Exhibit 99.1
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SUBSCRIPTION AGREEMENT DATED FEBRUARY 24, 2005
BETWEEN: SILVERSTAR HOLDINGS, LTD. (the "Purchaser"), a corporation duly
incorporated under the laws of Bermuda, having its head office at 6100
Glades Road, suite 305, Boca Raton FL 33434, herein acting and
represented by Clive Kabatznik, its Chief Executive Officer, duly
authorized for the purposes of this agreement, as he so declares
AND: STRATEGY FIRST INC. (the "Corporation"), a corporation duly
incorporated under the Canada Business Corporations Act, having its
head office at 174 St-Paul Street West, Suite 300, Montreal, Quebec,
H2Y 1Z5, herein acting and represented by Brian Clarke, its Executive
Vice-President, duly authorized for the purposes of this agreement, as
he so declares
WHEREAS the Purchaser wishes to subscribe for common shares in the capital stock
of the Corporation in order to become the sole shareholder of the Corporation
for a consideration (the "Subscription Price") comprised of (i) an amount of
$750,000 (the "Cash Amount"), (ii) unregistered shares of the common stock of
the Purchaser (the "Purchaser Common Shares") having an aggregate Market Value
(as defined below) of US$500,000, (iii) based on future profits of the
Corporation, additional shares of the common stock of the Purchaser (the "Earned
Purchaser Common Shares") having an aggregate Market Value up to US$500,000, and
(iv) 200,000 purchase warrants, each to purchase one share of the common stock
of the Purchaser at a price of US$2.50 during the 36 months following issuance,
substantially in the form set out in Schedule A (the "Warrants"), in accordance
with the terms and conditions established hereinafter;
WHEREAS the Corporation has filed a petition under the Companies Creditors
Arrangement Act (Canada) (the "CCAA") in a case pending (the "CCAA Proceedings")
in the Superior Court, Commercial Division, District of Montreal (the "CCAA
Court") and has been granted a stay of proceedings currently ending on March 18,
2005;
WHEREAS pursuant to the CCAA Proceedings, Raymond, Chabot Inc. has been
appointed monitor of the Corporation (the "Monitor");
WHEREAS the Subscription Price will be used to fund an arrangement to be entered
into between the Corporation and its creditors under the CCAA Proceedings (the
"CCAA Arrangement"), substantially in the form set out in Schedule B;
WHEREAS the Corporation intends to proceed with a reorganization (the "CBCA
Reorganization") under section 191 of the Canada Business Corporation Act (the
"CBCA")
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substantially in the form set out in Schedule B pursuant to which (i)
all of the outstanding shares of the Corporation will be cancelled without any
consideration being payable to the current shareholders, and (ii) common shares
of the Corporation (which will comprise a new class of shares) will be issued to
the Purchaser in order to permit it to become the sole shareholder of the
Corporation.
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. INTERPRETATION
1.1 The recitals and schedules hereto form an integral part of
this Agreement.
1.2 Titles and subtitles contained herein are for ease of
reference only and will not affect the interpretation of this
Agreement.
1.3 Unless otherwise specifically indicated, all sums of money
referred to in this Agreement are expressed in Canadian
dollars.
2. DEFINITIONS
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the
following meaning respectively:
2.1 "Market Value" means, in respect of a share of the common
stock of the Purchaser, the greater of (i) the average of
closing prices (in U.S. dollars) of the shares of the common
stock of the Purchaser on the NASDAQ National Market for a
period of ten consecutive trading days ending on the day prior
to the relevant date of issue (whether the Closing Date (as
defined below) or the date that shares of the common stock of
the Purchaser are scheduled to be issued pursuant to
paragraphs 4.1.1 and 4.1.2), and (ii) US$1.00.
2.2 "Earn-Out Period" means the period starting from the Closing
Date and ending 24 months following the Closing Date.
2.3 "Profits" means the Corporation's cumulative net pre-tax
earnings during the Earn-Out Period as shown or reflected in
the unaudited quarterly financial statements or the annual
audited financial statements of the Corporation, as the case
may be (the "Financial Statements").
3. SUBSCRIPTION
3.1 The Purchaser hereby agrees to subscribe for one thousand
common shares of the Corporation (the "Corporation Shares")
for the Subscription Price, payable as set forth herein.
3.2 The Subscription Price shall be payable as follows:
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3.2.1 within two business days of the date hereof, by the
non-refundable deposit of $100,000 (the "Deposit")
with Raymond, Chabot Inc. (the "Escrow Agent"), to be
held by the Escrow Agent and delivered to the
Corporation at Closing, subject to the provisions of
Section 12.2;
3.2.2 on the Closing Date, by the payment of $650,000 in
cash to the Corporation (representing the Cash Amount
less the Deposit);
3.2.3 subject to the obtainment by the Purchaser of all
required regulatory approvals with respect thereto,
on the Closing Date, by the issue of Purchaser Common
Shares having an aggregate Market Value of
US$500,000; and
3.2.4 subject to the obtainment by the Purchaser of all
required regulatory approvals with respect thereto,
on the Closing Date, by the issue of the Warrants.
The Subscription Price shall be distributed to the
Corporation's creditors in accordance with the terms of the
CCAA Arrangement.
3.3 All payments provided for in paragraphs 3.2.1 and 3.2.2 will
be made, at the option of the Purchaser, by bank draft or wire
transfer.
3.4 The Corporation hereby accepts the foregoing subscription and
agrees to allot and issue to the Purchaser the Corporation
Shares at Closing.
4. ADJUSTMENTS TO THE SUBSCRIPTION PRICE
4.1 The Subscription Price shall be subject to the following
adjustments:
4.1.1 if at any time during the Earn-Out Period, the
Profits have exceeded $1,600,000, the Subscription
Price shall be increased by an amount equal to
US$500,000, payable by the issue of the Earned
Purchaser Common Shares having an aggregate Market
Value of US$500,000. The Earned Purchaser Common
Shares shall be issued within five days following the
delivery to the Monitor of the Financial Statements
for the fiscal period in which the Profits exceed the
$1,600,000 threshold;
4.1.2 if the Profits do not exceed $1,600,000 at any time
during the Earn-Out Period, the Subscription
Agreement shall be adjusted based on the Profits at
the expiry of the Earn-Out Period, as follows: if at
the expiry of the Earn-Out Period, the Profits exceed
$1,200,000, the Subscription Price shall be increased
by an amount equal to US $100,000, plus US $100,000
for every $100,000 of Profits in excess of
$1,200,000, payable by the issue of the Earned
Purchaser
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Common Shares having an aggregate Market Value equal
to such amount. The Earned Purchaser Common Shares
shall be issued within five days following the
delivery to the Monitor of the Financial Statements
for the fiscal period in which the Earn-Out Period
ends.
4.2 The Corporation will deliver the Financial Statements to the
Monitor as soon as reasonably practicable, and no later than
30 days following the end of each financial quarter and 90
days following the end of each financial year end, as the case
may be. The Financial Statements will be prepared in
accordance with Canadian generally accepted accounting
principles, consistently applied. Notwithstanding the
foregoing, nothing herein contained shall oblige the
Corporation to have audited financial statements prepared more
than once yearly after Closing.
4.3 Within ten business days of the delivery of any Financial
Statements, the Monitor shall notify the Purchaser in writing
(the "Dispute Notice") of any objection (an "Objection") it
may have with respect to the amounts disclosed as Profits on
such Financial Statements. In the event that the parties are
unable to come to an agreement regarding an Objection within
ten business days of the delivery of the Dispute Notice, all
unresolved issues shall be submitted for resolution to a
single arbitrator who shall be a partner of the Montreal
office of Pricewaterhouse Coopers LLP appointed by the
managing partner of that office. The arbitration proceedings
shall take place in Montreal, Quebec, and the proceedings and
decision shall be completed within 45 days of the sending of
the Dispute Notice. The decision of the arbitrator with
respect to the computation of the Profits will be final and
binding and the parties renounce to contest or appeal such
decision. The fees and expenses of the single arbitrator shall
be shared equally by the Purchaser and the Monitor.
5. CLOSING
The subscription of the Corporation Shares shall be consummated (the
"Closing") at 9:00 a.m. on the fifth business day after all of the
conditions set forth in Section 10 are fulfilled or waived at the
offices of McCarthy Tetrault LLP, 1170 Peel Street, Montreal, Quebec,
H3B 4S8, provided that all such conditions shall be fulfilled or waived
prior to April 11, 2005, or on such other date as the parties may agree
upon (the "Closing Date").
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
As of the date hereof, the Corporation represents and warrants to the
Purchaser as follows, it being acknowledged that the Purchaser is
relying upon such representations and warranties as a condition to its
entering into the present Agreement and its subscription for the
Corporation Shares as contemplated herein:
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6.1 Each of the Corporation and Les Productions Micomeq Inc. and
9055-5137 Quebec Inc. (the "Subsidiaries") is a corporation
duly incorporated, organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation. Each of the Corporation and the Subsidiaries
has full corporate power and authority to conduct its business
as and to the extent now conducted and to own, use and lease
its assets and properties. Each of the Corporation and the
Subsidiaries is duly qualified, licensed or admitted to do
business in, and is in good standing, and possesses all
governmental franchises, licenses and permits in the
jurisdictions in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission
necessary, except for those jurisdictions in which the failure
to be qualified, licensed or admitted and in good standing
would not in the aggregate have a material adverse effect on
the business or financial condition of the Corporation and the
Subsidiaries. The Corporation has delivered to the Purchaser
true and complete copies of the charter documents of the
Corporation and the Subsidiaries as in effect on the date
hereof. There has not been any claim by any jurisdiction to
the effect that the Corporation and the Subsidiaries are
required to qualify or otherwise be authorized to do business
herein.
6.2 The authorized capital stock of the Corporation is described
in Schedule 6.2. The Corporation has delivered to the
Purchaser a list of the holders of all of the outstanding
shares of the Corporation including the address of each holder
and the number of shares held which list is set forth in
Schedule 6.2 hereof. The outstanding shares of the Corporation
are duly authorized, validly issued, and fully paid and
nonassessable and no shares of the Corporation other than
those listed on Schedule 6.2 hereof are outstanding on the
date hereof. Except for this Agreement and as disclosed in
Schedule 6.2, there are no outstanding options, warrants,
rights, agreements, convertible or exchangeable securities or
similar rights to acquire securities of the Corporation and
the Subsidiaries or pursuant to which the Corporation or the
Subsidiaries is or may become obliged to issue, sell,
purchase, return or redeem any securities of the Corporation
or the Subsidiaries, as the case may be. The delivery of a
share certificate at the Closing representing the Corporation
Shares will be given to the Purchaser good and valid title to
the Corporation Shares, free and clear of all hypothecs,
security interests, liens and any other charges or
encumbrances of any sort ("Liens"). None of the shares in the
capital of the Corporation and the Subsidiaries have been
issued in violation of, and none of such charges are subject
to, any pre-emptive or subscription right. The Corporation
owns all the issued and outstanding securities of the each of
the subsidiary free and clear of all Liens.
6.3 The execution, delivery and performance of this Agreement by
the Corporation, and the consummation by the Corporation of
the transactions contemplated hereby, including, without
limitation, the issue of the Corporation Shares to the
Purchaser pursuant to this Agreement, have been duly
authorized by all necessary actions required on the part of
the Corporation. This Agreement has been duly and validly
executed and delivered by the Corporation and constitutes a
legal, valid
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and binding obligation of the Corporation, enforceable against
the Corporation in accordance with its terms.
6.4 The execution and delivery of this Agreement by the
Corporation does not, and the performance by the Corporation
of the Corporation's obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:
6.4.1 conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the
charter documents of the Corporation and the
Subsidiaries including without limitation, their
articles and by-laws (all as amended);
6.4.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices
disclosed in Schedule 6.4, to the knowledge of the
Corporation, conflict with or result in a violation
or breach of any material term or provision of any
law or order applicable to the Corporation and the
Subsidiaries or any of their assets and properties;
nor
6.4.3 except as disclosed in Schedule 6.4, (i) conflict
with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time
or both) a default under, (iii) require the
Corporation or the Subsidiaries to obtain any
consent, approval or action of, make any filing with
or give any notice to any person as a result or under
the terms of, (iv) result in or give to any person
any right of termination, cancellation, acceleration
or modification in or with respect to, (v) result in
or give to any person any additional rights or
entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the
creation or imposition of any Lien upon the
Corporation or the Subsidiaries or any of their
assets and properties under, any material agreement,
lease, license, evidence of indebtedness, mortgage,
indenture, security agreement, permit, certificate of
authority, authorization, approval, registration,
franchise, or other agreement to which the
Corporation or the Subsidiaries is a party or by
which any of their assets or properties is bound.
6.5 Except as disclosed in Schedule 6.5, no consent, approval or
action of, filing with or notice to any governmental or
regulatory authority on the part of the Corporation and the
Subsidiaries is required, to the knowledge of the Corporation,
in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions
contemplated hereby.
6.6 Except as disclosed in Schedule 6.6, the minute books and
other similar records of the Corporation and the Subsidiaries
as made contain a true and complete record,
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in all material respects, of all action taken at all meetings
and by all written resolutions in lieu of meetings of the
shareholders, the board of directors and committees of the
board of directors of the Corporation and the Subsidiaries in
accordance with applicable law. The stock transfer ledgers and
other similar records of the Corporation and the Subsidiaries
accurately reflect all record transfers prior to the execution
of this Agreement in the share capital stock of the
Corporation.
6.7 The Corporation has no subsidiaries other than Les Productions
Micomeq inc. and 9055-5137 Quebec Inc.
6.8 Except as disclosed in Schedule 6.8,
6.8.1 there are no orders outstanding and no actions or
proceedings pending or, to the knowledge of the
Corporation (after having undertaken due inquiries,
acting reasonably), threatened against, relating to
or affecting the Corporation and the Subsidiaries or
any of their assets and properties which (i) could
reasonably be expected to result in the issuance of
an order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or
to otherwise result in a material impairment of the
benefits contemplated by this Agreement to the
Purchaser, or (ii) if determined adversely to the
Corporation and the Subsidiaries, could reasonably be
expected to result in any injunction or other
equitable relief against the SF Group that would
interfere in any material respect with their business
or operations or adversely affect the financial
situation of the Corporation on a consolidated basis;
and
6.8.2 there are no facts or circumstances known to the
Corporation (after due inquiry, acting reasonably)
that could be expected to give rise to any action or
proceeding that would be required to be disclosed
pursuant to Section 6.8.1.
6.9 The Corporation and the Subsidiaries are in possession of and
have good title to, or has valid leasehold interests in or
valid rights under contract to use, all tangible personal
property used in or reasonably necessary for the conduct of
their business. All such tangible personal property is free
and clear of all Liens, other than Permitted Liens (as such
term is defined in Schedule 6.9) and Liens disclosed in
Schedule 6.9.
6.10 The unaudited consolidated financial statements of the
Corporation for the year ended June 30, 2004 and the unaudited
consolidated financial statements of the Corporation for the
period ended December 31, 2004 (collectively the
"Corporation's Financial Statements") annexed hereto at
Schedule 6.10:
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6.10.1 reflect accurately the transactions entered into the
books and accounts of the Corporation and the
Subsidiaries, as at the dates thereof;
6.10.2 are true, complete and correct and present fairly the
assets, liabilities (including the description and
classification thereof as current liabilities and
long-term liabilities, respectively), retained
earnings, profit and loss and financial position of
the Corporation and the Subsidiaries as at the dates
thereof; and
6.10.3 have been prepared in accordance with Canadian
generally accepted accounting principles,
consistently applied.
6.11 Except to the extent reflected or reserved against on the
Corporation's Financial Statements and/or incurred in the
ordinary course of business since December 31, 2004, the
Corporation and the Subsidiaries do not have any liabilities
or obligations of any nature, whether direct or indirect,
accrued, absolute, contingent, unasserted or otherwise, known
or unknown, fixed or unfixed, liquidated or unliquidated
including, without limitation, federal, provincial, state,
local, municipal or other tax liabilities due or to become due
or penalties, assessments or interest charges in respect
thereof, or unusual forward or long term commitments or
unrealized or anticipated losses from any unfavourable
commitments. Any items of income or expense which are unusual
or of a non-recurring nature have been separately disclosed in
the Corporation's Financial Statements. Adequate provision has
been timely made in the Corporation's Financial Statements for
doubtful accounts and other receivables; all taxes assessable
against the Corporation and the Subsidiaries in respect of the
periods therein referred to have been adequately reflected in
the Corporation's Financial Statements and all taxes
assessable against it in respect of the periods therein
referred to but not as at the dates thereof due and payable
have been timely and fully accrued or otherwise provided for
therein;
6.11.1 all of the liabilities, debts and obligations of the
Corporation and the Subsidiaries have arisen in the
ordinary course of the operation by the Corporation
and the Subsidiaries of their business. The
Corporation and the Subsidiaries have not at any time
engaged in any other business or activity other than
as specifically set forth in the record of the CCAA
Court in the context of the CCAA Proceedings;
6.11.2 the Corporation and the Subsidiaries maintains
insurance in respect of their property and assets for
the replacement thereof on a full-replacement clause
basis, and the Corporation and the Subsidiaries are
not in default under any provision of any policy of
insurance and have not received notice of
cancellation or none renewal of any such policy. No
misstatement or misrepresentation has been made
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by the Corporation and the Subsidiaries in any
application for any policy of insurance;
6.11.3 the Corporation and the Subsidiaries have maintained
and shall continue to maintain up to and including
the date of Closing, full, true and complete books of
account and financial records accurately reflecting
all matters normally entered into books of account
maintained by similar businesses and such books of
account and financial records have been maintained
and shall continue to be maintained in accordance
with Canadian generally accepted accounting
principles consistently applied, and all such books
and records shall remain with the Corporation at
Closing;
6.11.4 other than in the context of the CCAA Proceedings, as
extended, all payments owing to contractors,
sub-contractors, workers or any suppliers of goods or
services with respect to the Corporation and the
Subsidiaries have been paid in full, without
subrogation; and
6.11.5 other than as listed in Schedule 6.11.5, the
Corporation and the Subsidiaries have no employees.
6.12 Schedule 6.12 sets forth, a true and complete list of all of
the Intellectual Property Rights (as hereinafter defined)
owned, licensed, or otherwise possessed or used by the
Corporation in the conduct of its business, none of which has
been opposed, invalidated or held unenforceable and, each of
which is in full force and effect. The Corporation is the
absolute owner or exclusive licensee and has, without making
any payment to any person or granting rights to any person in
exchange, the sole and exclusive right to use the Intellectual
Property Rights used by the Corporation or which are or may be
necessary for the research, development, manufacture, use,
sale, lease, license and service of its products and services
under development or proposed to be developed by the
Corporation. The Intellectual Property Rights used by the
Corporation have been duly registered by the Corporation (or
the relevant third party licensor as disclosed to the
Purchaser) with, filed in, or issued by, as the case may be,
the appropriate governmental body, and such registrations,
filings and issuances remain in full force and effect, and
such registrations, filings and issuances cover the technology
required to produce all products and provide all services
currently under development or proposed to be developed by the
Corporation. During the course of the registration or filing
of, or during any other proceeding relating to, the
Intellectual Property Rights used by the Corporations, no
event has occurred that would make invalid or unenforceable,
or negate the right to issuance or use of, or result in the
lapse of, any of such Intellectual Property Rights. All
registration, use and maintenance fees relating to the
Intellectual Property Rights used by the Corporation have been
paid in a timely manner. The Intellectual Property Rights used
by the Corporation are sufficient for the lawful conduct,
ownership and operation of the Corporation's business as
presently conducted and, to the best of
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the Corporation's knowledge (after due inquiry, acting
reasonably), there are no Intellectual Property Rights of any
person which impair or prevent the development, manufacture,
use, sale, lease, license or service of products, or provision
of services, now existing or under development by the
Corporation. The Corporation has the unabridged right to bring
actions for the infringement of all of its Intellectual
Property Rights used by it;
6.12.1 without limiting the generality of Section 6.12
hereof, none of the execution, delivery and
performance of this Agreement nor the consummation of
the transactions contemplated hereby has breached,
violated or conflicted with or will breach, violate
or conflict with, any Contract (as hereinafter
defined) governing any of the Intellectual Property
Rights used by the Corporation, has caused or will
cause the forfeiture or termination, or has given
rise to or will give rise to a right of forfeiture or
termination, of such Intellectual Property Rights or
in any way impaired or will impair the right of the
Corporation to use, sell, license or dispose of, or
to bring any action for the infringement of, any of
such Intellectual Property Rights;
6.12.2 to the best of the Corporation's knowledge (after due
inquiry, acting reasonably), none of the Intellectual
Property Rights owned by the Corporation (or
possessed or used by it, other than in accordance
with the terms of a valid and binding license
agreement to which the Corporation is a party) has
been derived, in part or in whole, from the
Intellectual Property Rights of any other person. To
the best of the Corporation's knowledge (after due
inquiry, acting reasonably), the underlying
inventions in any patents and patent applications
used by the Corporation, were created, engineered and
developed by inventors who have irrevocably assigned
to the Corporation (or to the relevant third party
licensor as disclosed to the Purchaser) all of their
right, title and interest in and to said inventions
and all other Intellectual Property Rights related
thereto. No information relating to the inventions
used by the Corporation has been disclosed in such a
manner as to become available to the public prior to
all relevant priority dates of any applicable patent
applications. All former and current employees of,
and consultants to the Corporation who have been or
are involved in the development, for or on behalf of
the Corporation, of Intellectual Property Rights,
including, without limitation, the Intellectual
Property Rights used by the Corporation, have entered
into agreements with the Corporation pursuant to
which all Intellectual Property Rights developed by
them in the course of their relationship with the
Corporation are duly assigned in favour the
Corporation and belong solely, without any
restrictions or obligations whatsoever, to the
Corporation, or can be freely and exclusively
licensed by or assigned in favour of the Corporation
without making any payment to such person or granting
rights to such person in exchange, and all such
agreements are included in the Contracts. All
third-party developers of the Corporation have
entered into agreements with the Corporation pursuant
to which all Intellectual Property Rights developed
by them in the course of their relationship with the
Corporation are duly assigned and belong solely,
without any restriction or obligation whatsoever, to
the Corporation, or can be freely and
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exclusively licensed by or assigned in favour of the
Corporation without making any payment to such person
or granting rights to such person in exchange, and
all such agreements are included in the Contracts.
The Corporation has taken all reasonable and
practical steps (including, entering into
confidentiality and non-disclosure agreements with
all former and current employees of the Corporation
and all former and current consultants, and, to the
best of the Corporation's knowledge, third party
developers or any other persons with access to or
knowledge of the Intellectual Property Rights used by
the Corporation) sufficient to safeguard and maintain
the secrecy and confidentiality of, and its
proprietary rights in, all of its Intellectual
Property Rights;
6.12.3 without limiting the generality of Section 6.12
hereof, none of the development, manufacture,
marketing, license, sale or use of any product or
service currently licensed or sold by the Corporation
or currently under development or proposed to be
developed by the Corporation, to the best of the
Corporation's knowledge (after due inquiry, acting
reasonably), violates or will violate any Contract
with any Person or infringe or will infringe any
Intellectual Property Rights of any person. There are
no outstanding, pending or to the best of the
Corporation's knowledge threatened proceedings,
litigation or other adverse claims affecting, or with
respect to, any part of the Intellectual Property
Rights used by the Corporation and, to the best of
the Corporation's knowledge (after due inquiry,
acting reasonably), no person is infringing any
Intellectual Property Rights used by any of the
Corporations;
6.12.4 other than as disclosed to the Purchaser and set
forth on Schedule 6.12.4 hereof, no license or
sublicense has been granted by the Corporation or
other Contract has been entered into by the
Corporation with respect to any of the Intellectual
Property Rights used by the Corporations;
6.12.5 the term "Intellectual Property Rights" means all
intellectual property rights of whatsoever nature,
kind or description including, without limitation,
and wherever located: (a) all trade-marks,
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service marks, trade-mark and service mark
registrations, trade-mark and service mark
applications, rights under registered user
agreements, logos, trade names and other trade-mark
and service mark rights, whether registered or not;
(b) all copyrights and applications therefor,
including all computer software (in both source and
object code formats) and related documentation
including documents relating to the design and
execution of computer software, and rights to any of
the foregoing; (c) all inventions, patents, patent
applications and patent rights and counterparts
thereof (including any patents issuing on such
applications or rights) including, without
limitation, every divisional, continuation,
continuation-in-part, substitution and confirmation
application and any reissue based thereon; (d) all
licenses, sub-licenses and franchises; (e) all trade
secrets and proprietary and confidential information;
(f) all industrial designs and registrations thereof
and applications therefor; (g) all renewals,
modifications and extensions of any of the
Intellectual Property Rights set forth in items (a)
to (f) of this Section 6.12.5; and (h) all patterns,
plans, designs, research data, other proprietary
know-how, processes, drawings, technology,
inventions, formulae, recipes, apparatus,
specifications, performance data, information,
quality control information, un-patented blue prints,
flow sheets, equipment and parts lists, instructions,
manuals, records and procedures including testing and
inspection techniques and procedures, and all
licenses and other Contracts relating to any of the
foregoing. The term "Contract" shall mean any
agreement, understanding, undertaking, instrument or
contract to which the Corporation is a party.
6.13 The Corporation has non-capital losses as defined under
subsection 111(8) of the Income Tax Act (Canada) (the "Act")
in the following taxation years and in the following amounts
(the "Tax Losses"), all of which are available for deduction
in computing the Corporation's taxable income under the Act
for taxation years ending prior to the acquisition of control
of the Corporation by effect of this Agreement:
TAXATION YEAR AMOUNT
2004 $ 2,046,904
2003 $ 5,816,513
2002 $ 484,989
2001 $ 0
2000 $ 1,521,300
1999 $ 590,881
1998 $ 0
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$10,460,587
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6.14 The Tax Losses were incurred by the Corporation from carrying
on its software development and sale business (the
"Business").
6.15 Additionally:
6.15.1 the taxation year of the Corporation ends on June 30
and it has not had any other taxation year since June
30, 2004;
6.15.2 no taxation year will end between June 30 2004 and
the Closing Date; and
6.15.3 there are no outstanding assessments, reassessments
against the Corporation and the Corporation has no
knowledge of any threatened or potential assessments
or reassessments that would have an adverse effect on
the amount of the Tax Losses or result in an
additional tax liability for the Corporation.
7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As of the date hereof, the Purchaser represents and warrants to the
Corporation as follows, it being acknowledged that the Corporation is
relying on such representations and warranties as a condition of the
issue of the Corporation Shares as contemplated herein:
7.1 The Purchaser is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has full
corporate power and authority to conduct its business as and
to the extent now conducted and to own, use and lease its
assets and properties. The Purchaser is duly qualified,
licensed or admitted to do business in, and is in good
standing, and possesses all governmental franchises, licenses
and permits in the jurisdictions in which the ownership, use
or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or
admission necessary, except for those jurisdictions in which
the failure to be qualified, licensed or admitted and in good
standing would not in the aggregate have a material adverse
effect on the business or financial condition of the
Purchaser. There has not been any claim by any jurisdiction to
the effect that the Purchaser is required to qualify or
otherwise be authorized to do business herein.
7.2 The execution, delivery and performance of this Agreement by
the Purchaser, and the consummation by the Purchaser of the
transactions contemplated hereby, including, without
limitation, the issue of the Purchaser Common Shares, the
Earned Purchaser Common Shares, the Warrants and the shares of
common stock
-14-
of the Purchaser underlying the Warrant (the "Underlying
Purchaser Common Shares") to the Corporation pursuant to this
Agreement, have been duly authorized by all necessary actions
required on the part of the Purchaser. This Agreement has been
duly and validly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance
with its terms.
7.3 The execution and delivery of this Agreement by the Purchaser
does not, and the performance by the Purchaser of the
Purchaser's obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:
7.3.1 conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the
charter documents of the Purchaser including without
limitation, its articles and by-laws (all as
amended);
7.3.2 subject to obtaining the consents, approvals and
actions, making the filings and giving the notices
disclosed in Schedule 7.3, to the knowledge of the
Purchaser, conflict with or result in a violation or
breach of any material term or provision of any law
or order applicable to the Purchaser or any of its
assets and properties; nor
7.3.3 except as disclosed in Schedule 7.3, (i) conflict
with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time
or both) a default under, (iii) require the Purchaser
to obtain any consent, approval or action of, make
any filing with or give any notice to any person as a
result or under the terms of, (iv) result in or give
to any person any right of termination, cancellation,
acceleration or modification in or with respect to,
(v) result in or give to any person any additional
rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi)
result in the creation or imposition of any Lien upon
the Purchaser or any of its assets and properties
under, any material agreement, lease, license,
evidence of indebtedness, mortgage, indenture,
security agreement, permit, certificate of authority,
authorization, approval, registration, franchise, and
other agreement to which the Purchaser is a party or
by which any of its assets and properties is bound.
7.4 Except as disclosed in Schedule 7.4, no consent, approval or
action of, filing with or notice to any governmental or
regulatory authority on the part of the Purchaser is required,
to the knowledge of the Purchaser, in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
-15-
7.5 The Purchaser Common Shares, the Earned Purchaser Common
Shares and the Underlying Purchaser Common Shares to be issued
pursuant to the terms of the Agreement or upon the exercise of
the Warrants (the "Underlying Common Shares") will, in all
cases, be (i) duly and validly issued by the Purchaser on
their respective dates of issue as fully paid and
non-assessable shares and (ii) issued in compliance with
relevant securities laws, including the applicable provincial
securities laws of Canada and the federal and state securities
laws of the United States. The shares of the common stock of
the Purchaser will, as of the Closing Date, have attributes
substantially as set forth in Schedule 7.5.
8. COVENANTS OF THE CORPORATION
8.1 The Corporation covenants and agrees that prior to the Closing
except (i) as expressly contemplated by this Agreement or (ii)
as agreed or in writing by the Purchaser, after the date
hereof:
8.1.1 the business of the Corporation and the Subsidiaries
shall be conducted only in the ordinary course
consistent with prior practice.
8.1.2 the Corporation and the Subsidiaries shall not enter
into any material agreement or commitment for capital
expenditures.
8.2 The Corporation covenants and agrees that from the date of
this Agreement until the earlier of the Closing Date or the
date this Agreement is terminated in accordance with the terms
and provisions hereof, it shall not (and it shall cause each
of its officers, directors, agents, affiliates and other
representatives to not), directly or indirectly, (i) take any
action to solicit, initiate or encourage any Corporation
Acquisition Proposal (as hereinafter defined) or (ii) engage
in negotiations with any person or entity that may be
considering making, or has made, a Corporation Acquisition
Proposal unless otherwise expressly required by the CCAA
Court. For purposes of this Agreement, "Corporation
Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business
combination involving the Corporation or the acquisition of
any equity interest in, or all or any material part of the
assets of the Corporation and the Subsidiaries other than the
transactions contemplated by this Agreement.
9. CONFIDENTIALITY
All information concerning any party hereto that has been or is
provided to any other party hereto, other than publicly available
information, will be kept in strict confidence by the party to whom
such information is provided and will only be used to evaluate the
completion of the transactions contemplated hereby. In the event this
Agreement is terminated, all documentation or other media containing
such information will be returned promptly to the party providing such
information and the information so obtained shall be kept confidential.
The parties also agree that except as and to the extent
-16-
required by law or permitted by prior written consent of the other
parties, no party may and each party shall direct its representatives
not to directly or indirectly, make any public comment, statement, or
communication with respect to, otherwise disclose or permit the
disclosure of the existence of discussions regarding this Agreement or
the transactions contemplated hereby except to their representatives
that need to know such information for the purpose of evaluating or
otherwise effecting the transactions contemplated hereby. If a party is
required by law to make any such disclosure, it shall first provide to
the other parties the content of the proposed disclosure, the reasons
that such disclosure is required by law, and the time and place that
such disclosure will be made. Notwithstanding the foregoing, the
Corporation shall be permitted to disclose the transaction to the CCAA
Court, the shareholders and creditors of the Corporation as expressly
required by the CCAA Court. Notwithstanding the foregoing, from the
Closing, the Corporation and the Purchaser shall have the right to
publicly disclose to third parties (including, without limitation,
customers, suppliers, dealers and distributors) this Agreement, the
transactions contemplated hereby and the fact that the Closing has
occurred.
10. CONDITIONS TO THE CLOSING
10.1 The obligation of the Purchaser to subscribe to the
Corporation Shares and otherwise consummate the transactions
contemplated by this Agreement are subject to the following
conditions, any or all of which may be waived by the Purchaser
in its discretion:
10.1.1 the representations and warranties made by the
Corporation shall be correct at and as of the Closing
in all material respects with the same force and
effect as though such representations and warranties
had been made as of the Closing and all the covenants
and conditions of this Agreement to be completed with
or performed by the Corporation at or before Closing
shall have been duly complied and performed and at
the Closing; the Corporation shall deliver to the
Purchaser a certificate dated as of the Closing Date
to such effect;
10.1.2 no material adverse change in the condition,
financial or otherwise, business, properties, net
value or results of operations of the Corporation and
the Subsidiaries taken as a whole shall have
occurred;
10.1.3 each class of the creditors of the Corporation shall
have accepted, by the majority prescribed by the
CCAA, the CCAA Arrangement filed in accordance with
the provisions of the CCAA;
10.1.4 the Corporation shall have obtained an order of the
CCAA Court (the "Order") approving the CCAA
Arrangement and the delays for appeal of the Order
shall have expired without any request for
-17-
or the granting of any appeal and the Corporation
shall have received from the CCAA Court, a
certificate of non-appeal with respect thereto;
10.1.5 any Liens on the assets of the Corporation and the
Subsidiaries, except for the Permitted Liens, shall
have been released, discharged and terminated in full
in each case to the entire satisfaction of the
Purchaser;
10.1.6 the Corporation shall have provided the Purchaser
with all material consents, waivers and approvals of
third parties and government authorities necessary
for the consummation of the transactions contemplated
hereunder;
10.1.7 the Corporation shall have provided the Purchaser
with resignations of all directors and officers of
the Corporation and the Subsidiaries requested by the
Purchaser, such resignations to be effective as of
the Closing Date;
10.1.8 the Corporation shall have entered into employment
agreements (with appropriate non-competition clause)
acceptable to the Purchaser, with each of Don
McFatridge, Brian Clarke and Richard Therrien, and
such agreements shall be in full force and effect;
10.1.9 the Corporation shall have provided the Purchaser
with evidence acceptable to the Purchaser, that the
Corporation's non-capital loss available for the
purposes of computing its taxable income under the
Act for the taxation year commencing immediately
after Closing will be at least $3,500,000;
10.1.10 the CBCA Reorganization shall have been approved in
accordance with the CBCA and sanctioned by the
Superior Court, District of Montreal of the Province
of Quebec and the delays for appeal of the CBCA
Reorganization shall have expired without any request
for or the granting of any appeal and the Corporation
shall have received a certificate of non-appeal from
such Court with respect thereto;
10.1.11 the issuance of the Purchaser Common Shares and the
Warrants shall have been made in compliance with
relevant securities laws, including the applicable
provincial securities laws of Canada and the federal
and state securities laws of the United States; and
10.1.12 the claim of Atari against the Corporation shall have
been settled and the Corporation shall have been
granted a full and final unconditional release with
respect thereto.
-18-
10.2 The obligations of the Corporation to issue the Corporation
Shares to the Purchaser and otherwise consummate the
transactions contemplated by this Agreement are subject to the
following conditions, any or all of which may be waived by the
Corporation in its discretion:
10.2.1 the representations and warranties made by the
Purchaser shall be correct at and as of the Closing
in all material respects with the same force and
effect as though such representations and warranties
had been made as of the Closing and all the covenants
and conditions of this Agreement to be completed with
or performed by the Purchaser at or before Closing
shall have been duly complied and performed and at
the Closing, the Purchaser shall deliver to the
Corporation a certificate dated as of the Closing
Date to such effect;
10.2.2 the weighted average closing prices (in U.S. dollars)
of the shares of the common stock of the Purchaser on
the NASDAQ National Market for a period of ten
consecutive trading days ending on the day prior to
the Closing Date shall be at least US$0.80 (unless in
such event, the Purchaser indicates that it is
willing to satisfy the portion of Subscription Price
that is payable in shares, including any adjustments
to the Subscription Price, as the case may be, in
cash);
10.2.3 the creditors of the Corporation shall have accepted,
by the majority prescribed by the CCAA, the CCAA
Arrangement filed in accordance with the provisions
of the CCAA which plan of arrangement incorporates
the terms and conditions of the Term Sheet executed
by the Corporation and the Purchaser on January 31,
2005;
10.2.4 the Corporation shall have obtained the Order and the
delays for appeal of the Order shall have expired
without any request for or the granting of any
appeal;
10.2.5 the Purchaser shall have provided the Corporation
with all consents, waivers and approvals of third
parties and government authorities necessary for the
consummation of the transactions contemplated
hereunder;
10.2.6 the CBCA Reorganization shall have been approved in
accordance with the CBCA and sanctioned by the
Superior Court, District of Montreal of the Province
of Quebec and the delays for appeal of the CBCA
Reorganization shall have expired without any request
for or the granting of any appeal;
-19-
10.2.7 if required, a Notification Form for the listing of
additional shares shall have been filed with the
NASDAQ National Market with respect to the Purchaser
Common Shares, the Earned Purchaser Common Shares and
the Underlying Shares; and
10.2.8 the issuance of the Purchaser Common Shares and the
Warrants shall have been made in compliance with
relevant securities laws, including the applicable
provincial securities laws of Canada and the federal
and state securities laws of the United States.
11. TERMINATION OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Corporation and the Purchaser
contained herein shall terminate on the earlier of (i) the termination
of this Agreement in accordance with its terms, and (ii) the completion
of the subscription for the Corporation Shares on the Closing Date.
12. TERMINATION
12.1 This Agreement may be terminated at any time prior to the
Closing Date:
12.1.1 by the mutual written consent of the Corporation and
the Purchaser;
12.1.2 by written notice of the Purchaser to the
Corporation, if any condition contained in Section
10.1 is not satisfied at or before the Closing Date;
12.1.3 by written notice of the Corporation to the
Purchaser, if any condition contained in Section 10.2
is not satisfied at or before the Closing Date;
12.1.4 by written notice of the Corporation to the
Purchaser, if all the conditions contained in Section
10.1 are satisfied and, through the fault of the
Purchaser, the transactions contemplated herein are
not consummated at the Closing Date.
12.2 The deposit will be released (i) to the Purchaser if the
Agreement is terminated pursuant to Sections 12.1.1 to 12.1.3
or (ii) to the Corporation (A) if the Agreement is terminated
pursuant to Section 12.1.4 or (B) at Closing.
12.3 The parties hereto agree that, except for the distribution of
the Deposit in accordance with Section 12.2, neither party
will have any liability, or any remedy, following the
termination of this Agreement.
-20-
13. FINAL PROVISIONS
13.1 Any notice required herein will be given in writing and will
be transmitted by facsimile or by courier to the addresses of
the parties, indicated in the preamble to this Agreement or to
any other address or facsimile number which they may designate
in a written notice sent to the other party. Any notice or
document given or transmitted by facsimile pursuant to this
section will be deemed to have been delivered and received on
the same day or if by courier on the date actually delivered.
13.2 This Agreement shall be governed and construed in accordance
with the laws of the Province of Quebec and each party hereby
submits to the jurisdiction of the courts of the Province of
Quebec with respect to any matter arising out of or in
connection with this Agreement.
13.3 This Agreement and the schedules hereto contain the entire
understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and
understandings between the parties with respect hereto.
13.4 Each of the parties shall pay all of the fees, costs and
expenses incurred by it in connection with the negotiation and
execution of this Agreement and the transactions contemplated
hereunder, including without limitation all legal, accounting
and other fees, costs and expenses, whether or not the
transactions contemplated hereunder are consummated.
13.5 The parties hereto undertake to complete, sign and execute
when necessary, any actions or documents which either of the
parties may reasonably require so as to give effect to the
provisions of this Agreement.
13.6 This Agreement may be amended in whole or in part by the
parties, but any such modification or amendment will take
effect only upon its due execution by the parties hereto.
13.7 The fact that a party to this Agreement does not insist on the
full execution of any of the undertakings contained in this
Agreement, or has not exercised a right hereunder, will in no
way be considered as a waiver of the execution of such
undertakings or the exercise of such rights.
13.8 This Agreement may be signed in counterparts and each such
counterpart shall constitute an original document and such
counterparts, taken together, shall constitute one and the
same instrument.
(Signature page follows)
-21-
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
referred to above.
SILVERSTAR HOLDINGS LTD.
Per:
------------------------------------------
Name:
Title:
STRATEGY FIRST INC.
Per:
------------------------------------------
Name: Brian Clarke
Title: Executive Vice-President
SCHEDULE A
- SPECIMEN OF WARRANT -
- --------------------------------------------------------------------------------
SCHEDULE B
- TERMS AND CONDITIONS OF CBCA REORGANIZATION -
- --------------------------------------------------------------------------------
SCHEDULE 6.2
- CAPITAL STOCK OF THE CORPORATION-
- --------------------------------------------------------------------------------
Corporation is authorized to issue an unlimited number of Class A, B, C, D, E,
F, G, H, I and Common shares; according to registers, there appear to be
currently issued and outstanding:
>> 38,013 Common shares
>> 479,682 Class F shares
>> 16,208 Class H shares, and
>> 65,530 Class I shares.
Class A:
- -------
o voting;
o annual non-cumulative dividend max 10% Redemption Price, as
declared by directors at their discretion;
o on liquidation, return of Redemption Price, after payment to
Class G, H, I, F and B shareholders.
Class B:
- -------
o non-voting;
o monthly, non-cumulative dividends max. 1% Redemption Price;
o redeemable and retractable for Redemption Price;
o on liquidation, return of Redemption Price, after payment to
Class G, H, I and F shareholders.
Class C:
- -------
o voting;
o annual non-cumulative dividend max 10% Redemption Price, as
declared by directors at their discretion;
o redeemable for Redemption Price;
o on liquidation, return of Redemption Price, after payment to
Class G, H, I, F, B and A shareholders.
Class D:
- -------
o non-voting;
o annual non-cumulative dividend max 10% Redemption Price, as
declared by directors at their discretion;
o redeemable for Redemption Price;
o on liquidation, return of Redemption Price, after payment to
Class G, H, I, F, B, A and C shareholders.
Class E:
- -------
o non-voting;
o discretionary dividends payable in amount and when declared by
directors;
o on liquidation, return of the amount of stated capital, after
payment to Class G, H, I, F, B, A, C and D shareholders, plus
balance (if any, remaining after payment of all classes of
shares) share for share, proportionally with holders of Class
H, I and Common shares.
Class F:
- -------
o non-voting;
o priority (before all other classes of shares) annual
cumulative dividend of 8% of Consideration for which such
shares issued; o redeemable for Redemption Price;
o on liquidation, return of Redemption Price on liquidation,
after payment to Class G, H, and I shareholders
Class G:
- -------
o non-voting;
o priority (before all other classes of shares, EXCEPT FOR CLASS
F) annual cumulative dividend of 8% of the Redemption Price in
respect thereof;
o redeemable and retractable for Redemption Price;
o priority return of Redemption Price on liquidation
Class H:
- -------
o voting;
o discretionary dividends payable in amount and when declared by
directors, BUT PARI PASSU with Class I and Common shares;
o exchangeable for common shares (1/1) at the option of holder;
o return of amount of stated capital on liquidation, pari passu
with Class I shares, after Class G shares, plus balance (if
any, remaining after payment of all classes of shares), share
for share, proportionally with holders of Class E, I and
Common shares.
Class I:
- -------
o non-voting;
- 2 -
o discretionary dividends payable in amount and when declared by
directors, BUT PARI PASSU with Class I and Common shares;
o exchangeable for Class H shares (1/1) at the option of holder,
but subject to ceiling of participating shares held by
specified investors;
o on liquidation, return of amount of stated capital, pari passu
with Class H shares, after Class G shares, plus balance (if
any, remaining after payment to all classes of shares), share
for share, proportionally with holders of Class E, H and
Common shares
Common:
- ------
o voting;
o discretionary dividends payable in amount and when declared by
directors, BUT PARI PASSU with Class I and Common shares;
o on liquidation, return of the amount of stated capital, after
payment of Class G, H, I, F, B, A, C, D and E shares, plus
balance, if any, remaining after payment to all classes of
shares, share for share, proportionally with holders of Class
E, H and I shares
As per articles of incorporation, defined terms as follows:
*Consideration means the amount of money for which a share is issued, or if
share issued in consideration of past services or property, fair market value of
such past services or property, less fair market value of any other
consideration paid for same
** Redemption Price means the aggregate of the Consideration for which share was
issued and any dividends declared and unpaid as of date of redemption, less all
amounts paid on share as a reduction of stated capital.
- 3 -
- --------------------------------------------------------------------------------
Name of Shareholder Common Shares
- --------------------------------------------------------------------------------
Richard Therrien 2,925
Steven Wall 2,925
David Hill 2,925
Donald McFatridge 14,000
Morris Krymalowski 3,250
Marcel Emond 790
Ghislaine Gourmelen Emond 790
Jean-Marc Minville 255
Gilles Piche 377
Henri Roy 148
Gilles Beauchamp 124
3103-5660 Quebec Inc. 229
Sonia Langlois 2,925
Brian Clarke 2,925
Charles Kroegel 2,925
Stirling Westrup 500
Total 38,013
- --------------------------------------------------------------------------------
- 4 -
- --------------------------------------------------------------------------------
Name of Shareholder Class F Shares
- --------------------------------------------------------------------------------
BDBC Venture Capital 211,887
Societe Innovatech du Grand Montreal 267,795
Total 479,682
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Shareholder Class H Shares
- --------------------------------------------------------------------------------
BDBC Venture Capital 8,269
Societe Innovatech du Grand Montreal 662
Fond d'Investissement de culture et 7,277
des communications, s.e.c.
Total 16,208
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Shareholder Class I Shares
- --------------------------------------------------------------------------------
BDBC Venture Capital 34,333
Societe Innovatech du Grand Montreal 22,808
Fond d'Investissement de culture et
des communications, s.e.c. 8,389
Total 65,530
- --------------------------------------------------------------------------------
- 5 -
SCHEDULE 6.4
- CONSENTS, APPROVALS AND ACTIONS -
- --------------------------------------------------------------------------------
N/A
SCHEDULE 6.5
- REGULATORY APPROVALS -
- --------------------------------------------------------------------------------
N/A
SCHEDULE 6.6
- MINUTE BOOKS AND RECORDS OF THE CORPORATION -
- --------------------------------------------------------------------------------
N/A
SCHEDULE 6.8
- LITIGATION -
- --------------------------------------------------------------------------------
N/A
SCHEDULE 6.9
- LIENS -
- --------------------------------------------------------------------------------
As at February 22, 2005 at 3:00 p.m.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
A Conventional April 1, 2004 Secured Party: Charged Property: The universality of the
hypothec without at 12:58 a.m. Grantor's present and future movable
delivery Business Development Bank of property, corporeal and incorporeal,
04-0181419-0002 Canada wheresoever same may be located, relating to
(Venture Capital Division) the business of the Grantor.
Grantor: Amount: $65,000 including an additional
hypothec in the amount of $9,000.
Strategy First Inc.
Expiry date: April 1, 2014
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
B Conventional April 1, 2004 Secured Party: Charged Property: The universality of the
hypothec without at 12:58 a.m. Grantor's present and future movable
delivery Societe Innovatech du Grand property, corporeal and incorporeal,
04-0181419-0001 Montreal wheresoever same may be located, relating to
the business of the Grantor.
Grantor:
Amount: $39,000 including an additional
Strategy First Inc. hypothec in the amount of $9,000.
Premiere Strategie Inc. Expiry date: April 1, 2014
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
C Rights resulting December 13, 2002 Lessor: Property: Specific vehicle (Volkswagen Pass,
from a lease and at 11:54 a.m. 2003).
assignment of Les Automobiles Autohaus Ltee
rights 02-0563857-0067 Date of agreement: October 9, 2002
Lessees:
Expiry date: October 9, 2007
Strategy First Inc.
Comment:
Steven Wall
(d.o.b.: 1962-06-28) Rectification of an inscription registered
on December 24, 2003 under number
Assignee: 03-0685407-0002 to correct Lessee's name
from Strategie First Inc. to Strategy First
Credit VW Canada, Inc. Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
D Conventional December 23, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 9:00 a.m. Grantor's present and future movable
delivery Societe Innovatech du Grand property, corporeal and incorporeal,
03-0681518-0004 Montreal wheresoever same may be located, relating to
the business of the Grantor.
Grantor:
Amount: $227,500 including an additional
Strategy First Inc. hypothec in the amount of $52,500.
Premiere Strategie Inc. Expiry date: December 22, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
E Conventional December 23, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 9:00 a.m. Grantor's present and future movable
delivery Business Development Bank of property, corporeal and incorporeal,
03-0681518-0003 Canada wheresoever same may be located, relating to
(Venture Capital Division) the business of the Grantor.
Grantor: Amount: $357,500 including an additional
hypothec in the amount of $82,500.
Strategy First Inc.
Expiry date: December 22, 2013
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
F Conventional December 23, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 9:00 a.m. Grantor's present and future movable
delivery Fonds d'Investissement de la property, corporeal and incorporeal,
03-0681518-0001 Culture et des Communications wheresoever same may be located, relating to
the business of the Grantor.
Grantor:
Amount: $39,000 including an additional
Strategy First Inc. hypothec in the amount of $9,000.
Premiere Strategie Inc. Expiry date: December 22, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
G Conventional October 6, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 10:31 a.m. Grantor's present and future movable
delivery Fonds d'Investissement de la property, corporeal and incorporeal,
03-0530249-0003 Culture et des Communications wheresoever same may be located, relating to
the business of the Grantor.
Grantor:
Amount: $39,000 including an additional
Strategy First Inc. hypothec in the amount of $9,000.
Premiere Strategie Inc. Expiry date: October 2, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
H Conventional October 6, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 10:31 a.m. Grantor's present and future movable
delivery Business Development Bank of property, corporeal and incorporeal,
03-0530249-0002 Canada wheresoever same may be located, relating to
(Venture Capital Division) the business of the Grantor.
Grantor: Amount: $65,000 including an additional
hypothec in the amount of $15,000.
Strategy First Inc.
Expiry date: October 2, 2013
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
I Conventional October 6, 2003 Secured Party: Charged Property: The universality of the
hypothec without at 10:31 a.m. Grantor's present and future movable
delivery Societe Innovatech du Grand property, corporeal and incorporeal,
03-0530249-0001 Montreal wheresoever same may be located, relating to
the business of the Grantor.
Grantor:
Amount: $65,000 including an additional
Strategy First Inc. hypothec in the amount of $15,000.
Premiere Strategie Inc. Expiry date: October 2, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
-2-
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
J Conventional September 29, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 9:00 a.m. current and future assets making up the
delivery Societe Innovatech du Grand universal property described hereinafter, as
03-0513029-0002 Montreal well as those acquired in replacement of the
same:
Grantor:
1 - the universality of all tangible
Strategy First Inc. personal property and intangible personal
property, of any nature, form or description
Premiere Strategie Inc. whatsoever;
2 - the universality of all accounts
receivable, book debts, claims and all other
sums due or that may become due to the
Grantor in the future;
3 - the universality of all the inventory of
raw materials, goods in process, finished
products and any other current and future
stock whatsoever;
together with the rights to an d
compensation for insurance and
expropriation, the debts, payment
instruments or sums of money resulting from
the rental, sale or other transfer of the
mortgaged assets, if applicable, as well as
all property purchased as a replacement, the
sums deposited in any financial institution,
the titles, records, invoices, contracts,
values and other instruments that the
Grantor shall receive or may be entitled to
receive relative to any rental, sale or
other transfer of the mortgaged assets.
Amount: $32,500 including an additional
hypothec in the amount of $7,500.
Expiry date: September 24, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
K Conventional September 29, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 9:00 a.m. current and future assets making up the
delivery Business Development Bank of universal property described hereinafter, as
03-0513029-0001 Canada well as those acquired in replacement of the
(Venture Capital Division) same:
Grantor: 1 - the universality of all tangible
personal property and intangible personal
Strategy First Inc. property, of any nature, form or description
whatsoever;
Premiere Strategie Inc.
2 - the universality of all accounts
receivable, book debts, claims and all other
sums due or that may become due to the
Grantor in the future;
3 - the universality of all the inventory of
raw materials, goods in process, finished
products and any other current and future
stock whatsoever;
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 3 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
together with the rights to an d
compensation for insurance and
expropriation, the debts, payment
instruments or sums of money resulting from
the rental, sale or other transfer of the
mortgaged assets, if applicable, as well as
all property purchased as a replacement, the
sums deposited in any financial institution,
the titles, records, invoices, contracts,
values and other instruments that the
Grantor shall receive or may be entitled to
receive relative to any rental, sale or
other transfer of the mortgaged assets.
Amount: $32,500 including an additional
hypothec in the amount of $7,500.
Expiry date: September 24, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
L Conventional August 21, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 11:54 a.m. current and future assets making up the
delivery Business Development Bank of universal property described hereinafter, as
03-0436982-0002 Canada well as those acquired in replacement of the
(Venture Capital Division) same:
Grantor: 1 - the universality of all tangible
personal property and intangible personal
Strategy First Inc. property, of any nature, form or description
whatsoever;
Premiere Strategie Inc.
2 - the universality of all accounts
receivable, book debts, claims and all other
sums due or that may become due to the
Grantor in the future;
3 - the universality of all the inventory of
raw materials, goods in process, finished
products and any other current and future
stock whatsoever;
together with the rights to an d
compensation for insurance and
expropriation, the debts, payment
instruments or sums of money resulting from
the rental, sale or other transfer of the
mortgaged assets, if applicable, as well as
all property purchased as a replacement, the
sums deposited in any financial institution,
the titles, records, invoices, contracts,
values and other instruments that the
Grantor shall receive or may be entitled to
receive relative to any rental, sale or
other transfer of the mortgaged assets.
Amount: $32,500 including an additional
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 4 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
hypothec in the amount of $7,500.
Expiry date: August 20, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
M Conventional August 21, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 11:54 a.m. current and future assets making up the
delivery Societe Innovatech du Grand universal property described hereinafter, as
03-0436982-0001 Montreal well as those acquired in replacement of the
same:
Grantor:
1 - the universality of all tangible
Strategy First Inc. personal property and intangible personal
property, of any nature, form or description
Premiere Strategie Inc. whatsoever;
2 - the universality of all accounts
receivable, book debts, claims and all other
sums due or that may become due to the
Grantor in the future;
3 - the universality of all the inventory of
raw materials, goods in process, finished
products and any other current and future
stock whatsoever;
together with the rights to an d
compensation for insurance and
expropriation, the debts, payment
instruments or sums of money resulting from
the rental, sale or other transfer of the
mortgaged assets, if applicable, as well as
all property purchased as a replacement, the
sums deposited in any financial institution,
the titles, records, invoices, contracts,
values and other instruments that the
Grantor shall receive or may be entitled to
receive relative to any rental, sale or
other transfer of the mortgaged assets.
Amount: $32,500 including an additional
hypothec in the amount of $7,500.
Expiry date: August 20, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
N Conventional June 27, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 12:33 p.m. present and future undertaking and movable
delivery Charles John Kroegel Jr. property, corporeal and incorporeal,
03-0330610-0001 (d.o.b.: 1952-02-11) together with all proceeds thereof.
Grantor: Amount: $270,000 including an additional
hypothec of 20%.
Strategy First Inc.
Expiry date: June 27, 2013
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
O Conventional June 27, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 12:26 a.m. present and future undertaking and movable
delivery Brian Clarke property, corporeal and incorporeal,
03-0330578-0001 (d.o.b.: 1938-12-02) together with all proceeds thereof.
Grantor: Amount: $270,000 including an additional
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 5 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
hypothec of 20%.
Strategy First Inc.
Expiry date: June 27, 2013
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
P Conventional June 20, 2003 Secured Party: Charged Property: All of the Grantor's
hypothec without at 10:29 a.m. present and future Claims, Property in
delivery Atari, Inc. Stock, Equipment, Contractual Rights,
03-0318869-0001 Intellectual Property, Receivables on its
Grantor: Intellectual Property an Securities,
together with the proceeds thereof and
Strategy First Inc. insurance and expropriation indemnities
related thereto.
Premiere Strategie Inc.
Amount: $4,780,550 including an additional
hypothec of 15%.
Expiry date: June 20, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Q Conventional February 18, 2003 Secured Party: Charged Property: All sums which are or will
hypothec without at 9:00 a.m. be in the Grantor's account bearing number
delivery Banque Nationale du Canada 559023525970 held by the Secured Party, or
03-0073309-0001 any account replacing it up to the amount of
Grantor: $35,000.
Strategy First Inc. Amount: $35,000.
Premiere Strategie Inc. Expiry date: February 10, 2013
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
R Conventional December 16, 2002 Secured Party: Charged Property: The universality of the
hypothec without at 2:44 p.m. Grantor's present and future claims owing to
delivery National Bank of Canada the Grantor including any debts, accounts,
02-0566583-0001 client accounts, claims, judgments, demands,
Grantor: income, abatements, remissions, cash
balances, money deposits and, without
Strategy First Inc. limitation, any amounts deposited or
remitted by the Grantor to the Secured Party
Premiere Strategie Inc. in virtue of the Financing Agreement, in any
bank account or any amount of whatever
nature which may, at any time hereafter, be
owed or might be owed in the future to the
Grantor, as well as all the fruits and
revenues therefrom including those acquired
in replacement thereof as well as any
proceeds from the sale thereof or any part
thereof, pertaining or relating, directly or
indirectly, to the business operated by the
Grantor, and also all judgments, hypothecs,
suretyships, security and other rights in
connection thereto, as well as all
contracts, securities, bills, notes,
policies and other documents now held or
owed or which may be hereafter taken, held
or owned by the Grantor in respect of said
charged Property.
Amount: $1,710,000 including an additional
hypothec of $285,000.
Expiry date: December 16, 2012
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 6 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
S Conventional February 28, 2002 Secured Party: Charged Property: The universality of the
hypothec without at 9:55 a.m. Grantor's present and future claims owing to
delivery National Bank of Canada the Grantor including any debts, accounts,
02-0079479-0001 client accounts, claims, judgments, demands,
Grantor: income, abatements, remissions, cash
balances, money deposits and, without
Strategy First Inc. limitation, any amounts deposited or
remitted by the Grantor to the Secured Party
Premiere Strategie Inc. in virtue of the Facility A of the Financing
Agreement, in any bank account or any amount
of whatever nature which may, at any time
hereafter, be owed or might be owed in the
future to the Grantor, as well as all the
fruits and revenues therefrom including
those acquired in replacement thereof as
well as any proceeds from the sale thereof
or any part thereof, pertaining or relating,
directly or indirectly, to the business
operated by the Grantor, and also all
judgments, hypothecs, suretyships, security
and other rights in connection thereto, as
well as all contracts, securities, bills,
notes, policies and other documents now held
or owed or which may be hereafter taken,
held or owned by the Grantor in respect of
said charged Property.
Amount: $360,000
Expiry date: February 27, 2012
Comment:
Rectification of an inscription registered
on September 27, 2002 under number
02-0435180-0001 relating to the English and
French version of the Grantor's name.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
T Conventional February 28, 2002 Secured Party: Charged Property: The universality of the
hypothec without at 9:55 a.m. Grantor's present and future claims owing to
delivery National Bank of Canada the Grantor including any tax credits,
02-0079479-0002 debts, accounts, client accounts, claims,
Grantor: judgments, demands, income, abatements,
remissions, cash balances, money deposits
Strategy First Inc. and, without limitation, any amounts
deposited or remitted by the Grantor to the
Premiere Strategie Inc. Secured Party in virtue of the Facility F of
the Financing Agreement, in any bank account
or any amount of whatever nature which may,
at any time hereafter, be owed or might be
owed in the future to the Grantor, as well
as all the fruits and revenues therefrom
including those acquired in replacement
thereof as well as any proceeds from the
sale thereof or any part thereof, pertaining
or relating, directly or
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 7 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
indirectly, to the business operated by the
Grantor, and also all judgments, hypothecs,
suretyships, security and other rights in
connection thereto, as well as all contracts,
securities, bills, notes, policies and other
documents now held or owed or which may be
hereafter taken, held or owned by the Grantor
in respect of said charged Property.
Amount: $2,880,000
Expiry date: February 27, 2012
Comment:
Rectification of an inscription registered
on September 27, 2002 under number
02-0435180-0001 relating to the English and
French version of the Grantor's name.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
U Rights resulting June 14, 2002 Lessor: Property: Specific vehicle (Toyota RAV4,
from a lease and at 1:28 p.m. 2002)
assignment of 3566072 Canada Inc.
rights 02-0259598-0099 Date of agreement: May 22, 2002
Lessees:
Expiry date: May 22, 2007
Strategy First Inc.
Davil Hill
(d.o.b.: 1957-03-16)
Assignee:
Toyota Credit Canada Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
V Rights of October 19, 2001 Lessor: Property: Specific equipment (2 Merlin
ownership of at 2:15 p.m. Magix, messaging system)
Lessor CIT Financial Ltd.
01-0385023-0001 Date of agreement: October 16, 2001
(Leasing Lessee:
Agreement) Expiry date: April 16, 2008
Strategy First Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
W Conventional June 15, 1999 Secured Party: Charged Property: All of the Grantor's
hypothec without at 9:00 a.m. movable property, corporeal and incorporeal,
delivery Banque Nationale du Canada present and future, wherever they may be.
99-0095584-0001
Grantor: Amount: $900,000 including an additional
hypothec in the amount of $150,000.
Strategy First Inc.
Expiry date: May 27, 2009
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
X Rights resulting June 13, 2001 Lessor: Property: Specific vehicle (Pontiac Grand
from a lease and at 2:07 p.m. AM, 2001)
assignment of Harland Pontiac Buick Inc.
rights 01-0207726-0006 Date of agreement: June 6, 2001
Lessees:
Expiry date: June 6, 2005
Strategy First Inc.
Don McFatridge
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 8 -
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Nature of right Date and Parties Summary of Charge and Information
Registration No
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
(d.o.b.: 1956-05-26)
Assignee:
GMAC Leaseco Limited
GMAC Location Limited
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Y Conventional July 16, 1999 Secured Party: Charged Property: All of the Grantor's
hypothec without at 9:00 a.m. rights, title and interests in and to the
delivery National Bank of Canada insurance policy in the amount of $1,000,000
99-0114829-0001 bearing number 7932582 issued by Sun Life
Grantor: upon the life of Donald McFatridge, together
with any renewals, additions, substitutions
Strategy First Inc. or modifications thereto.
Premiere Strategie Inc. Amount: $1,000,000
Expiry date: July 14, 2009
Comments:
Rectification of an inscription registered
on July 28, 1999 under number
99-0122577-0001 correcting the French
version of the Grantor's name.
Rectification of an inscription registered
on September 27, 2002 under number
02-0435180-0002 relating to the date of
agreement.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
Z Conventional May 10, 2002 Secured Party: Charged Property: The universality of the
hypothec without at 2:11 p.m. Grantor's present and future movable
delivery National Bank of Canada property, corporeal and incorporeal,
02-0196764-0001 wheresoever same may be located, relating to
Grantor: the business of the Grantor.
Strategy First Inc. Amount: $2,598,000
Premiere Strategie Inc. Expiry date: May 8, 2012
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
AA Conventional July 16, 1999 Secured Party: Charged Property: The universality of the
hypothec without at 9:00 a.m. Grantor's present and future movable
delivery National Bank of Canada property, corporeal and incorporeal,
99-0114815-0001 relating to the business of the Grantor.
Grantor:
Amount: $750,000
Strategy First Inc.
Expiry date: July 14, 2009
Premiere Strategie Inc.
- -------- ------------------ --------------------- ------------------------------ ----------------------------------------------
- 9 -
SCHEDULE 6.10
- FINANCIAL STATEMENTS -
- --------------------------------------------------------------------------------
See attached
o unaudited financial statements for the year ended June 30,
2004;
o unaudited financial statements for the interim period ended
December 20, 2004.
SCHEDULE 6.11.5
- EMPLOYEES -
- --------------------------------------------------------------------------------
See attached list.
SCHEDULE 6.12
- INTELLECTUAL PROPERTY -
- --------------------------------------------------------------------------------
See attached list.
SCHEDULE 7.3
- CONSENTS, APPROVALS AND ACTIONS -
- --------------------------------------------------------------------------------
SCHEDULE 7.4
- REGULATORY APPROVALS -
- --------------------------------------------------------------------------------
SCHEDULE 7.5
- CAPITAL STOCK OF THE PURCHASER -
- --------------------------------------------------------------------------------