ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 11th day of July 2005, by and between Stratabase Inc., a Canadian
corporation having an address at 34595 3rd Avenue, #101, Abbotsford, B.C.,
Canada (the "Seller"); and 657865 B.C. Ltd., a British Columbia corporation
having an address at 34595 3rd Avenue, #101, Abbotsford, B.C., Canada
("Purchaser").
WITNESSETH
WHEREAS, Seller is engaged in the business of providing Knowledge
Worker Automation software designed to allow enterprises to improve the
efficiency of knowledge workers (the "Business"); and
WHEREAS, Seller has developed both open source and proprietary
Web-based software for its Business including its two proprietary software
products "Resync" and "Relata" (collectively, the "Software"); and
WHEREAS, Seller and Trevor Newton, the Chairman and President of
Seller, have entered into a Letter of Intent dated as of June 6, 2005 (the
"Letter of Intent"), pursuant to which Mr. Newton agreed to purchase from Seller
all of the Assets (as defined below) relating to the Business, including the
Software but excluding all cash, cash equivalents, equipment and furniture.
WHEREAS, Purchaser is a British Columbia corporation wholly-owned and
controlled by Mr. Newton;
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Assets (as defined below), subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereinafter set forth, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound hereby, the parties agree as follows:
1. Sale and Purchase of Assets. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, assign, convey and deliver to
Purchaser, on the Closing Date (as defined in Section 10(a) hereof), and
Purchaser hereby agrees to purchase all of the tangible and intangible assets as
more particularly described in EXHIBIT A to this Agreement, including, but not
limited to, all right, title, and interest in and to all trademarks, web pages,
and domain names related to the Software, the rights to the Relata and Resync
source code as well as rights to the Stratabase, Relata and Resync names, and
all intellectual property comprising such assets (including without limitation,
trademarks, copyrights, trade secrets and any patents) throughout the world
relating thereto and all rights to exercise any and all such intellectual
property rights and bring actions for past, present or future infringement
thereof (collectively, the "Assets").
(a) Notwithstanding the foregoing, no other assets of Seller are included within
the transaction contemplated by this Agreement, including cash, bank accounts,
cash equivalents, equipment and furniture (the "Excluded Assets") and Purchaser
shall not have a right to purchase, acquire or use any of the Excluded Assets.
Further, the Assets shall not include the Seller's Articles of Continuance,
By-laws, qualifications to conduct business, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
loss carry forwards, capital loss carry forwards, seals, minute books, stock
ledger, blank stock certificates, and other documents relating to the
organization, maintenance, and existence of Seller as a Canadian corporation.
(b) Purchaser hereby acknowledges that Trevor Newton, its sole officer and
director, is also the Chairman and President of Seller and, consequently,
Purchaser is deemed to have, and is deemed to have had prior to the date hereof,
adequate and fair access to the Assets and all facilities, books and records
relating to the Assets to perform its due diligence with respect to the purchase
of the Assets.
2. Obligations and Liabilities Assumed and Not Assumed.
(a) Purchaser shall pay any transfer, sales, purchase, use or similar tax under
the laws of any governmental authority arising out of or resulting from the
purchase of the Assets. The parties shall use their respective best efforts to
provide and obtain from any taxing authority any certificate or other document
necessary to mitigate, reduce or eliminate any such transfer taxes (including
additions thereto or interest and penalties thereon) that otherwise would be
imposed with respect to the transactions contemplated by this Agreement.
3. Purchase Price and Payment Terms. In consideration of Seller's conveyance of
the Assets to Purchaser, Purchaser shall pay to Seller in full payment and
exchange for all of the Assets, a cash purchase price in U.S. dollars to be
determined prior to the Closing Date (as defined in Section 10(a) hereof) in a
report on the valuation of the Assets (the "Valuation Report") prepared by the
independent valuation firm of Evans & Evans, Inc. of Vancouver, British Columbia
("Evans & Evans"). Evans & Evans shall deliver the Valuation Report to Seller
and Purchaser no later than three (3) business days prior to the Closing Date.
Seller shall pay, when due, the fee and expenses charged by Evans & Evans for
the preparation of the Valuation Report. The purchase price set forth in the
Valuation Report (the "Purchase Price") shall be in U.S. Dollars and shall be
final and binding on Seller and Purchaser, except for manifest error and subject
to the provisions of Section 8(f) hereof.
(a) The Purchase Price shall be paid by Purchaser to Seller at Closing by the
delivery of a secured convertible promissory note in the principal amount
thereof (the "Note"), which Note shall (i) be substantially in the form annexed
hereto as EXHIBIT B, (ii) bear interest at annual rate of 0% and (iii) be
secured by all of the Assets of Purchaser being purchased hereunder. The Note
shall become due and payable on the first anniversary of the Closing Date (the
"Due Date"). Prior to the Due Date, at the option of Purchaser, exercised in its
sole discretion, the principal balance of the Note may be converted into common
shares of Purchaser at a conversion price equal to the fair market value of the
common shares of Purchaser as determined by an independent valuation firm
engaged by the Purchaser at Purchaser's expense and reasonably acceptable to
Seller.
(b) The valuation and allocation of the consideration or tax basis among the
Assets attributable to the transactions contemplated by this Agreement shall be
as set forth in the Valuation Report. Purchaser and Seller shall follow such
allocation in determining and reporting their liabilities for taxes in their
respective tax returns filed subsequent to the Closing Date, and agree not to
take, in any filing with or accompanying any tax return reporting any part of
the transaction undertaken herein, a position inconsistent with such
allocations. If such allocation is disputed by any governmental entity, the
party receiving notice of such dispute shall promptly notify the other parties
hereto and shall cooperate with the other parties in resolving such dispute.
4. Representations and Warranties of Seller. Seller represents and warrants to
Purchaser, as of the date of this Agreement and as of Closing Date, as follows:
(a) Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the federal laws of Canada. Seller
has all requisite corporate power and authority to carry on the Business, to own
the Assets, as currently owned and operated and is duly qualified to transact
business and is in good standing in each jurisdiction where the failure so to
qualify would have a material adverse effect on the Business or the ownership,
use or operation of the Assets.
(b) Due Authorization. Seller has all corporate and legal right, power and
authority to enter into, execute and deliver this Agreement, the Security
Agreement and all bills of sale, instruments and documents to be executed and
delivered on the part of Seller under or in connection with this Agreement
(collectively, the "Seller Instruments"), and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the Seller
Instruments by Seller has been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed by Seller, and delivered
by Seller, and constitutes the legal, valid and binding agreement of Seller,
enforceable in accordance with its terms. As of the Closing Date, the Seller
Instruments will have been duly executed by Seller, and delivered by Seller, and
will constitute the legal, valid and binding obligations of Seller, enforceable
in accordance with their terms.
(c) Title to Assets. On the Closing Date, Seller will have, and will transfer to
Purchaser, good and marketable title to the Assets, free and clear of all
encumbrances or other security interests excepts as otherwise disclosed in any
of Seller's periodic reports filed with the Securities and Exchange Commission
pursuant to Section 13 of the Securities Exchange Act of 1934.
(d) Brokers and Finders. Neither Seller, nor any of its officers, directors or
employees, has employed any broker, agent or finder or incurred any liability
for any brokerage fees, agent's commissions or finder's fees concerning the
transactions contemplated hereby. Seller shall indemnify and hold Purchaser
harmless from and against any loss, liability, damage, costs and expenses
arising out of any claim for such commission or fees in connection with the
transactions contemplated hereunder.
(e) Other Agreements. The execution and delivery of this Agreement by the
Seller, and the execution and delivery of each of the Seller Instruments do not,
and the consummation of the transactions contemplated hereby and thereby will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligations under any provision of the
Articles of Continuance or By-laws of the Seller, or any mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, license,
and to the best of its or their knowledge, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Seller or any of the Assets.
(f) Litigation; Compliance with Law. To the best of Seller's knowledge: (i)
there is no litigation, claim, governmental or other proceeding or investigation
pending or, to the best of its or their knowledge, threatened which affects the
Assets or which may impair Seller's ability to perform the transactions
contemplated by the Agreement; and (ii) there is no outstanding judgment, order,
injunction or decree of any court, government or governmental agency against or
affecting the Seller or the Assets.
(g) Disclaimer. Except as expressly set forth in this Section 4, Seller makes no
representation or warranty, express or implied, at law or in equity, in respect
of any of its Assets, Assumed Liabilities or the Business, including without
limitation, future earnings potential of the Assets, and any such other
representations or warranties are hereby expressly disclaimed. Purchaser hereby
acknowledges and agrees that, except to the extent specifically set forth in
this Section 4, Purchaser is purchasing the Assets on an "as-is", "where-is"
basis. Without limiting the generality of the foregoing, Seller makes no
representation or warranty regarding any assets or equipment other than those
acquired hereunder or any liabilities other than the Assumed Liabilities, and no
such representation or warranty shall be implied at law or in equity.
5. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller, as of the date of this Agreement and as of Closing, as
follows:
(a) Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
province of British Columbia, Canada. Purchaser has all requisite
corporate power and authority to carry on the Business, to own the
Assets, as currently owned and operated and is duly qualified to
transact business and is in good standing in each jurisdiction where
the failure so to qualify would have a material adverse effect on the
Business or the ownership, use or operation of the Assets.
(b) Due Authorization; Reservation of Shares. Purchaser has
all corporate and legal right, power and authority to enter into,
execute and deliver this Agreement, the Note and all assumptions,
instruments and documents to be executed and delivered on the part of
Purchaser under or in connection with this Agreement and the Note
(collectively, the "Purchaser Instruments") and to issue the common
shares upon the conversion of the Note (the "Conversion Shares"), and
to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, the Note and the Purchaser
Instruments by Purchaser and the issuance of the Conversion Shares upon
the conversion of the Note have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed by
Purchaser, and delivered by Purchaser, and constitutes the legal, valid
and binding agreement of Purchaser, enforceable in accordance with its
terms. As of the Closing Date, each of the Note and the Purchaser
Instruments will have been duly executed by Purchaser, and delivered by
Purchaser, and will constitute the legal, valid and binding obligations
of Purchaser, enforceable in accordance with their terms. Purchaser has
sufficient number of authorized common shares reserved for issuance of
the Conversion Shares.
(c) Other Agreements. The execution and delivery of this
Agreement and the Note by Purchaser, and the execution and delivery of
each of Purchaser Instruments do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with,
or result in any violation of or default (with or without notice or
lapse of time, or both), or give rise to right of termination,
cancellation or acceleration of any obligations under any mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Purchaser or Trevor Newton.
(d) Brokers and Finders. Neither Purchaser nor any of its
officers, directors or employees, has employed any broker, agent or
finder or incurred any liability for any brokerage fees, agent's
commissions or finder's fees concerning the transactions contemplated
hereby. Purchaser agrees to indemnify and hold harmless Seller from and
against any loss, liability, damage, costs and expenses arising out of
any claim for such commission or fees in connection with the
transactions contemplated hereunder.
6. Obligations and Covenants of Seller. Seller covenants and agrees
with Purchaser, as of the date of this Agreement and as of the Closing Date, as
follows:
(a) Operation of the Business. Seller will conduct the
Business diligently, only in the ordinary course and substantially the
same manner as heretofore conducted, and shall maintain the Assets as
they have heretofore been maintained, and shall not take any action
which shall materially harm the goodwill and reputation of the Business
or the condition of the Business and the Assets. Seller will refrain
from taking or omitting to take an action that would materially violate
Seller's representations and warranties hereunder or render them
inaccurate as of the date hereof or the Closing Date or that in any way
would prevent the consummation of the transactions contemplated hereby.
(b) Access. Seller will permit Purchaser and its authorized
representatives, at all reasonable times prior to the Closing to have
access to and to examine the Assets and all books, documents, records,
financial information and operating data of Seller, and will cooperate
with Purchaser in its investigation of the Business and Assets.
(c) Consents. Seller will use reasonable efforts to obtain the
consents, if any, of other parties required for the consummation of the
transactions contemplated hereunder and, in general, Seller will use
reasonable efforts to satisfy or cause to be satisfied all of the
conditions to the obligations of Seller set forth in Section 8 of this
Agreement. If such consent is not obtained, each of the parties agree
to cooperate with the other in any reasonable arrangement designed to
enable Seller to perform its obligations under, and to provide for
Purchaser the benefits of, any such agreements, including enforcement
at the cost, and for the account of, Purchaser of any and all rights of
Seller against the other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise.
7. Survival of Representations; Indemnification.
(a) Seller's Indemnification. After the Closing Date, Seller
shall indemnify and hold harmless Purchaser, its successors and
assigns, against and in respect of any liability resulting from (i) any
breach of any material representation, warranty, covenant or agreement
of Seller hereunder; and (ii) any third party claim with respect to
liabilities or obligations of Seller related to the Assets. Seller
shall be liable to Purchaser under this Agreement pursuant to clause
(i) only to the extent that such losses, liabilities or expenses are
asserted within one (1) year following the Closing Date, and pursuant
to clause (ii) only to the extent such losses, liabilities or expenses
are asserted within the applicable statute of limitations period for
the underlying claim of such losses, liabilities or expenses. Purchaser
shall give written notice to Seller within thirty (30) days from
discovery by Purchaser of any matter which may give rise to a claim for
indemnification under this Agreement. Failure to give such notice shall
relieve Seller from any liability under this Agreement with respect to
such matter. Seller may, at its own expense, participate in, direct or
take over any legal proceeding and the negotiation and settlement of
any claim or demand for which it may have an obligation to indemnify
Purchaser pursuant to this Paragraph. Purchaser shall have the absolute
right, in its sole discretion and without the consent of Seller, to
settle any and all such legal proceedings, claims or demand, provided,
however, if Purchaser makes any settlement with respect to such legal
proceedings, claims or demands without the prior written consent of
Seller, Seller shall be discharged from any indemnification obligations
with respect to such legal proceedings, claims or demands.
(b) Indemnification by Purchaser. After the Closing Date,
Purchaser shall indemnify and hold harmless Seller its successors and
assigns, against and in respect of any liability resulting from: (i)
any breach of any material representation, warranty, covenant or
agreement of Purchaser hereunder; and (ii) any liabilities or
obligations relating to the Assets or conduct of the Business after the
Closing Date. Purchaser shall be liable to Seller under this Agreement
pursuant to clause (i) only to the extent that such losses, liabilities
or expenses are asserted within one (1) year following the Closing
Date, and pursuant to clause (ii) only to the extent such losses,
liabilities or expenses are asserted within the applicable statute of
limitations period for the underlying claim of such losses, liabilities
or expenses. Seller shall give written notice to Purchaser within
thirty (30) days from discovery by Seller of any matter which may give
rise to a claim for indemnification under this Agreement. Failure to
give such notice shall relieve Purchaser of any liability under this
Agreement with respect to such matter. Purchaser may, at its own
expense, participate in, direct or take over any legal proceeding and
the negotiation and settlement of any claim or demand for which it may
have an obligation to indemnify Seller. Seller shall have the absolute
right, in its sole discretion and without the consent of Purchaser, to
settle any and all such legal proceedings, claims, or demands;
provided, however if Seller makes any settlement with respect to such
legal proceedings, claims or demands without the prior written consent
of Purchaser, Purchaser shall be discharged from any indemnification
obligations with respect to such legal proceedings, claims or demands.
(c) Third Party Indemnification. If any legal proceedings
shall be instituted or any claim or demand made by a third party (as
hereinafter defined) against an indemnified party in respect of which
the other party (the "indemnifying party") may be liable under this
Section 7, the indemnified party shall give prompt written notice
thereof to the indemnifying party. The indemnifying party shall defend,
at its own expense, in any such legal proceedings, or in the
negotiation or settlement of any such claim or demand. If the
indemnified party, without the prior written consent of the
indemnifying party, makes any settlement with respect to any such legal
proceedings, claim or demand, the indemnifying party shall be
discharged from any liability hereunder with respect thereto provided
that the indemnifying party is so defending. The term "third party" as
used herein means any person or entity other than Seller or Purchasers
or parties, persons or entities affiliated with Seller or Purchaser.
(d) Survival of Obligations. The provisions of this Section 7
and the indemnity obligations of the respective parties hereunder shall
survive Closing.
8.Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions provided for herein are subject to the satisfaction
of each of the following conditions on or prior to the Closing Date:
(a) Compliance by Purchaser. All the terms, covenants and
conditions of this Agreement to be complied with and performed by
Purchaser on or before the Closing Date shall have been fully complied
with and performed.
(b) Representations and Warranties of Purchaser. The
representations and warranties of Purchaser contained herein and in the
exhibits, statements and documents delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be true and
correct, in all material respects, on and as of the Closing Date with
the same effect as though all such representations and warranties had
been made on and as of the Closing Date.
(c) Litigation. No action, suit, or proceeding shall be
pending or threatened against Purchaser before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect).
(d) Bring-down Certificate. Purchaser shall have delivered to
Seller a certificate to the effect that each of the conditions
specified above in Section 9(a) through 9(c) is satisfied in all
respects.
(e) Documents Delivered. Purchaser shall have delivered to
Seller at Closing all of the documents described in Section 10(c) of
this Agreement.
(f) Approval by Shareholders and Board of Directors of Seller;
Change of Name. The shareholders of Seller shall each have approved the
transactions contemplated by this Agreement, the Note, the Security
Agreement and the Seller's Instruments. The Board of Directors of the
Seller (the "Board") shall have approved of the Purchase Price as set
forth in the Valuation Report and shall not have changed its approval
of the transactions contemplated by this Agreement, the Note, the
Security Agreement and the Seller's Instruments. Seller shall also have
filed an amendment to its Articles of Continuance to change its name to
"Strata Petroleum Inc." or such other name as the Board may determine
and is approved by the shareholders of the Seller.
(g) Risk of Loss. THE RISK OF LOSS TO THE ASSETS SOLD
HEREUNDER, UNTIL THE CLOSING, IS ASSUMED AND SHALL BE BORNE BY SELLER
UNLESS POSSESSION OF THE ASSET HAS BEEN TRANSFERRED TO THE BUYER PRIOR
TO CLOSING.
9. Conditions to Obligations of Purchaser. The obligations of Purchaser
to consummate the transactions provided for herein are subject to the
satisfaction of each of the following conditions on or prior to the Closing
Date:
(a) Compliance by Seller. All the terms, covenants and
conditions of this Agreement to be complied with and performed by
Seller on or before the Closing Date shall have been fully complied
with and performed by the Seller.
(b) Representations and Warranties of Seller. The
representations and warranties of Seller contained herein and in the
exhibits, statements and documents delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be true and
correct on and as of the Closing Date with the same effect as though
all such representations and warranties had been made on and as of the
Closing Date and there shall have been no material damage, destruction
or loss to the Assets, regardless of insurance coverage.
(c) Litigation. No action, suit, or proceeding shall be
pending or threatened against Seller before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect.
(d) Bring-down Certificate. The Seller shall have delivered to
Purchaser a certificate to the effect that each of the conditions
specified above in Section 9(a) through 9(c) is satisfied in all
respects.
(e) Approval by Shareholders and Board of Directors of Seller;
Change of Name. The shareholders of Seller shall each have approved the
transactions contemplated by this Agreement, the Note, the Security
Agreement and the Seller's Instruments. The Board of Directors of the
Seller (the "Board") shall have approved of the Purchase Price as set
forth in the Valuation Report and shall not have changed its approval
of the transactions contemplated by this Agreement, the Note, the
Security Agreement and the Seller's Instruments. Seller shall also have
filed an amendment to its Articles of Continuance to change its name to
"Strata Petroleum Inc." or such other name as the Board may determine
and is approved by the shareholders of the Seller.
(f) Documents Delivered. Seller shall have delivered to
Purchaser at Closing all of the documents described in Section 10(b) of
this Agreement.
10. The Closing.
(a) Date and Time. The closing of the transactions
contemplated hereby (the "Closing") will take place
at 10.a.m., Pacific Time, on JULY 11, 2005 or such
other date and time as Seller and Purchaser may agree
on (the "Closing Date") but in no event later than
AUGUST 31, 2005. The Closing shall take place at the
offices of Seller located at Suite 101, 34595 3rd Ave
Abbotsford, British Columbia, Canada V2S 8B7
(b) Seller's Closing Documents. At the Closing, Seller
shall deliver to Purchaser the following:
(i) An executed Bill of Sale and other Seller Instruments
of assignment conveying to Purchaser, Seller's right,
title and interest in and to the Assets;
(ii) Certified copies of the resolutions of the Board and
the shareholders of Seller authorizing the
transactions contemplated hereby;
(iii) Executed Asset Purchase Agreement;
(iv) Seller's Bring Down Certificate as required by
Section 9(e); and
(v) Such other instruments and documents as may be
reasonably requested by Purchaser.
(c) Purchaser's Closing Documents. At the Closing,
Purchaser shall deliver to Seller the following:
(i) Executed Asset Purchase Agreement;
(ii) Executed Note;
(iii) Executed Purchaser Instruments;
(iv) Certified copies of the resolutions of the Board of
Directors and shareholders of Purchaser authorizing
the transactions contemplated hereby;
(vi) Purchaser's Bring-down Certificate as required
by Section 8(e); and
(viii) Such other instruments and documents as may be
reasonably requested by the Seller.
(d) Further Assurances. From time to time after the Closing Date, and without
further consideration, the parties will execute and deliver, or arrange for the
execution and delivery of such other instruments of conveyance and transfer or
other instruments or documents and take or arrange for such other actions as may
reasonably be requested to complete more effectively any of the transactions
provided for in this Agreement.
11.Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(a) The parties may terminate this Agreement by mutual written consent at any
time prior to the Closing;
(b) Purchaser may terminate this Agreement by giving written notice to the
Seller at any time prior to the Closing in the event (i) Seller has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Purchaser has notified Seller of the breach, and the
breach has continued without cure for a period of fifteen (15) days after the
notice of breach, or (ii) if the Closing shall not have occurred on or before
AUGUST 31, 2005, by reason of the failure of any condition precedent hereunder
(unless the failure results primarily from Purchaser itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(c) Seller may terminate this Agreement by giving written notice to Purchasers
at any time prior to the Closing in the event (i) Purchaser has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, the Seller has notified Purchaser of the breach, and the
breach has continued without cure for period of fifteen (15) days after the
notice of breach, or (ii) if the Closing shall not have occurred on or before
AUGUST 31, 2005 by reason of the failure of any condition precedent hereunder
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
(d) Effect of Termination. If any Party terminates this Agreement pursuant to
this Section 11, then all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party the other (except for any liability
of any Party whose breach was the basis for the termination pursuant to Section
11(b) or (c) hereof). Notwithstanding the above, the confidentiality provisions
contained herein shall survive any termination of this Agreement.
12. Miscellaneous.
(a) Assignment. This Agreement shall not be assignable by Purchaser without the
prior written consent of Seller, which consent shall not be unreasonably
withheld or delayed.
(b) Confidentiality of Information. Purchaser shall keep confidential the
information (unless readily ascertainable from public or published information
or trade sources) obtained from Seller concerning the Business and Seller shall
similarly keep confidential any information concerning the Business or obtained
from Purchaser concerning the operation and Business of Purchaser. Seller shall
have the right to all remedies at law and in equity in the event of Purchaser's
violation of such confidentiality.
(c) Construction; Jurisdiction. This Agreement shall be construed and enforced
in accordance with the laws of the province of British Columbia, Canada, without
regard to conflict of laws principals. Both parties consent that any action or
proceeding arising under this Agreement shall be commenced and maintained within
the courts of the province of British Columbia, Canada.
(d) Amendment. This Agreement may be amended, supplemented or interpreted at any
time, but only by a written instrument executed by all of the parties hereto.
(e) Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered or if
mailed, by United States or Canadian certified or registered mail, or by
recognized overnight delivery service, prepaid to the parties or their assignees
at the following addresses (or at such other addresses as shall be given in
writing by the parties to one another):
Purchaser: 657865 B.C. Ltd
34595 3rd Avenue
Suite 101
Abbotsford, British Columbia
Canada V2S 8B7
Seller: Stratabase, Inc.
34595 3rd Avenue
Suite 101
Abbotsford, British Columbia
Canada V2S 8B7
With a copy to: David Lubin & Associates
92 Washington Street
Cedarhurst, New York 11516
Attention: David Lubin, Esq.
(f) Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy.
The election of any one remedy by a party hereto shall not constitute a waiver
of the right to pursue other available remedies.
(g) Expenses. Except as provided to the contrary elsewhere in this Agreement,
each party hereto shall pay its or his or her own expenses incident to this
Agreement and the transactions contemplated hereby, including all fees and
expenses of their respective counsel, whether or not such transactions shall be
consummated.
(h) Entire Agreement. This Agreement and the certificates, exhibits and other
documents delivered pursuant hereto or incorporated by reference herein contain
the entire agreement between the parties hereto concerning the transactions
contemplated herein and supersede all prior agreements or understandings between
the parties hereto relating to the subject matter hereof, including all prior
letters of intent or understanding and including the Prior Agreement. No oral
representation, agreement or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto. Any amendment to or
modification of this Agreement must be in writing and signed by the party
claimed to be bound.
(i) Captions and Article Headings. Captions and Article headings used herein are
for convenience only and are not a part of this Agreement and shall not be used
in construing it.
(j) Waiver. Any waiver by any party hereto of any of its rights hereunder shall
be without prejudice of its future assertions of any such rights, and any delay
in exercising any right shall not operate as a waiver thereof.
(k) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[SIGNATURES APPEAR ON NEXT PAGE]
19
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SELLER:
STRATABASE INC.
By:____/s/ Trevor Newton______________________
Name: Trevor Newton
Title: President
By:___/s/ Fred Coombes________________________
Name: Fred Coombes
Title: Vice President
PURCHASER:
657865 B.C. Ltd.
By:___/s/ Trevor Newton_______________________
Name: Trevor Newton
Title: President
EXHIBIT A
The following are the assets that are to be acquired by the Purchaser.
1. All rights and use to the "Stratabase", "Relata", and "Resync" names.
2. All rights and use of the trademarks, web pages, and domain names for
"Stratabase", "Relata", and "Resync". 3. All rights to the source code and
related documentation for the "Relata" and "Resync" software.
EXHIBIT B
THIS CONVERTIBLE NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES LAWS OF THE UNITED STATES, CANADA OR
ANY STATE OR PROVINCE THEREOF AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER APPLICABLE SECURITIES LAW OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL THAT SUCH NOTE AND/OR COMMON SHARES MAY BE
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER APPLICABLE SECURITIES LAWS.
657865 B.C. Ltd.
Secured Convertible Promissory Note
No. ___ July 11, 2005
Abbotsford, British Columbia
657865 B.C. Ltd., a British Columbia corporation (the "Company"), for
value received, hereby promises to pay, on July 11, 2006 (the "Maturity Date")
(or earlier as provided in Section 1 below), to STRATABASE INC. or its
successors or its assigns (the "Holder"), the principal amount of ONE HUNDRED
AND THIRITY THOUSAND DOLLARS ($130,000). The Note shall not bear interest..
Payments of principal shall be made in lawful money of the United States of
America in cash or by check at the address of the Holder set forth on the last
page hereof or such other address as the Holder may designate in writing to the
Company. The Company may pay the outstanding principal due under this Note, in
whole or in part, prior to the Maturity Date or an earlier conversion pursuant
to Section 1 hereof.
This Note is being issued pursuant to that certain Asset Purchase
Agreement, dated as of June 29, 2005 by and between the Company and the Holder
(the "Purchase Agreement"). This Note is in payment of the Purchase Price (as
defined in the Purchase Agreement). Capitalized terms used herein without
definition shall have the meaning ascribed thereto in the Purchase Agreement.
1. Conversion. The entire outstanding principal amount of this Note may
be converted, at the sole discretion of the Company, into the Company's no par
value common shares ("Common Shares"), at any time prior to the maturity. The
Company may not convert less than the entire principal amount of this Note. The
Company shall not be permitted to convert this Note into Common Shares if there
is an Event of Default (as defined in the Section 5 below) which has not been
cured and is continuing.
The price per share at which the principal and accrued interest on this
Note shall convert into Common Shares, if the Company so elects, shall be the
fair market value of one Common Share as of the date of the Conversion Notice
(as defined below) (the "Conversion Price"). The Conversion Price shall be
determined by a independent valuation firm engaged by the Company at its own
expense and reasonably acceptable to the Holder (the "Appraiser"). Conversion of
this Note by the Company shall be by delivery of a written notice of conversion
to the Holder duly executed by the Company and which sets forth (i) the amount
of principal and interest being converted, and (ii) the name, address, telephone
number and contact person of the Appraiser proposed to be used (the "Conversion
Notice"). The Holder may object in writing to the Appraiser identified in the
Conversion Notice, in which event the Company and the Holder shall select an
Appraiser that is mutually acceptable. Upon delivery of the Conversion Notice to
the Holder or the approval of a new Appraiser, which ever is later, the Company
shall have sixty (60) days to obtain a report from the Appraiser that sets forth
the Conversion Price, which report shall set forth in reasonable details of the
Appraiser's the determination of the Conversion Price. The valuation report
shall be final and binding on the Company and the Holder, except for manifest
error.
The conversion shall be effective on the third business day following
delivery of a valuation report to the Holder and the Company. Upon such
conversion in accordance with the terms of this Note, the Holder's sole right
pursuant to this Note shall be to obtain certificates representing the number of
Common Shares issuable upon conversion of this Note at the Conversion Price
(which shall be a number equal to fraction, the numerator of which is the amount
of the outstanding principal hereof and accrued but unpaid interest hereon and
the denominator of which is the Conversion Price), against delivery to the
Company of the originally executed copy of this Note. No fractional Common
Shares shall be issued upon conversion of this Note. The Holder shall be paid in
cash in lieu of any fractional Common Shares which the Holder may otherwise be
entitled to by the conversion of this Note. The stock certificate representing
the Common Shares shall be delivered to Holder as promptly after receipt of the
original Note.
2. General. This Note is not in registered form and is not transferable
except in compliance with the applicable securities laws. Upon any such
transfer, the Company will, at its expense, prepare new Notes in the
denominations indicated by the holder hereof, deliver such new Notes as
instructed by the Holder and make appropriate entries and on the Note registry
maintained at the Company's offices. The Company may treat the person in whose
name this Note is registered on the Note registry maintained at such office as
the owner hereof for all purposes and the Company shall not be affected by any
notice to the contrary. The parties hereto, including the Company and all
endorsers of this Note, hereby waive presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note. The Holder will be entitled to receive,
in addition to any other remedies at law or in equity, all costs in connection
with the collection and enforcement of this Note (including reasonable
attorney's fees).
3. Default Interest. In the event this Note is not paid in accordance
with its terms, Holder shall be entitled to collect from Company, interest on
the sum of (i) the principal balance and (ii) interest thereon to the date
payment is demanded at 10% compounding semi-annually, and after the date such
payment is demanded to the date of payment in full.
Interest and fees shall be calculated on the basis of the actual number
of days elapsed in a 365 day year. At Holder's discretion, all payments will be
applied first to unpaid accrued interest, then to charges, costs, expenses or
late fees outstanding, and then to principal. In no event shall interest payable
hereunder exceed the highest rate permitted by applicable law. To the extent any
interest received by Holder exceeds the maximum amount permitted such payment
shall be credited to principal and any excess remaining after full payment of
principal shall be refunded to Company.
4. Security Interest. As security for the payment and performance of
this Note to the Holder, Holder is hereby granted a lien and security interest
in and to all Assets of the Company as described in Exhibit A to the Sale
Agreement.
5. Default
(i) Event of Default. Each of the following shall constitute an "Event of
Default", whatever the reason for such event and whether it shall be voluntary
or involuntary, or within or without the control of the Company, or be effected
by operation of law or pursuant to any judgment or order of any court or any
order, rule or regulation of any governmental authority:
(a) Payment Default. The Company defaults in the payment of
the principal of or interest on the Note or any other payment required hereunder
when the same become due and payable in accordance with the terms of this Note
and, such default continues for a period of three (3) business days; or
(b) Voluntary Petition. The Company shall (i) commence a
voluntary case under Canadian Federal bankruptcy laws (as now or hereafter in
effect), (ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, (iii) consent to or fail to contest in
a timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (iv) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its assets, domestic or foreign, (v) admit in
writing its inability to pay its debts as they become due, (vi) make a general
assignment for the benefit of creditors, or (vii) take any corporate action for
the purpose of effecting any of the foregoing; or
(c) Involuntary Proceeding. A case or other proceeding shall
be commenced against the Company in any court of competent jurisdiction seeking
(i) relief under the Canadian bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, or (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Company, or of all
or any substantial part of the assets, domestic or foreign, of the Company and
such case or proceeding shall continue undismissed or unstayed for a period of
sixty (60) calendar days, or an order granting the relief requested in such case
or proceeding against the Company (including, but not limited to, an order for
relief under such Federal bankruptcy laws) shall be entered; or
(d) The Company fails to observe, perform or comply with any
covenant, condition or agreement to be observed, performed or complied with
under the Note, the Purchase Agreement or this Agreement, and if such failure
can be cured, such failure continues unwaived and uncured for thirty (30) days
following the date of such nonperformance.
(ii) Rights on Default. Upon an Event of Default, Seller shall have the
following rights:
(a) It may, by notice to the Company, declare the entire amount of the
Obligations to be due and payable immediately, and upon any such declaration
said amount shall become and be immediately due and payable.
(b) It shall have and may exercise all rights and remedies of
a secured party under the applicable federal laws of Canada and the province of
British Columbia.
(c) If any notification of intended disposition of the
Collateral is required by law, such notification, if mailed, shall be deemed
properly given if mailed at least five days before such disposition in the
manner for giving notices hereunder. Any proceeds of any disposition of the
Collateral may be applied by Seller to the payment of expenses of Seller in
connection with the exercise of its rights or remedies, including reasonable
fees and disbursements of attorneys, and any balance of such proceeds may be
applied by Seller to the payment of the Obligations under the Note in such other
order of application as Secured Party shall determine.
(d) It may take possession of the Collateral and for the
purposes thereof enter the premises at which any Collateral is located. The
Company acknowledges that Seller may at their sole option exercise its rights of
entry and possession under this and the following Section without resort to
judicial process.
6. Governing Law. This Note shall be governed by the laws of the
province of British Columbia, Canada.
7. Legend. Each certificate for the Common Shares issued upon
conversion of this Note shall bear a legend relating to the non-registered
status of such Common Shares under applicable securities laws, unless at the
time of conversion of this Note such Common Shares are subject to a currently
effective registration statement.
8. No Rights of a Stockholder. The Holder shall not be entitled to any
rights of a stockholder of the Company, either at law or in equity, until such
time as this Note shall have been converted and Common Shares issued to the
Holder.
9. Reserved Shares. The Company warrants that there have been reserved,
and covenants that at all times it shall keep reserved, out of the authorized
and unissued Common Shares, a number of shares sufficient to provide for the
exercise of the rights of conversion represented by this Note.
[Signature appears on the next page]
IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument on the date first above written by duly authorized
representatives of the Company.
657865 B.C. Ltd.
By:______/s/ __Trevor Newton_________________________
Name: Trevor Newton
Title: President
ADDRESS OF HOLDER FOR NOTICES AND PAYMENT:
34595 3rd Avenue, #101
Abbotsford, B.C., Canada