Liquidation Price, the Retraction Price, the Redemption Price, the Exchange Price, the Liquidation Call Right, the Retraction Call Right, the Redemption Call Right, the Exchange Put Right) (as that term is defined in the Voting and Exchange Trust Agreement)), require registration or qualification with or approval of or the filing of any document including any prospectus or similar document, the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Canadian or US federal or provincial/state law or regulation or pursuant to the rules and regulations of any regulatory authority, or the fulfilment of any other legal requirement (collectively, the "Applicable Laws") before such securities (or other securities into which USCo Common Stock may be reclassified or changed as contemplated by Section 2.6 hereof) may be delivered by USCo or CallCo to the initial holder thereof (other than AcquisitionCo) or in order that such securities may be freely traded thereafter (other than any restrictions on transfer by reason of a holder being a "control person" of USCo for purposes of Canadian or US federal or provincial/state securities law), USCo and CallCo will in good faith expeditiously take all such actions and do all such things as are necessary to cause such USCo Common Stock (or other securities into which USCo Common Stock may be reclassified or changed as contemplated by Section 2.6 hereof) to be and remain duly registered, qualified or approved. USCo and CallCo represent and warrant that they have in good faith taken all actions and done all things as are necessary under Applicable Laws as they exist on the date hereof to cause the USCo Common Stock (or other securities into which USCo Common Stock may be reclassified or changed as contemplated by Section 2.6 hereof) to be issued and delivered pursuant to the Share Provisions or the terms of the Voting Exchange Trust Agreement to be freely tradeable thereafter (other than restrictions on transfer by reason of a holder being a "control person" of USCo for the purposes of Canadian and US federal and provincial/state securities law). USCo and CallCo will in good faith expeditiously take all such actions and do all such things as are necessary to cause all USCo Common Stock (or other securities into which USCo Common Stock may be reclassified or changed as contemplated by Section 2.6 hereof) to be delivered pursuant to the Share Provisions or the terms of the Voting Exchange Trust Agreement to be listed, quoted or posted for trading on the OTCBB or the OTCQB or such other stock exchange or quotation system on which such securities are principally listed, quoted or posted for trading at such time.
 
2.6                     Equivalence
 
(a)      USCo will not:
 
(i)
issue or distribute USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) to the holders of all or substantially all of the then outstanding USCo Common Stock by way of stock distribution or other distribution, other than an issue of USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) to holders of USCo Common Stock who exercise an option to receive distributions in USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock) in lieu of receiving cash distributions; or
 
 
 
 
 
-6-
 
(ii)
issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding USCo Common Stock entitling them to subscribe for or to purchase USCo Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire USCo Common Stock); or
 
(iii)
issue or distribute to the holders of all or substantially all of the then outstanding USCo Common Stock:
 
(A)
shares or securities of USCo of any class other than USCo Common   Stock   (other   than   securities   convertible   into   or exchangeable for or carrying rights to acquire USCo Common Stock);

 
(B)
rights, options or warrants other than those referred to in Section (ii) (ii)above;
 
(C)
evidences of indebtedness of USCo; or
 
(D)
assets of USCo (other than dividends on the USCo Common Stock in respect of which a corresponding dividend is concurrently paid on the Exchangeable Shares in accordance with section Error! Reference source not found, of the Share Provisions);
 
unless one or both of the AcquisitionCo and USCo is permitted under applicable law to issue and distribute the economic equivalent on a per share basis of such rights, options, warrants, securities, evidences or indebtedness or assets and the items referred to in clauses (i) (ii) and (iii) above, as applicable, are issued or distributed simultaneously to holders of Exchangeable Shares, on a share-for-share basis, counting each Exchangeable Share as equivalent to a share of USco Common Stock.
 
(b)      USCo will not:
 
  (i) 
subdivide, redivide or change the then outstanding USCo Common Stock into a greater number of USCo Common Stock; or
 
  (ii)
reduce, combine, consolidate or change the then outstanding USCo Common Stock into a lesser number of USCo Common Stock; or
 
  (iii)
reclassify or otherwise change the rights, privileges or other terms of the USCo Common Stock or effect an amalgamation, merger, reorganization or other transaction involving or affecting the USCo Common Stock.
 
unless the Corporation is permitted under applicable law to simultaneously make the same or an economically equivalent change to, or in the rights of the holders of, the Exchangeable Shares and the same or an economically equivalent change is simultaneously made to, or in the rights of the holder of, the Exchangeable Shares.
 
 
 
 
 
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(c)
USCo will ensure that the record date for any event referred to in Section 2.6(a) and (b) above, or (if no record date is applicable for such event) the effective date for any such event, is not less than 10 Business Days after the date on which such event is declared or announced by USCo (with simultaneous notice thereof to be given by USCo to AcquisitionCo).
 
2.7                     Tender Offers, Etc.
 
In the event that a take-over bid or similar transaction with respect to USCo Common Stock (a "Bid") is proposed by USCo or is proposed to USCo or the holders of USCo Common Stock, and is recommended by the board of directors of USCo or the Board of Directors of AcquisitionCo, as applicable, or is otherwise effected or to be effected with the consent or approval of the board of directors of USCo or the Board of Directors of AcquisitionCo, as applicable, USCo or AcquisitionCo or both shall, in good faith, use reasonable efforts to take all such actions and do all such things as are necessary or desirable to enable and permit holders of Exchangeable Shares to participate in such Bid to the same extent and on an economically equivalent basis as the holders of USCo Common Stock, without discrimination, including, without limiting the generality of the foregoing, USCo or AcquisitionCo or both will use its good faith efforts expeditiously to (and shall, in the case of a transaction proposed by USCo or AcquisitionCo or both or where USCo or AcquisitionCo or both is a participant in the negotiation thereof) ensure that holders of Exchangeable Shares may participate in all such Bids without being required to retract Exchangeable Shares as against AcquisitionCo (or, if so required, to ensure that any such retraction shall be effective only upon, and shall be conditional upon, the closing of the Bid and only to the extent necessary to tender or deposit to the Bid).
 
2.8                     Ownership of Outstanding Shares
 
USCo and CalICo jointly covenant and agrees that, as long as any outstanding Exchangeable Shares are owned by any person or entity other than USCo, CalICo or any of their respective affiliates or Subsidiaries, CalICo will, unless approval to do otherwise is obtained in accordance with Article 11 of the Share Provisions from the holders of the Exchangeable Shares, be and remain the direct or indirect beneficial owner of more than 50% of all issued and outstanding voting securities of AcquisitionCo; provided that USCo will not be in violation of this provision if a party acquires all or substantially all of the assets of USCo.
 
2.9                     USCo and CalICo Not to Vote Exchangeable Shares
 
USCo and CalICo covenant and agree that they will appoint and cause to be appointed proxy holders with respect to all Exchangeable Shares held by USCo, CalICo or any of their respective affiliates or Subsidiaries for the sole purpose of attending each meeting of holders of Exchangeable Shares in order to be counted as part of the quorum for each such meeting. USCo and CalICo further covenant and agree that they will not, and will cause their respective affiliates or Subsidiaries not to, exercise any voting rights which may be exercisable by holders of Exchangeable Shares from time to time pursuant to the Share Provisions or pursuant to the provisions of the Act with respect to any Exchangeable Shares held by them or by their respective affiliates or Subsidiaries in respect of any matter considered at any meeting of holders of Exchangeable Shares.
 
 
 
 
 
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2.10                     Due Performance
 
On and after the Effective Date, USCo and CallCo shall duly and timely perform all of their obligations under the Share Provisions.
 
2.11                     No Specified Financial Institution
 
On and after the effective date hereof and until AcquisitionCo no longer has any Exchangeable Shares issued and outstanding, neither USCo nor CallCo nor any of its affiliates or Subsidiaries will be a "specified financial institution" as that term is defined in the Income Tax Act (Canada).
 
2.12                     Exercise of Call Rights
 
USCo and CallCo covenant and agree that, as long as any outstanding Exchangeable Shares are owned by any person or entity other than USCo, CallCo or any of their respective affiliates or Subsidiaries, USCo and CallCo will formulate a policy respecting whether CallCo will exercise any of the Call Rights, in accordance with the Share Provisions.
 
ARTICLE 3
 
USCO SUCCESSORS
 
3.1                   Certain Requirements in Respect of Combination, etc.
 
USCo shall not complete any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing entity resulting therefrom unless, and may do so if:
 
(a)  
such other person or continuing entity (herein called the "USCo Successor"), by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are reasonably necessary or advisable to evidence the assumption by the USCo Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such USCo Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of USCo under this Agreement; and
 
(b)  
such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other parties hereunder.
 
 
 
 
 
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3.2                     Vesting of Powers in Successor
 
Whenever the conditions of Section 3.1 have been duly observed and performed, the USCo Successor, CallCo and AcquisitionCo shall, if required by Section 3.1, execute and deliver the supplemental agreement provided for in Section 3.1 (a) and thereupon USCo Successor shall possess and from time to time may exercise each and every right and power of USCo under this agreement in the name of USCo or otherwise and any act or proceeding by any provision of this agreement required to be done or performed by the Board of Directors of AcquisitionCo or any officers of AcquisitionCo on behalf of USCo may be done and performed with like force and effect by the directors or officers (or other agents or governing body) of such USCo Successor.
 
3.3                     Wholly-Owned Subsidiaries
 
Nothing herein shall be construed as preventing the combination of any wholly-owned direct or indirect subsidiary of USCo with or into USCo or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of USCo provided that all of the assets of such subsidiary are transferred to USCo or another wholly-owned direct or indirect subsidiary of USCo, and further provided that such subsidiary shall not include AcquisitionCo and Calico for the purpose of this Section 3.3, and any such transactions are expressly permitted by this ARTICLE 3.
 
ARTICLE 4
 
GENERAL
 
4.1                     Term
 
This agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as no Exchangeable Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire Exchangeable Shares) are held by any party other than USCo, CallCo or any of their respective Subsidiaries or affiliates.
 
4.2                     Changes in Capital of USCo and AcquisitionCo
 
Notwithstanding the provisions of Section 4.4 hereof, at all times after the occurrence of any event effected pursuant to section 2.6 or 2.7 hereof, as a result of which either USCo Common Stock or the Exchangeable Shares or both are in any way changed, this agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which USCo Common Stock or the Exchangeable Shares or both are so changed, and the parties hereto shall as soon as possible execute and deliver an agreement in writing giving effect to and evidencing such necessary amendments and modifications.
 
4.3                     Severability
 
If   any provision of this agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this agreement shall not in any way be affected or impaired thereby and this agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.
 
 
 
 
 
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4.4                     Amendments, Modifications, Etc.
 
This agreement may not be amended, modified or waived except by an agreement in writing executed by USCo, CalICo and AcquisitionCo and approved by the holders of the Exchangeable Shares in accordance with Article 11 of the Share Provisions.
 
4.5                     Amendments
 
Notwithstanding the provisions of Section 4.4, the parties to this agreement may in writing, at any time and from time to time, without the approval of the holders of the Exchangeable Shares, amend or modify this agreement for the purposes of:
 
(a)  
adding to the covenants of the other parties to such agreement for the protection of the Corporation or the holders of the Exchangeable Shares thereunder;
 
(b)  
making such provisions or modifications not inconsistent with such agreement or certificate as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or
 
(c)  
making such changes in or corrections to such agreement or certificate which, on the advice of counsel to the Corporation, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares.
 
4.6                     Meeting to Consider Amendments
 
AcquisitionCo, at the request of USCo, CalICo, or any combination of them, shall call a meeting or meetings of the holders of the Exchangeable Shares for the purpose of considering any proposed amendment or modification requiring approval of such shareholders. Any such meeting or meetings shall be called and held in accordance with the Act, the by-laws of AcquisitionCo, the Share Provisions and all Applicable Laws.
 
4.7                     Amendments Only in Writing
 
No amendment to or modification or waiver of any of the provisions of this agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto.
 
4.8                     Enurement
 
 
 
 
 
-11 -
 
This agreement shall be binding upon and inure to the benefit of the parties hereto and the holders, from time to time, of Exchangeable Shares and each of their respective heirs, successors and assigns.
 
4.9                     Notices to Parties
 
All notices and other communications between the parties shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for either such party as shall be specified in like notice) to USCo, AcquisitionCo or CallCo to:
 
c/o Foodfest International 2000 Inc., 361 Connie Crescent Concord, Ontario, L4K 5R2
 
Attention:                                         Fred Farnden, President
Telecopier No.:                                1.905.709.7116
 
or
 
Attention:                                         Henry Ender, Secretary
Telecopier No.:                                1.905.709.7116
 
Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of confirmed receipt thereof, unless such day is not a Business Day, in which case it shall be deemed to have been given and received upon the immediately following Business Day.
 
4.10                     Counterparts
 
This Agreement may be executed in several counterparts each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.
 
4.11                     Jurisdiction
 
This agreement shall be construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
 
4.12                       Attornment
 
Each of USCo, CallCo and AcquisitionCo agrees that any action or proceeding arising out of or relating to this agreement may be instituted in the courts of the Province of Ontario, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of such courts in any such action or proceeding, agrees to be bound by any judgment of such courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction.
 
4.13                     Assignment by and Successor to CallCo
 
Notwithstanding any other provision in this agreement to the contrary, CailCo may transfer or assign its rights and interest in or under this agreement to any affiliate of AcquisitionCo or USCo ("successor corporation"); provided that the successor corporation shall expressly assume, by agreement satisfactory in form to the parties hereto and executed and delivered to parties hereto, the due and punctual performance and observance of each and every covenant and condition of this agreement to be performed and observed by CailCo.

 
 
 
 
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                                        IN WITNESS WHEREOF the parties hereto have caused this agreement to be signed by their respective officers thereunder duly authorized, all as of the date first written above.
 
  FOODFEST   INTERNATIONAL   2000, INC.
  Per: 
     
  FOODFEST ACQUISITION-CORP.
  Per: 
     
  FOODFEST CALL CORP.
  Per: 
 
 
 
 
 
 
 
Exhibit 2.4
State of Delaware
Secretary of State
Division of Corporations
Delivered 07:07 PM 10/22/2010
FILED 07:07 PM 10/22/2010
SRV 101022128 - 4222931 FILE
 
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK OF
FOODFEST INTERNATIONAL 2000 INC.
 
          Foodfest International 2000 Inc., a Delaware Corporation (the �Corporation�), DOES HEREBY CERTIFY:
 
          Pursuant to authority expressly granted and vested in the Board of Directors of the Corporation by the provisions of the Corporation�s Certificate of Incorporation, as amended, the Board of Directors adopted the following resolution on October 18, 2010 (i) authorizing a series of the Corporation�s previously authorized 10,000,000 shares of preferred stock, $0,001 par value per share, and (ii) providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of One (1) share of Series A Preferred Stock of the Corporation, as follows:
 
          RESOLVED: That pursuant to the authority vested in the Board of Directors of the Corporation by the Corporation�s Certificate of Incorporation (the �Certificate of Incorporation�) as amended, a series of Preferred Stock of the Corporation be, and it hereby is, created out of the 10,000,000 authorized but unissued shares of the capital preferred stock of the Corporation, such series to be designated Series A Preferred Stock (the �Series A Preferred Stock�), to consist of one (1) share, $0.01 par value per share, which shall have the following preferences, powers, designations and other special rights;
 
          1. Voting. The Holder of the Series A Preferred Stock shall be entitled to exercise the number of votes equal to the number of Exchangeable Shares that are issued and outstanding as of the record date, except for any Exchangeable Shares owned by any Subsidiary of the Corporation, as further described in the Voting and Exchange Agreement. The holder of Series A Preferred Stock has equivalent voting rights to the holders of common shares in the Corporation (�Common Stock�), as if the holder of Series A Preferred Stock held the number of shares of Common Stock equal to the number of Exchange Shares issued and outstanding at that point in time.
 
 
(i)
The term �Voting and Exchange Trust Agreement� as used in this Certificate of Designation shall mean the agreement to be entered into between the Corporation, its Subsidiaries, and the Trustee, prior to the issuance by any Subsidiary of the Corporation of any Exchangeable Shares, the purpose of which will be to create a trust for the benefit of the registered holders of Exchangeable Shares that will enable the Trustee to exercise voting rights on behalf of the holders of Exchangeable Shares similar to those of holders of Common Stock, in accordance with the Voting and Exchange Trust Agreement and the provisions of the shares issued to the Trustee. A copy of the Voting and Exchange Trust Agreement is attached hereto as Schedule A.
     
 
(ii)
The term �Subsidiary� as used in this Certificate of Designation shall mean, when used with reference to the Corporation, any corporation more than 50% of the outstanding stock of which is owned, directly or indirectly, by the Corporation, by one or more other Subsidiaries of the Corporation, or by the Corporation and one or more other Subsidiaries of the Corporation.

 
 
 

 
(iii)
The term �Exchangeable Shares� as used in this Certificate of Designation shall mean non-voting shares of a Subsidiary of the Corporation issued to a person or persons that have the right to be issued common shares in the capital of the Corporation on a one to one basis in exchange for the redemption or cancellation of each Exchangeable Share.
     
 
(iv)
The term �Trustee� as used in this Certificate of Designation shall mean the trustee chosen by the Corporation to act as trustee under the Voting and Exchange Trust Agreement, being a corporation organized and existing under the laws of Canada or any Province thereof and authorized to carry on the business of a trust company in the province of Ontario, and any successor trustee appointed under the Voting and Exchange Trust Agreement.
     
 
(v)
The term �Support Agreement� as used in this Certificate of Designation shall mean, a support agreement to be entered into between the Corporation and its Subsidiaries prior to the issuance by any Subsidiary of the Corporation of any Exchangeable Shares, which will include the duty of the Corporation to issue common shares to owners of Exchangeable Shares on a one to one basis as the Exchangeable Shares are redeemed or otherwise cancelled in accordance with the terms of the individual Exchangeable Shares, as detailed in the Support Agreement attached as Schedule B attached hereto.
 
          2.       Dividends.   The holder of Series A Preferred Stock shall not be entitled to receive dividends paid on the Common Stock.
 
          3.       Liquidation Preference.   Upon the liquidation, dissolution and winding up of the Corporation, whether voluntary or involuntary, the holder of the Series A Preferred Stock then outstanding shall be not be entitled to receive out of the assets of the Corporation, whether from capital or from earnings available for distribution to its stockholders any assets or property of the Corporation, and the Series A Preferred Stock shall be considered to have nominal value.
 
          4.      Conversion into Common Stock.   The Holder of the Series A Preferred Stock shall not have any rights to convert the Series A Preferred Stock into Common Stock.
 
          5.       Redemption.   As of the date that all Exchangeable Shares have been redeemed or otherwise cancelled in accordance with their terms, and Common Stock has been issued to the holders of Exchangeable Shares in accordance with the Support Agreement, the Corporation shall have the right to redeem the Series 1 Preferred Voting Shares for $0.01 USD, in accordance with the terms of the Voting and Exchange Agreement. The Corporation shall not otherwise have the right to unilaterally redeem or cancel the Series A Preferred Stock, or otherwise amend any of the conditions or voting rights associated with the Series A Preferred Stock, except as otherwise outlined in the Voting and Exchange Agreement.

 
 
 
 
          6.       Vote to Change the Terms of or Issue Additional Series A Preferred Stock . The affirmative vote at a meeting duly called for such purpose, or the written consent without a meeting, of the holder the Series A Preferred Stock shall be required for (i) any change to the Corporation�s Articles of Incorporation that would amend, alter, change or repeal any of the preferences, limitations or relative rights of the Series A Preferred Stock, or (ii) any issuance of additional shares of Series A Preferred Stock, or (iii) any issuance of any shares in the capital of the Corporation that have equal or superior voting rights to those associated with the Series A Preferred Stock.
 
           7..        Notices . In case at any time:
 
                    (a)      the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; or
 
                    (b)      there shall be any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation�s assets to another Person or other transaction in each case, which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, referred to herein as an �Organic Change�;
 
then, in any one or more of such cases, the Corporation shall give, by first class mail, postage prepaid, or by facsimile or by recognized overnight delivery service to non-U.S. residents, addressed to the registered holder of the Series A Preferred Stock at the address of such holder as shown on the books of the Corporation, (i) at least twenty (20) Trading Days prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such subscription rights or for determining rights to vote in respect of any such Organic Change and (ii) in the case of any such Organic Change, at least twenty (20) Trading Days� prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Organic Change.
 
          8.       Record Owner . The Corporation may deem the Trustee, who is the person in whose name shares of Series A Preferred Stock shall be registered upon the registry books of the Corporation to be, and may treat him as, the absolute owner of the Series A Preferred Stock for the purposes of conversion and for all other purposes, and the Corporation shall not be affected by any notice to the contrary. All such payments and such conversion shall be valid and effective to satisfy and discharge the liabilities arising under this Certificate of Designations to the extent of the sum or sums so paid or the conversion so made.
 
          9.       Register. The Corporation shall maintain a transfer agent, which may be the transfer agent for the Common Stock or the Corporation itself, for the registration of the Series A Preferred Stock. Upon any transfer of shares of Series A Preferred Stock in accordance with the provisions hereof, the Corporation shall register or cause the transfer agent to register such transfer on the Stock Register.

 
 
 
 
          IN WITNESS WHEREOF, Henry Ender, Chief Executive Officer of the Corporation, under penalties of perjury, does hereby declare and certify that this is the act and deed of the Corporation and the facts stated herein are true and accordingly has signed this Certificate of Designations on October 22, 2010.
 
 
 
/s/ Henry Ender  
    HENRY ENDER  
 
 
 
 
 
 
 
 
Exhibit 2.5
 
 
THIS AGREEMENT made as of the 20th day of December, 2010.
 
AMONG:
 
FOODFEST INTERNATIONAL 2000, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the "USCo")
 
- and -
 
FOODFEST CALL CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "CallCo")
 
- and -
 
FOODFEST ACQUISITION CORP., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "AcquisitionCo")
 
- and -
 
PATRIQUIN LAW PROFESSIONAL CORPORATION, a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "Trustee")
 
- and -
 
FOODFEST INTERNATIONAL 2000 INC., a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "CanCo")
 
- and -
 
FRED FARNDEN, of the City of Delta, in the Province of British Columbia (hereinafter called the "Farnden")
 
- and -
 
HENRY ENDER, of the City of Richmond Hill, in the Province of Ontario (hereinafter called the "Ender")
 
- and -
 
JOSEPH FORMUSA, of the City of Vaughan, in the Province of Ontario (hereinafter called the "Form usa")
 
(collectively the "Parties")
 
 
 
 
 
WHEREAS the Parties hereto have entered into a series of agreements (collectively the "Agreements") listed below and attached hereto as Schedule A, all of which were dated as of November 2, 2010:
 
n  
Rollover Agreements between AcquisitionCo and Farnden, AcquisitionCo and Ender, and AcquisitionCo and Formusa, respectively, and the directors' resolutions of AcquisitionCo and Canco authorizing and consenting to the transactions contemplated thereby
 
n  
Option Agreement between Farnden and Ender and Foruma
 
n  
Support Agreement between USCo, CallCo and AcqusitionCo
 
n  
Voting and Exchange Trust Agreement between USCo, CaliCo, Acquisition and the Trustee
 
n  
The resolutions of <<Il the directors and shareholders, as applicable of USCo, CallCo and AcquisitionCo authorizing the entering into the Support Agreement and Voting and Exchange Trust Agreement as described above
 
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants herein contained and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged) the parties covenant and agree as follows:
 
1.     The transactions as contemplated by the Agreements have been, at all times, intended to take effect on the 20th day of December, 2010.
 
2.     This agreement may be executed in any number of counterparts and delivered in the original, by fax or by email attachment in Portable Document Format ("PDF"), each of which when so executed and delivered shall constitute an original and all of which taken together shall constitute one and the same instrument.
 
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement. FOODFE INT ATIONAL 2000, INC.
 
 
FOODFEST INTERNATIONAL 2000, INC.  
     
  /s/  Fred Farnden  
By its authorizing attorney  
Name:  Fred Farnden  
Title: President  
     
 
FOODFEST ACQUISITION CORP.  
     
  /s/  Fred Farnden  
By:  
Name:  Fred Farnden  
Title: President  
     
 
 
 
 
 
FOODFEST CALL CORP.  
     
  /s/  Fred Farnden  
By:  
Name:  Fred Farnden  
Title: President  
     
 
PATRIQUIN LAW PROFESSIONAL CORPORATION  
     
  /s/  Scott Patriquin  
By:  
Name:  Scott Patriquin  
Title: Managing Director  
     
 
FOODFEST INTERNATIONAL 2000, INC.  
     
  /s/  Fred Farnden  
By:  
Name:  Fred Farnden  
Title: President  
     
 
 
FOODFEST INTERNATIONAL 2000, INC.  
     
  /s/  Fred Farnden  
    Fred Farnden  
     
  /s/ Henry Ender  
   Henry Ender  
     
  /s/ Joseph Formusa  
   Joseph Formusa  
 
Exhibit 99.1
 
For Immediate Release

Foodfest International 2000 Inc. Closes Merger Agreement

 Vaughan, Canada, December X, 2010/ Foodfest International 2000 Inc. (the “Company” or “FDFT”) completed the acquisition of all of the issued and outstanding shares of Foodfest International 2000, Inc., a private company incorporated under the laws of Ontario, Canada (“CanCo”) on December 20, 2010. CanCo is in the business of processing and distributing kosher, natural, and organic food and drink. Upon closing, CanCo became a wholly owned subsidiary of the Company. The combined entity has approximately $12.9 million in net sales.

Foodfest International 2000 Inc. was incorporated in Ontario, Canada on June 25, 1987 by Henry Ender, Chief Executive Officer and Fred Farnden, President and Chief Financial Officer. The company was formed to align with food distributors and processors specializing in kosher, natural, and organic food and drink to expand sales and manufacturing growth opportunities.

Foodfest is one of the largest kosher food distributors in North America and its mission statement is simple. To be the best supplier of Kosher, natural and organic food and drink to existing and new customers through its association with associated companies and suppliers servicing retail and institutional markets in North America and globally.

About Foodfest International 2000, Inc.

Foodfest International seeks out new opportunities to enter into new broker agreements representing companies with products focused on Kosher, organic, and/or natural qualities. In addition, Foodfest International will pursue acquisitions or joint ventures with other brokerage firms, distributors, and manufacturers that also focus on these Kosher, organic, and natural qualities. Through its wholly owned subsidiaries and partnerships, Foodfest International manufactures sells and distributes a diversified portfolio of high-quality, shelf-stable, frozen and refrigerated foods across North America. For further information on company developments and information, please visit our website at www.foodfestamerica.com .

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, expectations about the Brazilian coffee and food market and quotations from management in this announcement contain forward-looking statements. Statements that are not historical facts, including statements about Foodfest International Food Corp.'s beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those contained in any forward- looking statements. Further information regarding these and other risks is included in our annual report on Form 10-K and other documents filed with the Securities and Exchange Commission. All information provided in this press release is as of April 13, 2010 and Foodfest International Food Corp. undertakes no duty to update such information, except as required under applicable law.