UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934
ABLEAUCTIONS.COM, INC.
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(Exact name of registrant as specified in its charter)
Florida Not applicable
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1963 Lougheed Highway
Coquitlam, British Columbia Canada V3K 3T8
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 521 2253
Securities to be registered under Section 12(b) of the Act:
None None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value $0.001 Per Share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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PART I
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NOTE REGARDING FORWARD LOOKING STATEMENTS.........................................................................3
Item 1. Description of Business..................................................................................4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.....................30
Item 3. Description of Property.................................................................................39
Item 4. Security Ownership of Certain Beneficial Owners and Management..........................................40
Item 5. Directors, Executive Officers, Promoters and Control Persons............................................41
Item 6. Executive Compensation..................................................................................44
Item 7. Certain Relationships and Related Transactions..........................................................48
Item 8. Description of Securities...............................................................................49
PART II
Item 1. Market Price of and Dividends on Registrant's Common Equity
and Related Stockholder Matters........................................................................51
Item 2. Legal Proceedings.......................................................................................51
Item 3. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................51
Item 4. Recent Sales of Unregistered Securities.................................................................53
Item 5. Indemnification of Directors and Officers...............................................................54
PART F/S
Item 1. Index to Exhbits.........................................................................................2
Item 2. Description of Exhibits..................................................................................3
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PART I
NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the
Registrant to be materially different from any future results or achievements of
the Registrant expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, the following: risks involved in
implementing a new business strategy; the Registrant's ability to obtain
financing on acceptable terms; competition in the auction industry; market
acceptance of live auction broadcasts on the Internet; the Registrant's ability
to manage growth and integrate the operations of acquired auction houses; risks
of technological change; the Registrant's dependence on key personnel; the
Registrant's dependence on marketing relationships with auction houses and third
party suppliers; the Registrant's ability to protect its intellectual property
rights; government regulation of Internet commerce and the auction industry;
economic factors affecting the sales of auction merchandise; dependence on
continued growth in use of the Internet; risk of technological change; capacity
and systems disruptions; uncertainty regarding infringing intellectual property
rights of others; Year 2000 compliance risks and the other risks and
uncertainties described under "Description of Business - Risk Factors" in this
registration statement. Certain of the forward looking statements contained in
this registration statement are identified with cross-references to this section
and/or to specific risks identified under "Description of Business - Risk
Factors".
The Registrant's management has included projections and estimates in this
registration statement which are based primarily on management's assessment of
the Registrant's results of operations, discussions and negotiations with third
parties, management's experience and a review of information filed by its
competitors with the Securities and Exchange Commission. Investors are cautioned
against attributing undue certainty to management's projections.
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Item 1. Description of Business.
General Overview
We, Ableauctions.com, Inc., are a Florida corporation engaged in the business of
auctioning, through our wholly owned subsidiary, Able Auctions (1991) Ltd., a
broad range of merchandise.
Able Auctions (1991) has operated two auction houses in the Lower Mainland of
British Columbia, Canada since 1991. We auction merchandise and equipment from a
variety of industries including: bakery, broadcasting, chemical, construction,
dairy, electronics, energy, food processing, foundry, high-technology, machine
tool, metal fabrication, office, paper, pharmaceutical, plastic, printing,
restaurant, textile and others. Our auctions are open to the public. Bidders are
generally businesses and commercial purchasers. We generally earn gross profit
margins ranging from 20% to 55% on the sale of goods.
We intend to broadcast our live auctions on our web site at
www.ableauctions.com. Once we launch our web site, our physical
"brick-and-mortar" auction audiences will be integrated with our Web-based
online auction audiences, and our online customers will be able to bid on and
buy merchandise at our live auctions. We believe we can increase the gross
revenues and the profitability of our existing auction operations by expanding
the scope of our auction audience through the capabilities of the Internet.
Our long term growth strategy is to expand our business by:
o increasing our auction revenues by broadcasting our auctions on our
web site;
o entering into strategic relationships with other auction houses to
offer our Internet broadcasting technology on a transaction fee basis;
o acquiring additional auction houses in strategic geographic locations
throughout North America; and
o integrating other revenue generating business on our web site, such
as:
(a) silent auctions,
(b) charity auctions and
(c) specialty e-commerce retail stores.
We intend to compete in two highly competitive industries: (i) the auction
industry and (ii) the Internet commerce industry. Many of our competitors have
substantially greater financial, technical and other resources than us. Our
experience has been limited to the physical brick-and-mortar auction business,
and there are several competitors in the auction business that have established
businesses and reputations in the geographic locations that we may enter in the
future. In addition, several Web-based competitors already have established
auction web sites, brand names, user loyalty and strategic relationships with
sellers and consignors of merchandise, all of which create a competitive
advantage over us. We have only begun the process of developing the technology
to launch our web site and we cannot assure you that we will successfully
develop the technology necessary to broadcast our auctions over the Internet as
planned or that our Internet concept of accepting bids over the Internet will be
successful. We cannot guarantee that we will be able to compete effectively or
that we will ever generate sufficient revenues from our operations to make our
business commercially viable.
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We may expand our auction business by acquiring existing auction companies. We
have recently acquired Ross Auctioneers, a regional auction company, located in
the Lower Mainland of British Columbia, Canada. We cannot assure you that we
will successfully integrate the operations of Ross Auctioneers into our business
or that we will achieve profitability.
We currently have limited revenues from our operations and we have a history of
modest profits. We do not believe our past results of operations will be
representative of our future operations for the following reasons:
o We may increase our operating expenses to broaden our geographic
market by acquiring existing auction houses, which will require us to
finance these acquisitions through the issuance of debt, equity or a
combination of both;
o We intend to implement an Internet strategy, which will require us to
dedicate a significant amount of our resources to developing the
technologies and systems to launch our web site;
o We intend to incur significant marketing costs to market our auction
houses and our web site;
o We anticipate that our management and administrative costs will
increase as we integrate our brick-and-mortar operations with our web
site and our operations with the auction houses that we acquire;
o We anticipate that we will incur increased inventory costs as we
expand our auction business; and
o We may incur unforeseen costs related to implementing a new business
strategy that differs significantly from our operations in the past.
See "Our Business Strategy." To the extent such increases in expenses are not
followed by increased revenues which are sufficient to cover such costs, our
business and results of operations will be adversely affected. We believe that
period-to-period comparisons of our financial condition are not necessarily
meaningful, and you should not rely on them as an indication of future
performance.
We anticipate that we will incur substantial losses for the foreseeable future
because of increased costs related to implementing our business strategy. We
estimate that we will require additional financing of at least $14 million to
meet our cash requirements through December 31, 2000. See "Note Regarding
Forward Looking Statements." Our ability to fully implement our business
strategy will depend on our ability to raise future financing. Factors that will
affect our ability to raise such financing may include, among other things:
o the revenues and profits generated from our operations;
o our ability to identify and acquire additional auction houses or to
enter into arrangements with brick-and-mortar auction houses to
broadcast auctions on our web site on acceptable terms;
o the market acceptance of our Ableauctions.com web site by buyers of
auction merchandise;
o traffic on our web site and purchases made through our web site;
o our ability to obtain merchandise and consignments of merchandise for
our auctions; and
o the success of our silent auctions, charity auctions and our specialty
web site stores.
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We anticipate that we will raise additional financing through private placements
of our equity and/or debt during the first half of 2000. We are currently
seeking such financing by presenting our business plan to merchant and
investment banks, fund managers and investment advisors. We cannot assure you
that we will successfully complete any private placements or that we will obtain
additional financing to implement our business plans on acceptable terms, if at
all.
Industry Background
The Commercial Auction Industry
According to the National Auctioneers Association ("NAA") and MasestroSoft, the
commercial auction market in the United States is estimated to be a $267.5
billion business. The NAA estimates that more than 600,000 commercial auctions
and more than 350,000 charity auctions are performed annually by more than
12,000 licensed auctioneers.
Based on our discussions with operators of auction houses and our experience in
the industry, we believe that most brick-and-mortar based auctions are regional,
owner operated businesses. Each auction house must make significant investments
in real estate, personnel, inventory and marketing for each location. Most
traditional auction houses obtain their inventory locally and must contend with
the logistical problems of matching supplies of available merchandise to
unpredictable demand.
Our typical auction draws approximately 500 bidders and offers on average
approximately 1200 items or lots of merchandise and equipment for auction.
The Internet Auction Industry
The Internet has become an increasingly significant global interactive medium
for communications, information and commerce. Use of the Internet has grown over
the past 3 years. According to Deloitte Consulting, approximately 50% of U.S.
households own a personal computer. According to Deloitte Consulting, there were
414,000 active commercial web sites at the beginning of 1998, more than double
that of a year earlier. Deloitte Consulting estimates that there will be 1.6
million web sites by 2002. According to ActiveMedia, Internet e-commerce (the
online purchase of goods and services by consumers and businesses) revenues were
approximately $2.7 billion in 1996, and is expected to reach $1.3 trillion in
2003. ActiveMedia expects Internet e-commerce growth rates in 1999 to be 150%,
and 138% in 2000.
Online auctions are one of the fastest growing areas of electronic commerce.
According to a January 1999 survey by Jupiter Communications, the number of
people in the United States participating in online auctions will grow to 6.5
million in 2002 from 1.2 million in 1998. Jupiter Communications estimates that
auction buyers are anticipated to represent 11% of the total online shopping
population in 2002. Forrester Research estimated that the total value of online
auctions would grow from $1.4 billion in 1998 to $19 billion in 2003.
Person-to-person auctions, like those of eBay.com, uBid.com and Amazon.com,
currently dominate the market; however, according to Jupiter Communications,
business-to-consumer sales will comprise some 66% of total Internet auction
sales, or approximately $13 billion, by 2003.
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There are five models of online auctions:
o Event-based live auctions: Bidders participate in live auctions
transmitted over the Internet in real-time. Users register to qualify
as bidders to participate prior to the time of the auction and bid for
merchandise auctioned at physical auctions. Online bidders typically
bid against bidders present at the physical auctions.
o Business-to-consumer: Businesses or consumers bid on products that are
listed on an auction's web site within a set time limit. The auctioned
merchandise is sold to the highest bidder.
o Consumer-to-consumer auctions: Sellers post merchandise on the web
site in one of several categories. Hundreds of thousands of items,
usually priced under $50, are listed and bidders haggle directly with
sellers to purchase the merchandise.
o Specialty auctions: Sellers offer specific types of merchandise for
auction on specialty online auctions that serve eclectic collectors or
consumers interested in a special niche.
o Business-to-business: Businesses offer merchandise for auction to
other business, including items for liquidation, salvaged merchandise,
excess inventory, distressed inventory and other items offered in
large lots of several hundred items.
Our Growth Strategy
Our growth strategy is to expand the geographic scope of our business through
the following growth and expansion strategies:
o Increasing the geographic reach of our existing auction business by
broadcasting our auctions live on our web site;
o Expanding our auction business and operations by acquiring existing
brick-and-mortar auction houses;
o Building an Internet e-commerce site for live auctions by broadcasting
our auctions live and entering into strategic relationships with
existing brick-and-mortar auction houses to broadcast auctions live on
our web site; and
o Generating revenues from silent auctions, charity auctions and
specialty e-commerce stores on our web site.
We conduct our auctions on an unreserved basis with no minimum prices, resulting
in each and every item being sold to the highest bidder on the day of the
auction. Our policy is to prohibit consignees from bidding on the items they
consign to us for auction. We attempt to differentiate our auction services from
our competitors through our "no minimum price policy" and by selling merchandise
without interference or competition from consignees.
We currently attract customers to our auctions through marketing efforts and our
reputation in the markets we serve.
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Competition
We intend to compete in two distinct markets: the industrial auction market and
the online auction market.
We believe that our "no minimum price" policy coupled with broadcasting our
auctions live on the Internet through our web site will result in a greater
volume of consigned equipment and higher gross auction sales. Our strategy is to
grow through expanding into new geographic markets by acquiring brick-and-mortar
auction houses, marketing our auctions on our web site, and increasing income
from operations in our existing market strategy. This strategy is intended to
allow us to become a leading real-time Internet auctioneer and allow us to take
advantage of efficiencies such as a consolidated marketing strategy, uniform
auction services and increased customer satisfaction.
We believe that the growth of the Internet has facilitated the development of
solutions to some of the traditional problems we face in operating our auction
business, including reaching potential buyers of merchandise and equipment in
other geographic locations, increasing the size of bidding audiences for our
auctions, reaching more potential consignees of merchandise and automating our
auction preview process.
Our goal is to expand our operations by linking regional auction houses together
through our Ableauctions.com web site. We believe this will allow us to generate
a greater volume of traffic and interest to our web site and sales through our
auctions. We intend to launch our web site in late-November 1999 and plan to
conduct our first Internet auction in December 1999.
Industrial/Commercial Auction Market
The used equipment market and the industrial equipment auction market are highly
fragmented. We compete for potential purchasers of industrial equipment with
other auction companies and with indirect competitors, such as equipment
manufacturers, distributors, new or used equipment dealers, and equipment rental
companies.
There are major competitors in the industrial/commercial auction market,
including Michael Fox International, an international auctioneer of industrial
equipment and real estate; Ritche Bros. Auctioneers, an international auctioneer
of industrial equipment; Maynard's Auctioneers, an auctioneer and liquidator of
household items, antiques, and commercial goods; Jarvis Auctions, an auctioneer
of industrial and office equipment; and several independent auctioneers.
We believe that the principal competitive factors in the auction market are:
o reputation;
o customer service;
o the ability to provide the customer with a variety of merchandise at
an exceptional value, commission pricing and structure; and
o the ability to attract the bidders necessary to generate the best
possible prices.
We intend to compete with a number of companies with substantially greater
financial, technical and human resources than us. Our competitors include large
and small auction companies, dealers, and
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retailers, including discount retail stores, liquidation centres and other
retailers of new and previously owned merchandise.
Online Internet Auctions
We believe that the market leader in broadcasting live auctions over the
Internet is Livebid.com. Livebid.com is a Seattle-based company that pioneered
live, event-based auctions on the Internet. Amazon.com acquired Livebid.com in
May 1999.
Livebid.com uses real-time software technology that allows auction houses to
broadcast their auctions live over the Internet and online bidders to bid on
merchandise and participate in the live auctions. LiveBid.com enables bidders to
review auction catalogues and place proxy bids prior to an event. Based on
information posted on its web site, LiveBid.com earns revenues by charging
transaction fees based on auction revenues.
In addition, Brilliant Digital Equipment, Inc. broadcasts live auctions over the
Internet at www.theauctionchannel.com, and provides broadcast services to major
auction houses like Christine's South Kensington, Phillips, Bonhams, Allsop &
Co., Brooks and Antiquorum. We do not believe that Brilliant Digital is
currently broadcasting auctions from U.S.
locations.
Additionally, several auctioneers have launched web sites that allow buyers to
search for and bid on merchandise contained within the seller's inventory. In
general, buyers search for and acquire merchandise by visiting the web site and
dealing directly with the auction. Based on our review of our competitors' web
sites, we believe that the inventory of most independent auctions is limited in
size and selection.
The Internet auction industry is new, rapidly evolving and intensely
competitive, and we expect competition to intensify in the future. A variety of
auction web sites are presently available on the Internet, which are dedicated
to facilitating person-to-person and business-to-person transactions on a
bid-based format. These auction services allow sellers to post merchandise on
their web sites and buyers to locate items and submit bids online. These
services generally organize merchandise by categories and provide descriptions,
pictures or video clips of merchandise offer for sale.
Our silent auction will compete directly with online auction services such as
Onsale, First Auction, Surplus Auction, uBid, eBay, Yahoo!, Onsale, Excite,
Inc., Auction Universe and a number of other auction based services. See
"Description of Ableauctions.com Web site Offerings - the Silent Auction." We
potentially face competition from a number of large online communities and
services that have expertise in developing online commerce and in facilitating
online business-to-person interaction, including AOL, Lycos, Inc. and Microsoft
Corporation.
Our Auctions Operations
We conduct physical auctions from our auction houses located in British
Columbia. The costs involved in conducting a typical auction include, among
other things, the cost of catalogues, insurance, transportation, auction
advertising, auction site rental fees, security, temporary personnel and
expenses of certain additional auction-related accounting and shipping
functions. In general, we charge purchasers a buyer's premium on auction
purchases equal to 10% to 15% of the hammer price of the property and sellers a
commission ranging from 5% to 15% of the hammer price.
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Generally, we conduct approximately two auctions at each of our three locations
per month. We auction approximately 1,200 items or lots at each auction, and our
average gross revenues from each auction was $80,000 during 1998.
Like most auctioneers, we do not provide any guarantee or warranty with respect
to the property offered for sale at auction except as noted in our terms and
conditions of sale for particular auctions. We generally auction each lot as
described in our auction catalogue or on an "as is" basis.
After an auction, purchasers generally make their own arrangements to take
possession of the auctioned property. We can also make available shipping
services to forward the property to the buyer by mail freight forwarder, truck
transport or other delivery services for a cost. As agent of the consignor, we
normally collect payment from the buyer for property purchased and remit to the
consignor, on the settlement date, the consignor's portion of the buyer's
payment, less consignor cash advances, if any, and commissions payable to us. We
sometimes release property sold at auction to qualified buyers (primarily
dealers) on credit before we receive payment. These qualified buyers generally
have an account or line of credit (within established credit limits) with us and
agree to make payment within 30 days. We extend credit only to buyers who have
done business with us in the past and have an established credit standing with
us.
Under the standard terms and conditions of our auction sales, we are not
obligated to pay the consignor of the property if the purchase price for the
property has not been paid by the buyer. In these instances, we will hold
auctioned property until we receive payment from the buyer. If the buyer
defaults on payment, we may cancel the sale and return the property to the
owner, re-offer the property at another auction, or contact other bidders to
negotiate a private sale.
Sales of the Company's Inventory
We sometimes offer potential consignors the option to sell their property to us
for an amount determined by our expert appraisers. In an outright purchase, we
establish a price we are willing to pay for the property, and, if the price is
acceptable to the seller or if a price can be negotiated between us and the
seller, we typically pay the purchase price in full and take possession of the
property immediately. We will generally sell this property at auction with other
property or, if the purchase is large, at an auction of the purchased property.
Unlike sales of consigned property at auction, when selling our own inventory,
we earn a profit or incur a loss on the sale of inventory to the extent the
purchase price exceeds or is less than the purchase price paid by us for such
inventory. Generally, we provide for the sale of portions of our inventory at
public auctions. Occasionally, we may sell inventory to a customer directly
without placing the inventory for sale at auction. Our goal is to sell all our
inventory as quickly and as efficiently as possible, in order to achieve a high
level of inventory turnover and maintaining maximum liquidity.
We also generate revenues by purchasing merchandise from a variety of sources
and reselling it at our auctions. We purchase merchandise below normal wholesale
prices as a result of liquidation, generally from bankruptcy or overproduction
by manufacturers. In some cases, we purchase used equipment, such as office
equipment from bankrupt companies, closing businesses or merging companies. We
normally average over 50% gross margin on sales, before fixed expenses, on the
sale of liquidated merchandise.
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Consignor Advances
Frequently, an owner consigning property to us will request a cash advance when
the property is delivered to us and prior to its ultimate sale at auction or
otherwise. The cash advance is in the form of a self-liquidating secured loan,
using the consigned property as collateral. We are a secured party with respect
to the collateral, hold a security interest in the collateral and maintain
possession of the collateral until it is sold.
The amount of cash we advance generally does not exceed 50% of our estimated
value of the property when sold at auction.
Our Operating Strategy
We believe we can develop key operating strengths that will allow us to compete
and achieve profitable growth. Our strategy is to offer the following:
Reputation for Conducting Fair Auctions
We believe our regional physical brick-and-mortar auctions have allowed us to
develop a reputation for being committed to fair dealing. We believe our
unreserved auction process and "no minimum bid" policy have been key
contributors to our growth and success. We require each consignor to agree not
to bid on its own consigned items, which deters the practice of artificially
inflating the price of auctioned merchandise. Based on our experience, we
believe our policy results in a larger number of bidders at our auctions and
fair pricing of our auctioned merchandise.
Our goal is to build a reputation as a reputable auctioneer on the Internet.
High Quality Services for Consignors and Bidders
Our auctions are designed to be conducted on a standardized basis, which
generally includes inspection services, appraisals, marketing and auctioning.
We offer comprehensive services for consignors of merchandise which typically
begins with an equipment appraisal that gives the prospective consignor an
estimate of the value of the appraised equipment. Our appraisals are based on
our experience selling similar merchandise and we typically tailor a proposal
for each consignor, which may include an alternative commission structure based
upon a guaranteed minimum level of gross sale proceeds or an outright purchase
of the merchandise. Our willingness to take consignment of a customer's full
inventory (and all ancillary assets, including inventories, parts, tools,
attachments and construction materials), rather than only the most desirable
items, is another service we offer to the consignor. We also offer repair and
refurbishment services to consignors and provide advice on how to present the
equipment in order to maximize the consignor's proceeds.
Our personnel perform title searches on certain merchandise and equipment
consigned for auction, and in some cases, we warrant to each buyer free and
clear title to merchandise purchased at our auctions. We make merchandise being
offered at the auction available for inspection by prospective buyers prior to
the auction, and generally allow bidders to preview merchandise on the day
before the auction. We also offer access to third party financing and access to
trucking and freight forwarding at the auction venue. We intend to allow bidders
the opportunity to preview merchandise on our web site prior to auction.
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Geographic Scope
We desire to market each auction to potential bidders and consignors on a larger
geographical scope through the Internet. We believe that access to a larger
audience of potential bidders will allow consignors to receive the highest
possible price for their merchandise. We believe buyers will save time by
attending auctions online and will have the ability to locate and bid on
difficult to find merchandise.
Databases and Software
We currently maintain computerized tracking systems which are used to catalogue
and describe all of the property delivered or consigned to us for auction.
Property is generally stored in our warehouse or at the auction venue until it
is sold or put on public exhibition for inspection, generally 7-21 days before
auction.
Tracking our consigned property allows us to promptly and efficiently produce
catalogues and marketing materials for auctions. Catalogues are an important
marketing tool that allows us to solicit the business of both potential
consignors and bidders. In the future, we intend to develop an online catalogue
of merchandise available at all our auctions. We believe that the
computerization of our auction operations will enable us to compete with other
auction houses by placing all of our upcoming auction information in the homes
and offices of potential consignors and bidders through the Internet.
In the future, we intend to build a database containing information on our
registered bidders and their buying habits, which is expected to enhance our
ability to target market our auctions. We intend to track information such as
auction attendance, trade association membership, buying habits, sales tax and
account information.
Our Growth Strategy
Our growth strategy is to grow by increasing sales volumes for our existing
operations and possibly by acquiring reputable auction companies in selected
North American locations. We have recently purchased Ross Auctioneers, a local
auction company in the Lower Mainland of British Columbia, Canada, as part of
our growth strategy. See "Our Acquisition of Ross Auctioneers."
We may acquire additional auction companies in the next 12 months. We have
identified prospective targets in Seattle and Toronto, and are in the process of
researching possible targets in the San Francisco Bay Area.
We have established the following general criteria for our acquisition
candidates:
o Owner-operated business
o Minimum $2 million in sales
o Need to be profitable
o At least 5 years in business
o Holds 2 or more auctions per month
o Involved in auctions of liquidated stock
We plan to link all of our physical auction sites through our Ableauctions.com
web site. We anticipate that each venue will broadcast its auctions live on our
web site, and as the volume of auctions increases,
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we expect to broadcast live auctions on our Ableauctions.com web site daily. We
believe each of our auction houses will benefit from our marketing programs.
We cannot assure you that we will acquire any additional auction companies or
that we will have sufficient financing to acquire and operate the auction houses
we acquire, if any. We also cannot assure you that our marketing programs or
Internet broadcasts of our live auctions will result in increased auction
revenues.
Ableauctions.com - Web Solution
Our web site is designed to integrate the traditional physical brick-and-mortar
auction with electronic commerce by offering bidders with Internet access the
ability to bid at our auctions. We believe our system will increase the size of
our auction audiences, lower our overall transaction costs and increase interest
in our brick-and-mortar auction houses and events. Our Ableauctions.com web site
is designed to make the online purchase of auction merchandise more convenient
for consumers.
We are designing our web site to target both business and retail customers. Our
goal is to offer visitors to our web site an extensive range of products and
merchandise.
We intend to increase income from our operations in existing markets by holding
larger and more frequently scheduled auctions. Our goal is to attract a larger
number of consignors and bidders to our auctions. We also intend to enhance our
corporate identity and establish a long-term presence in each geographic market
we enter by establishing offices and physical facilities for our auctions.
We anticipate our web site will be attractive to business purchasers looking for
difficult to find equipment, fixtures, office equipment, furniture and similar
merchandise. We believe that offering previews of our merchandise over the
Internet will save our visitors time and increase the number of serious bidders
participating in our auctions. In addition, our web site is anticipated to be
attractive to consumers searching for merchandise such as jewelry, consumer
electronics, tools, collectibles, cameras and musical instruments. We do not
intend to offer or auction firearms, adult materials or other potentially
illegal merchandise on our web site.
Description of Ableauctions.com Web Offerings
Live Auctions
Our live auction feature is designed to allow us to broadcast our auctions live
by video over the Internet. Viewers will be able to conveniently preview items
in advance from their home or office and bid on merchandise live as the auction
is being conducted. Our auction previews will allow users to view a picture or a
video clip (a 360(degree) view) of each item and study items up to 8 hours prior
to the start of an auction. The users will also have the option to submit a bid
on an item before it goes to auction.
Our live auctions typically draw an average of 500 people in person. With the
Internet broadcast of the auctions, the number of people attending our auctions
in person may only increase marginally, but we expect a number of virtual users
to participate in the bidding through the Internet.
During the live auctions, virtual viewers are expected to be able to see the
auction in progress and follow the lots of merchandise as they are being sold.
They will be able to bid simultaneously with those
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attending in person and update bids at their convenience. We intend to post bids
received from the Internet on large screen monitors. Unlike eBay, Bid.com or
other web sites, we will offer every item on an unreserved basis, meaning there
is no minimum bid for the merchandise we auction. Every item we auction will be
physically present at the time of the auction and sold to the highest bidder.
Our Ableauctions.com site will allow visitors to register, to bid, preview
merchandise, place bids on merchandise, and purchase and pay for merchandise in
a secure environment. Our web site software is expected to feature tools that
calculate taxes, exchanges rates for various currencies and shipping costs. We
intend to post merchandise packaging and shipping information on our web site to
facilitate delivery of merchandise to purchasers.
The Silent Auction
Our silent auction will allow us to conduct auctions similar to eBay, Amazon and
Bid.com. We intend to continuously run an auction that lists thousands of
featured items for sale, each with a digital picture or video clip (a
360(Degree) view of the item) illustrating the product.
We intend to offer certain items from our inventory and inventory from
bankruptcies, mergers, acquisitions, insolvencies and expired leases on our
silent auction. We anticipate we will offer merchandise on our silent auction
with no minimum bid.
Unlike our competitors, we intend to offer only merchandise that we own or that
is consigned to us for sale on our silent auction.
The Retail Store
Our web site is expected to feature a retail store offering a broad range of
products. We intend to offer the merchandise of diamond distributors, jewelers,
computer and electronics wholesalers and antique dealers in catalogue format at
a set price with no bidding. In some instances, with antiques and specialized
items, the user may be allowed to make an offer on the merchandise. We have
established alliances with numerous distributors that have agreed to sell
merchandise on our web site. We anticipate our web site will feature the
following retail stores:
o Computers and Electronics
o Jewelry
o Specialty Items
o Lingerie
o Antiques
o Time Shares
Charity Auctions
Our charity auctions will allow registered non-profit organizations to raise
funds and awareness of their charities through auctions hosted on our web site.
We intend to charge commissions ranging from 10%, for hosting an auction, to
25%, for fully-organized fundraisers. Charity auctions may offer merchandise
such as automobiles, vacation packages and event passes to the highest bidder.
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We plan to complete the initial launch of the Ableauctions.com web site in late
November 1999.
Sales and Marketing Strategy
Our marketing strategy is designed to introduce and strengthen the
Ableauctions.com brand name.
We intend to market our web site and auction houses to increase customer traffic
to our web site, build customer loyalty, maximize repeat purchases and develop
additional revenue opportunities. We intend to promote each of our Live
Auctions, Silent Auctions, Charity Auctions and the Retail Store to a customer
base of potential bidders and consignors.
We intend to use electronic advertising, including banner advertising,
electronic mail and facsimile transmission of advertisements to promote our
auctions. We will also use traditional print media, including classified
advertisements in major newspapers and yellow page ads. We believe that our
advertising will increase awareness of the Ableauctions.com brand. We may also
develop strategic alliances with other Internet companies, that may provide
links to our web site, auctions and our other merchandise offerings.
We generally promote individual auctions using direct mail brochures, newspaper
ads, trade magazine ads, and other publications. We also use personal sales in
our marketing auction services to potential consignors in the business
community.
Our marketing efforts will be directed to specific regional areas where we
conduct auctions. We also intend to implement an after-sale marketing program,
which may include customer follow-up to reinforce purchase decisions and to
promote our web site. Our databases will be designed to track information
regarding potential bidders, consignors, industry information, equipment
valuations, which may enhance our ability to effectively market our auction
services, and which may be used for marketing certain types of auctions to
bidders in the future.
Business Relationships
We have relationships with a number of companies, including Compaq Computer
Corporation, the Allaire Corporation, Telus Advanced Communications, Cybercash,
and eBay, as follows:
o Compaq is custom designing a Distributed Internet Server Array (DISA)
to provide us with centralized international technical support from
one regional site in North America.
o The Allaire Corporation, based in Cambridge, Mass., is assisting us
with the implementation of application development and load-balanced
server software for our web site applications.
o Telus Advanced Communications is providing us with fault tolerant
high-speed access to the Internet, designed to minimize the risk of
downtime for our web site.
o Cybercash, a leading provider of third-party credit card processing
services, will assist us with facilitating our credit card
transactions.
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o eBay, the world's largest person-to-person trading community, has
agreed to simultaneously list all of our Silent Auction inventories on
eBay's web site and servers. eBay generally accepts all requests for
listing merchandise on its web site. Users logging on to
www.ableauctions.com and selecting "Silent Auction" will be linked to
a specific site on eBay's servers. Users logging on to www.ebay.com
will be able to preview and bid on Ableauctions.com's entire inventory
and link to the Charity Auctions and the schedule of the Live Video
Broadcast auctions on the Ableauctions.com web site.
We are also actively seeking listings with other Internet service providers,
including Yahoo!, Info Seek, to direct traffic to our web site. In the future,
we may enter into cooperative marketing arrangements designed to build our
Ableauctions.com brand name and to increase awareness of our web site. We have
not begun to enter into such arrangements and do not anticipate we will do so
until after our launch in the fourth quarter 1999.
Research and Development
We are in the process of developing technology to integrate our live auctions
with our web site. While our technology is primarily being developed internally,
we have outsourced development with the particular use of engineers and
developers, including Compaq Computer Corporation, Allaire Corporation and Telus
Advanced Communications. We intend to standardize our technology to industry
standards and to use off-the-shelf software, when available, to reduce our
development costs.
Our research and development program consists of developing technologies related
to our Web site and the systems required to broadcast live auctions over the
Internet. As of September 30, 1999, we had spent approximately $500,000 on
expenses related to research and development, including consulting fees,
technical fees, development of our data base management technologies, research
and development of our graphic and video broadcasting technologies, systems
design and testing and other technological aspects of our Web site. We
anticipate that we will spend approximately $675,000 on research and development
efforts during the period from October 1, 1999 through September 30, 2000.
Our systems are expected to provide our web site with high-volume capabilities
that will allow us to transmit and conduct live auctions and other transactions
over the Internet.
Our Ableauctions.com Technology
The following section outlines the technology components that are anticipated to
be used by us to deliver Web-based auctions:
DISA Technology
Our system will be based on distributed Internet server array or "DISA"
technology, a fault-tolerant architecture system custom designed by Compaq. DISA
uses industry-standard platforms and packaged application server software to
increase system flexibility. Compaq tests have shown that the DISA architecture
allows a web server, such as our ColdFusion application by Allaire Corporation,
to scale beyond the limitations of a single server. DISA enables a group of
servers to perform as a single, highly-scalable system, which can be networked
to share the load, compensate for server failures, and increase manageability of
a web site server system. DISA architecture also allows requests and
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processing to be transferred from one machine to another in the event any one
machine becomes overloaded. If one of our data resource servers fail, we
anticipate our conventional fail-over clustering technology will allow us to
minimize downtime.
Web Application Servers
We have installed Compaq 1850R servers to handle a large volume of transactions
on our web site and the transaction-intensive applications we intend to run. We
considered three critical factors in selecting our system:
performance, availability, and scalability.
Performance refers to the ability of an application to sustain a
business-defined performance metric, such as response time.
Availability refers to the amount of time that an application is available
to perform work, typically measured in percentage of uptime.
Scalability refers to the capacity of the application to perform increasing
amounts of work while maintaining acceptable performance levels.
The Compaq ProLiant 1850R servers we installed have the following features:
o A two-way symmetric multiprocessing (SMP) configuration of
400-megahertz (MHz) Intel Pentium II processors.
o 512-megabyte, 100 MHz SDRAM.
o Integrated dual Ultra Wide SCSI controller.
o Two PCI buses in master/slave configuration.
o Integrated remote console and other advanced manageability features.
o Designed for efficient racking, taking only 3 U of space on standard
racks. Our cluster with 72 nodes and 18 gigabytes (GB) of disk storage
was built with 22 42 U racks with plenty of room left for incremental
growth.
o Each node delivers excellent processor-memory bandwidth (450 megabytes
(MB) per second) on the STREAMS benchmark.
Web Application Server Software
We have selected the following server software:
Microsoft Windows NT Server, Microsoft SQL Server and Allaire ColdFusion
Enterprise Servers.
Our server ColdFusion application runs as a 32-bit multi-threaded system service
or daemon on Windows NT. This architecture enables ColdFusion to scale upward to
support heavy user loads. The multi-threaded architecture allows each user or
page request to execute as a separate thread on the system, with each thread
handled by the underlying operating system threading architecture. The
multi-thread server architecture lends itself to scaling the application server
across machines. Windows NT supports a technology called SMP that allows
applications to execute threads across multiple processors on a single machine,
which increases the efficiency and processing capabilities of the machine. As
the
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number of processing units on the machine increases, the simultaneous processing
power of the ColdFusion server increases.
Video Technology
We developed specialized technology to enable us to transmit our auctions live
on our web sites. This technology incorporates a high-image quality,
no-download, and no-buffer streaming video server for low bandwidth Internet
transmission. The broadcast produces real-time, 144 x 176 pixel images at 7 to
15 frames per second over a 56 Kbps connection. More importantly, users do not
need to download any software to view the broadcast. The broadcast can be scaled
to a variety of sizes to best suit the intended audience. The technology and
systems required at each remote auction house include the following components:
o 2 Video Cameras
o 4 Digital Cameras
o Wireless 900 MHz transmitters
o ISDN or ADSL lines
o 1 Video Server, 6 notebook checkout stations, 3 notebook proxy bidding
stations
o Local network and server
The fixed cost to implement each web site is expected to cost $125,000-$150,000.
Intellectual Property
We have developed the majority of our software internally. We have taken
measures to protect its intellectual property, ranging from confidentiality and
non-disclosure agreements for contractors and employees to deploying a
trans-modular development schedule where individual modules of software
developed or coded by employees or contractors have no stand-alone benefits
whatsoever until they are integrated with at least three independent modules.
"Ableauctions" and "Ableauctions.com" are our trademarks, which we intend to
register under Canadian and U.S. trademark laws in the fourth quarter of 1999.
We have not submitted an application to register these trademarks. We intend to
use copyright, trademark, service mark and trade secret laws and contractual
restrictions to protect our proprietary rights in products and services. We
cannot assure you that the measures we take to protect intellectual property
will prevent misappropriation of our technology or deter independent third-party
development of similar technologies.
Employees
We currently employ 15 employees and 3 consultants. In addition to management,
we employ auction staff, sales people, administrative staff, and development and
technical personnel. We expect to hire additional senior management, customer
service management, database administrator, several software developers,
customer service representatives, technical support representatives and
sales/marketing staff. In total, we expect the size of our staff will grow to
over 30 in the first quarter of 2000.
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Development of the Business to Date
Since July 1, 1999, we have completed the following in implementing our business
plan:
o Acquired Able Auctions (1991) Ltd.
o Developed the Ableauctions.com business plan and marketing strategy.
o Begun developing the Ableauctions.com web site and the proprietary
technology for broadcasting live auctions.
o Designed and installed the pilot server configurations that will
accommodate a high volume of Internet traffic.
o Secured strategic relationships with Allaire Corporation, Compaq
Computer, Telus Advanced Communications and eBay.
o Retained key management and staff with experience in the auction
business and e-commerce.
o Designed a marketing program to publicize the Ableauctions.com brand
and web site.
o Acquired Ross Auctioneers.
History of Our Corporation
We were incorporated in the State of Florida on September 30, 1996 as "J.B.
Financial Services, Inc." with an authorized share capital of 6,500 common
shares, with a par value of $1.00 per share. We were inactive until August 1998.
On September 2, 1998, we amended our Articles of Incorporation to (i) increase
our authorized capital to 50,000,000 shares of common stock with a par value of
$0.001 per share and (ii) effect a forward split of our issued and outstanding
stock on a 200-for-1 basis, increasing our total issued and outstanding share
capital from 5,000 to 1,000,000 common shares.
Effective July 19, 1999, Douglas McLeod, a promoter and former director of
Ableacutions.com, Inc., contributed back to the Company 8,000,000 shares of
common stock in consideration of $100. The shares were returned to our treasury
as part of an agreement to restructure our share capital and to allow us to
acquire Able Auctions (1991) Ltd. As a result of the contribution, our total
issued capital was reduced by 8,000,000 shares.
On July 19, 1999, we amended our Articles of Incorporation to change our name to
"Ableauctions.com, Inc." On July 20, 1999, we entered into an agreement to
acquire all the issued and outstanding common shares of Able Auctions (1991)
Ltd., a British Columbia corporation engaged in the business of auctioning used
equipment, office furnishings and equipment, and other merchandise, from Dexton
Technologies Corporation, a British Columbia corporation. See "Our Acquisition
of Able (1991)." As a result of our acquisition of Able (1991), we acquired all
of the assets and business operations of Able (1991), as a going concern.
On July 20, 1999, we distributed a dividend of four shares for every share held
by shareholders of record on July 20, 1999. After the dividend, we had
12,125,000 shares of common stock outstanding.
The Company's shares began trading on the National Association of Securities
Dealers' ("NASD") Over-the-Counter Bulletin Board ("OTCBB") under the symbol
"ABLC" on July 21, 1999.
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On August 9, 1999, we (i) amended our Articles of Incorporation to increase our
authorized share capital to 250,000,000 shares of common stock and (ii) effected
a 5-for-1 forward split of our common shares, increasing our total issued and
outstanding share capital from 12,250,000 to 61,250,000 common shares.
In September 1999, we (i) amended our Articles of Incorporation to reduce our
authorized capital to 50,000,000 common shares and (ii) reverse split our issued
and outstanding common shares on a 1-for-4 basis, reducing our issued and
outstanding share capital to 18,250,000 shares.
Effective September 20, 1999, we acquired all of the business assets of Ross
Auctioneers & Appraisers Ltd., a British Columbia based auction company, for
60,000 shares of our common stock with the fair market value of approximately
$175,000. See "Our Acquisition of Ross Auctioneers."
Our current corporate organization structure is as follows:
Ableauctions.com, Inc.
Organizational Chart
----------------------------------------
Ableauctions.com, Inc.
(a Florida corporation)
----------------------------------------
----------------------------------------
Able Auctions (1991) Ltd.
(a British Columbia corporation)
----------------------------------------
----------------------------------------
Ross Auctioneers & Appraisers Ltd.
(a British Columbia corporation)
----------------------------------------
We have not been subject to any bankruptcy, receivership or other similar
proceeding.
Our Acquisition of Able Auctions (1991)
On July 20, 1999, we agreed to acquire all of the issued and outstanding share
capital of Able Auctions (1991) Ltd. pursuant to a share purchase agreement
among us, Able Auctions (1991), and Dexton Technologies Corporation, a British
Columbia corporation and formerly the sole shareholder of Able Auctions (1991).
Under the terms of the share purchase agreement:
(a) We completed a private placement of 1,094,057 units at the price of
$3.20 per unit for proceeds to us of $3,500,980. Each unit consisted
of one share of common stock and one-half of one non-transferable
share purchase warrant. Each whole share purchase warrant is
exercisable to acquire one additional share of our common stock at a
price of $3.20 per share until August 24, 2000,
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and thereafter at a price of $4.00 per share until August 24, 2001.
See "Recent Sales of Unregistered Securities."
(b) We issued 1,843,444 shares of our common stock and paid $1,027,333 to
Dexton for all of the issued and outstanding shares of common stock of
Able Auctions (1991).
(c) We appointed Abdul Ladha as our President and a Director and Jeremy
Dodd, the Vice President of Operations of Able Auctions (1991), as our
Secretary and Treasurer.
(d) We commenced in the development and testing of technology, software
and systems to launch our Ableauctions.com web site.
(e) We filed this Form 10-SB registration statement with the SEC to
register our common stock under the Securities Exchange Act of 1934,
as amended.
Dexton was represented by separate legal counsel and the terms of the share
purchase agreement were negotiated at arm's length.
Our Acquisition of Ross Auctioneers
On September 20, 1999, Able Auctions (1991) agreed to purchase all of the
property, assets and undertaking of Ross Auctioneers & Appraisers Ltd., as a
going concern, pursuant to an asset purchase agreement among Ross Auctioneers,
Able Auctions (1991) and us. Ross Auctioneers is engaged in the business of the
auction of tools, vehicles, industrial equipment, government surplus equipment,
and police seized goods. The purchase price for the assets of Ross Auctioneers
was $175,000 (Cdn$250,000) plus applicable taxes, which was paid by the issuance
of 60,000 shares of our common stock at the deemed price of $2.80 (Cdn$4.16) per
share. See "Recent Sales of Unregistered Securities."
In addition, Able Auctions (1991), under a separate asset purchase agreement
dated as of September 20, 1999 with John Carrier dba LJM Computer Resources,
purchased the web site located at www.bcbids.com, including all associated
intellectual property rights and software technology, for the cash purchase
price of $26,500 (Cdn$38,000) plus applicable taxes. Able (1991) also purchased
the domain name "bcbids.com" from Ronald H. Smallwood for the purchase price of
$140 (Cdn$200) plus applicable taxes.
These transactions all closed on October 18, 1999. Ross Auctioneers was
represented by separate legal counsel and the terms of the acquisition were
negotiated at arm's length.
RISK FACTORS
We are a development stage company in the process of developing a web site
designed to broadcast over the Internet auctions conducted at our
brick-and-mortar auction houses and allow visitors to our web site to place bids
at these auctions. Our business is subject to a number of risks as outlined
below. An investment in our securities is speculative in nature and involves a
high degree of risk. You should read this registration statement carefully and
consider the following risk factors.
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Our ability to meet our business projections through September 2000 may depend
on our ability to raise additional operating capital in the amount of $14
million or more in the first quarter of 2000
We anticipate that we may need to seek additional capital in the amount of $14
million or more in the first quarter of 2000 to support our capital requirements
through the second quarter of 2000. We cannot assure you that any additional
financing would be available or, if available, that it would be available on
terms acceptable to us. See "Note Regarding Forward Looking Statements."
Furthermore, any issuance of additional securities may result in dilution to the
then existing shareholders. If adequate funds are not available, we will lack
sufficient capital to pursue our business plan fully, which will have a material
adverse effect upon our ability to meet our business projections.
We have a limited operating history and a history of losses, which makes our
ability to continue as a going concern questionable
Prior to our acquisition of Able Auctions (1991) Ltd., we had no material
business or results of operation. We incurred net losses since our inception in
September 1996, and Able Auctions (1991) had a history of only modest profits
prior to its fiscal year ended March 31, 1999. Based on pro forma financing
statements, which give effect to our acquisition of Able Auctions (1999) for the
financial periods, the fiscal year ended December 31, 1998 and the nine month
interim financial period ended September 30, 1999, we incurred pro forma
consolidated net losses of $198,451 and $840,307, respectively. We anticipate
that we will continue to incur loses at least through 2000. We do not believe
that we will generate sufficient revenues to support our operations in fiscal
1999 or 2000 because of our projected development and marketing costs and costs
related to our expansion strategy. See "Plan of Operation" and "Summary of
Operating Budget." In the foreseeable future, we believe that these expenses
will increase our net losses, and we cannot assure you that we will ever be
profitable.
As of September 30, 1999, we had current assets of $1,865,595, of which
$1,164,680 was in cash and cash equivalents. We had current liabilities of
$574,300, of which $375,836 were accounts payable and $150,000 were loans
payable. Our working capital position at September 30, 1999 was $1,337,172, and
we do not anticipate it will improve until we can generate revenues from our
operations to cover our expenses or until we raise additional capital. We
anticipate raising additional capital through sales of our equity and/or debt;
however, we cannot assure you that we will be able to obtain adequate financing
to support our operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resouces."
Because we have recently begun operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging. We cannot assure you that we will attract
consignors or bidders to use our web site or generate significant revenues in
the future. We cannot guarantee that we will ever establish a sizeable market
share or achieve commercial success.
Our success depends on the services of our key officers, Abdul Ladha, our
President and Chief Executive Officer, and Jeremy Dodd, the Vice-President of
Operations of our subsidiary, and our ability to attract and maintain qualified,
experienced personnel
Our future success will depend on Abdul Ladha, our President and Chief Executive
Officer, and Jeremy Dodd, the Vice-President of Operations of Able Auctions
(1991) and our Secretary and Treasurer. Abdul Ladha is also President of Dexton
Technologies Corporation, and we anticipate that he will only
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spend 50% of his business time managing our Company. As such, we intend to rely
heavily on Mr. Dodd to manage our auction operations and we intend to hire
additional personnel or consultants to assist us in developing and implementing
our technology and business plan. We also rely upon consultants and advisors who
are not employees, including North Star Communications, Inc., our investor
relations advisor.
The loss of key personnel could have an adverse effect on our operations. We do
not maintain insurance to cover losses that may result from the death of any of
our key personnel. Competition for qualified employees is intense, and an
inability to attract, retain and motivate additional, highly skilled personnel
required for expansion of operations and development of technologies could
adversely affect our business, financial condition and results of operations.
Our ability to retain existing personnel and attract new personnel may also be
adversely affected by our financial situation. We cannot assure you that we will
be able to retain our existing personnel or attract additional, qualified
persons when required and on acceptable terms.
We may be required to sell additional common stock or parties may exercise
options and warrants that would cause dilution of your shares
The number of shares of our outstanding common stock held by affiliates is large
relative to the trading volume of the common stock. Any substantial sale of our
common stock or even the possibility of such sales occurring may have an adverse
effect on the market price of the common stock.
As of October 22, 1999, we had outstanding warrants to purchase an aggregate of
547,029 shares of our common stock at the price of $3.20 per share until August
24, 2000 and thereafter at the price of $4.00 per share until August 24, 2001.
We have reserved up to an additional 3,000,000 shares of common stock for
issuance upon exercise of options under an incentive stock option plan, which we
intend to submit to a vote of our shareholders for approval and ratification
during the fourth quarter of 1999. On October 14, 1999, we granted options to
acquire up to 962,500 shares of our common stock at the price of $3.20 per share
to directors, officers, employees, and consultants, of which 812,500 options
were granted under the plan, as more particularly described under "Executive
Compensation - Stock Option Plan".
Holders of such warrants and options are likely to exercise them when, in all
likelihood, we could obtain additional capital on terms more favorable than
those provided by the options and warrants. Further, while our warrants and
options are outstanding, our ability to obtain additional financing on favorable
terms may be adversely affected.
Our executive officers and directors beneficially own or control a large number
of shares of our common stock and may influence all matters submitted to a vote
of our shareholders
Our executive officers and directors (and their affiliates), as a group
beneficially own 2,619,444 shares or approximately 14.31% of our common stock,
and together have the ability to influence matters submitted to our stockholders
for approval. See "Security Ownership of Certain Beneficial Owners and
Management."
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of our company, impede a merger,
consolidation, takeover or other business
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combination involving our company, or discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of our company,
which in turn could have an adverse effect on the market price of our company's
common stock.
Investors may not be able to secure foreign enforcement of civil liabilities
against our management
All of our directors and officers are residents of Canada. Consequently, it may
be difficult for United States investors to effect service of process within the
United States upon those directors or officers, or to realize in the United
States upon judgments of United States courts predicated upon civil liabilities
under the United States Securities Exchange Act of 1934, as amended. A judgment
of a U.S. court predicated solely upon such civil liabilities would probably be
enforceable in Canada by a Canadian court if the U.S. court in which the
judgment was obtained had jurisdiction, as determined by the Canadian court, in
the matter. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or Ableauctions.com,
Inc. predicated solely upon such civil liabilities.
The e-commerce industry is highly competitive, and we cannot assure you that we
will be able to compete effectively
The market for broadcasting auctions over the Internet is new, rapidly evolving
and intensely competitive. The market for live video-fed auctions is even newer,
and we expect competition to intensify further in the future. Our direct
competitors will include Livebid.com, owned by Amazon.com, and other web sites
that broadcast live auctions, we will also compete with various online auction
services, including eBay; Onsale Exchange, a division of Onsale, Inc.; Auction
Universe, a Times-Mirror company; Excite, Inc.; and a number of other small
services, including those that serve specialty markets. We will also compete
with business-to-consumer online auction services such as Onsale, First Auction,
ZAuction and Surplus Auction.
We face potential competition from a number of large online communities and
services that have expertise in developing online commerce and in facilitating
online person-to-person interaction. Certain of these potential competitors,
including Amazon.com, America Online, Inc., Microsoft Corporation and Yahoo!
Inc., currently offer a variety of business-to-consumer trading and classified
advertisement services and certain of these companies may introduce live
auctions to their large user populations. We believe that the principal
competitive factors in the online auctions market are volume and selection of
goods, population of buyers, customer service, reliability of delivery and
payment by users, brand recognition, web site convenience and accessibility,
price, quality of search tools and system reliability. Many of our current and
potential competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing,
technical and other resources than us.
Certain of our competitors with other revenue sources may be able to devote
greater resources to marketing and promotional campaigns, adopt more aggressive
pricing policies and devote substantially more resources to web site and systems
development than us or may try to attract traffic by offering services for free.
We cannot assure you that we will be able to compete successfully against
current and future competitors. Further, as a strategic response to changes in
the competitive environment, we may, from time to time, make certain pricing,
service or marketing decisions that could have a material adverse effect on our
business, results of operations and financial condition.
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If we are unable to successfully develop a network of brick-and-mortar auction
houses, we are unlikely to become profitable
Our business strategy is to grow through acquisitions of or strategic
affiliations with auction companies in a number of North American markets.
Although we believe that we have an adequate infrastructure to implement our
growth strategy, there can be no assurance that our current management,
personnel and corporate infrastructure will be adequate to manage future growth,
if any. In addition, to the extent the success of our strategy is contingent on
making further acquisitions of or entering into strategic affiliations with
auction companies, we cannot assure you that we will be able to identify and
enter into agreements with auction houses on terms favorable to us. We also
cannot guarantee we will be able to integrate such acquisitions or affiliations
successfully into our company without substantial costs, delays or other
operational or financial problems. Further, acquisitions and expansion into new
markets involve a number of special risks, including possible adverse effects on
our operating results, diversion of management's attention, failure to retain
key acquired personnel, risks associated with unanticipated events or
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on our business, financial condition and
results of operations. In addition, competition in the acquisition market is
intense, and prices paid for auction houses have increased in recent years.
To the extent we are required to write down goodwill associated with our
acquisitions due to a decline in the value of such acquired businesses, such
write-down could have a material adverse effect on our operating results.
We may finance future acquisitions and expansions through the incurrence of
additional bank indebtedness, the utilization of cash from operations, the
issuance of common stock or other securities, or any combination thereof. In the
event that our common stock does not maintain a sufficient market value, or
potential acquisition candidates are otherwise unwilling to accept our common
stock or other securities as part of the consideration for the sale of their
businesses, we may be required to use more of our cash resources or incur
substantial debt in order to finance future acquisitions. If we do not have
sufficient cash resources, our ability to make acquisitions could be limited
unless we are able to obtain additional capital through debt or equity
financings. There can be no assurance that we will be able to obtain the
financing we will need in the future on terms we deem acceptable, if at all.
If we are unable to achieve a significant number of visitors and successfully
facilitate transactions, we may be unable to generate sufficient revenues to
earn a profit
The success of our Ableauctions.com web site may be dependent upon achieving
significant market acceptance of our web site by consumers. We anticipate that
this point will be reached when 10,000 visitors visit our web site regularly and
facilitate 1,000 or more transactions per day. Our Ableauctions.com web site has
not been tested and we anticipate that we will have very limited market
acceptance until our brand name is established. Internet e-commerce is in the
early stage of development, and our business concept of offering an Internet
solution for holding auctions has not been tested.
Our competitors and potential competitors may offer more cost-effective
merchandising solutions than us, which could damage our business and our ability
to successfully launch our web site. Our failure to
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attract visitors, successfully complete transactions and develop an adequate
auction house base will seriously harm our business and our ability to earn a
profit.
Due to the emerging nature of Internet commerce, we are unable to forecast our
expenses and revenues accurately, and should our expenses exceed our revenues,
we may never become profitable
As a result of the emerging nature of the Internet, including Internet-based
advertising, services and electronic commerce, we are unable to forecast our
expenses and revenues accurately. We believe that due primarily to the
relatively brief time the Internet has been available to the general public,
there are several uncertainties related to the successful operation of any form
of Internet-based business. Our current and future estimated expense levels are
based largely on our estimates of future revenues and may increase considerably.
Few, if any, of our operating expenses can be quickly or easily reduced, such as
the laying off of personnel or reducing our commitment to our consultants and
service providers, in a manner which would not cause a material adverse effect
to our business, financial condition and operating results. In addition, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
expenditures, and a shortfall in actual revenues as compared to estimated
revenues would have an immediate material adverse effect on our business,
financial condition and operating results.
We have capacity constraints and system development risks that could damage our
customer relations or inhibit our possible growth, and we may need to expand our
management systems and controls quickly
Our success and our ability to provide high quality customer service largely
depends on the efficient and uninterrupted operation of our computer and
communications systems and the computers and communication systems of third
party vendors in order to accommodate any significant numbers or increases in
the numbers of consumers and businesses using our services. Our success also
depends upon us and our vendors' abilities to rapidly expand
transaction-processing systems and network infrastructure without any systems
interruptions in order to accommodate any significant increases in use of our
service.
We intend to rely on Compaq to provide us with DISA technology, Allaire
Corporation to implement application development and server software, Cybercash
to provide third party credit card processing services, and any other third
parties we may hire in the future to assist us in expanding our technological
capacity, our transaction-processing systems and network infrastructure as we
grow. We cannot assure you that the vendors we have selected and will select in
the future will be capable of accommodating any significant number or increases
in the number of consumer and auction houses using our services. Such failures
will have a material adverse affect on our business and results of operations.
We may experience periodic systems interruptions and infrastructural damage,
which may cause customer dissatisfaction and may adversely affect our results of
operations. Limitations of our and our vendors' technology infrastructure may
prevent us from maximizing our business opportunities.
Changing technology may render our equipment, software and programming obsolete
or irrelevant
The market for Internet-based products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require that we continually improve the performance,
features and reliability of our Internet-based products and services,
26
<PAGE>
particularly in response to competitive offerings. We cannot guarantee that we
will be successful in responding quickly, cost effectively and sufficiently to
these developments. In addition, the widespread adoption of new Internet
technologies or standards could require substantial expenditures by us to modify
or adapt our Internet sites and services and could fundamentally affect the
character, viability and frequency of Internet-based advertising, either of
which could have a material adverse effect on our business, financial condition
and operating results. In addition, new Internet-based products, services or
enhancements offered by us may contain design flaws or other defects that could
require costly modifications or result in a loss of consumer confidence, either
of which could have a material adverse effect on our business, financial
condition and operating results.
We depend on third parties for uninterrupted Internet access and may be harmed
by the loss of any such service
We rely on Telus Advanced Communications, an Internet service provider located
in the Lower Mainland of British Columbia, for uninterrupted Internet access. We
have not entered into a definitive agreement for such services. Our business is
dependent on uninterrupted Internet access and the loss of such services may
have a material adverse effect on our business, financial condition and
operating results. We cannot assure you that we would be able to obtain such
services from other third parties in the event of the loss of any of such
services.
If we cannot protect our Internet domain name, our ability to conduct our
operations may be impeded
We anticipate that the Internet domain name "ableauctions.com" will be an
extremely important part of our business and the business of our subsidiaries.
Governmental agencies and their designees generally regulate the acquisition and
maintenance of domain names. The regulation of domain names in the United States
and in foreign countries may be subject to change in the near future. Governing
bodies may establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, we may be unable to prevent third
parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights.
Third parties have acquired domain names that include "auctions" or variations
thereof both in the United States and elsewhere.
We may encounter significant costs should our software fail to meet Year 2000
compliance requirements
The "Year 2000" issue concerns the potential exposures related to the automated
generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. We
have completed our review of the potential impact of Year 2000 issues and do not
anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant. Our failure or failure of our software providers
to adequately address the Year 2000 issue could result in misstatement of
reported financial information or otherwise adversely affect our business
operations. See "Financial Information - Year 2000 Compliance."
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<PAGE>
Our Ableauctions.com business may be subject to government regulation and legal
uncertainties that may increase the costs of operating our web site or limit our
ability to generate revenues
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
specifically directed towards online services. However, due to the increasing
popularity and use of the Internet and online services, it is possible that laws
and regulations will be adopted with respect to the Internet or online services.
These laws and regulations could cover issues such as online contracts, user
privacy, freedom of expression, pricing, fraud, content and quality of products
and services, taxation, advertising, intellectual property rights and
information security. Applicability to the Internet of existing laws governing
issues such as property ownership, copyrights and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. In
addition, numerous states have regulations regarding the manner in which
auctions may be conducted and the liability of auctioneers in conducting such
auctions.
Due to the global nature of the Internet, it is possible that the governments of
other states and foreign countries might attempt to regulate our transmissions
or prosecute us for violations of their laws. We might unintentionally violate
such laws. Such laws may be modified, or new laws may be enacted, in the future.
Any such development could damage our business.
Our brick-and-mortar auction houses are subject to regulatory review under state
and federal laws governing auctions and auctioneers
Our brick-and-mortar auction houses are generally subject to extensive
regulation, supervision, and licensing under various federal, state, and local
statutes, ordinances, and regulations. Such laws and regulations may require us
to obtain a license or registration, or post a surety or bond as a precondition
of doing business within the jurisdiction. In addition, applicable laws may
require us to transact business and sell merchandise in accordance with specific
guidelines, including the means by which we obtain our merchandise, advertise
our auctions, conduct our bidding procedures, close transactions, hold client
funds and other restrictions that may vary from state to state. We cannot
guarantee that we will not be subject to actions arising out of violations by
our brick-and-mortar auction houses. Such action may have a material adverse
affect on our business and results of operations.
Our business may be subject to sales and other taxes, which may cause
administrative difficulties and increase our cost of operations
We will collect applicable sales and other similar taxes on goods sold on our
Ableauctions.com web site. One or more states may seek to impose additional
sales tax collection obligations on companies such as ours that engage in or
facilitate online commerce. Several proposals have been made at the state and
local level that would impose additional taxes on the sale of goods and services
through the Internet. These proposals, if adopted, could substantially impair
the growth of electronic commerce and could diminish our opportunity to derive
financial benefit from our activities. The U.S. federal government recently
enacted legislation prohibiting states or other local authorities from imposing
new taxes on Internet commerce for a period of three years ending October 21,
2001. This tax moratorium will last only for a limited period and does not
prohibit states or the Internal Revenue Service from collecting taxes on our
income, if any, or from collecting taxes that are due under existing tax rules.
A successful assertion by one or more states or any foreign country that we
should collect sales or other taxes on the exchange of merchandise on our system
could harm our business and adversely affect our results of operations.
28
<PAGE>
Seasonality and potential fluctuations in results of operating may cause cash
shortfalls materially affecting our results of operations
As a result of our limited operating history and the emerging nature of the
markets in which we compete, it is difficult for us to forecast our revenues or
earnings accurately. In addition, we have no backlog and a significant portion
of our net revenues for a particular quarter are derived from auctions that are
listed and completed during that quarter. Our current and future expense levels
are based largely on our investment plans and estimates of future revenues and
are, to a large extent, fixed.
We may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in revenues
relative to our planned expenditures would have an immediate adverse effect on
our business, results of operations and financial condition. Further, as a
strategic response to changes in the competitive environment, we may from time
to time make certain pricing, service or marketing decisions that could have a
material adverse effect on our business, results of operations and financial
condition.
Based on management's experience in the auction industry, our discussions with
other companies and public disclosures by our competitors, we believe that our
results of operations will be somewhat seasonal in nature, with fewer auctions
listed around the Thanksgiving and Christmas holidays in the fourth quarter than
at other times of the year.
Our limited operating history, however, makes it difficult to fully assess the
impact of these seasonal factors or whether or not its business is susceptible
to cyclical fluctuations in the U.S. and Canadian economies. There can be no
assurance that seasonal or cyclical variations in our operations will not become
more pronounced over time or that they will not materially adversely affect
results of operations in the future. Moreover, consumer "fads" and other changes
in consumer trends may cause significant fluctuations in our operating results
from one quarter to the next.
Due to the foregoing factors, our quarterly revenues and operating results are
difficult to forecast. We believe that period-to-period comparisons of our
operating results may not be meaningful and should not be relied upon as an
indication of future performance. In addition, it is likely that in one or more
future quarters our operating results will fall below the expectations of
securities analysts and investors. In such event, the trading price of our
common stock would almost certainly be materially adversely affected.
We do not intend to declare dividends, which may lower the market value of our
shares
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
Broker-dealers may be discouraged from effecting transactions in our shares
because they are considered penny stocks and are subject to the penny stock
rules
Rules 15g-1 through 15g-9 promulgated under the Securities and Exchange Act of
1934, as amended, impose sales practice and disclosure requirements on NASD
brokers-dealers who make a market in "a penny stock." A penny stock generally
includes any non-NASDAQ equity security that has a market
29
<PAGE>
price of less than $5.00 per share. Our shares are quoted on the OTCBB and the
closing price of our shares on October 20, 1999 was $2.00, and consequently, our
shares would be considered a penny stock. The additional sales practice and
disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or an "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Plan of Operation
Our plan of operation is based on the operating history of Able Auctions (1991)
Ltd., our experience in the industry, our discussions with third parties, the
SEC filings of our competitors and the decisions of our management. Set out
below is a summary of our plan of operation and operating budget for the next
four fiscal quarters ending September 30, 2000.
Generate revenues through auctions and increase our volume of sales by
increasing the number of live auctions at our existing locations
We will continue to operate auctions at our three locations in British Columbia,
Canada. We intend to increase the number of auctions we currently hold from two
to four per month, per auction house, beginning in January 2000. See
"Description of Business - Our Growth Strategy."
Increase revenues by broadcasting our auctions on the Internet and by selling
merchandise on our web site
We also intend to launch our Ableauctions.com live auction and retail auction
web site during the fourth quarter of 1999.
We are beta testing our software and web site, and we will anticipate that our
web site will be operational by the beginning of December 1999. Initially, we
will host live auctions alternating between our Surrey and Vancouver, British
Columbia locations. We may add auctions of other auction houses if we acquire
additional auction locations or if we develop strategic affiliations with other
auction houses to broadcast their auctions.
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Continue research and development to improve our web site and auction
broadcasting technologies
We plan to continue our research and development efforts by improving our web
site and auction broadcasting technologies. We are in the process of testing our
live auction broadcasting technologies and intend to develop software and
systems that will allow us to improve graphical presentations, the speed of our
bidding process, the preview of merchandise and the method of registering
bidders. We anticipate that we will spend approximately $675,000 on research and
development efforts during the period from October 1, 1999 through September 30,
2000. See "Description of Business - Research and Development."
Install the live broadcast technology at regional auction sites
We plan to install live broadcast technology at all of our auction locations. We
estimate the costs of installing broadcast equipment will be approximately
$125,000 to $150,000 per location.
Commence geographic expansion program by acquiring or entering into strategic
affiliations with auction companies
We intend to broadcast the auctions of auction companies in a variety of
locations throughout North America. We may also acquire auction companies. Our
management will start to identify possible auction companies to approach
regarding acquisition by us or potential strategic relationships.
We expect the focus of our geographic expansion will be in Seattle, New York,
the San Francisco Bay Area, Southern California, Texas, Atlanta, and Chicago.
See "Our Acquisition Strategy."
Install the computer server hardware in Vancouver, San Jose and New York
We intend to install 40 servers in the first phase of our hardware and software
implementation program in our British Columbia location in November 1999. We
intend to install additional servers as traffic on our web site increases. We
may also install secondary servers in San Jose and in New York during 2000. Our
multi-server networking strategy is designed to allow visitors to our auction
sites to have timely response time to effectively bid for items at our live
auctions without bandwidth restrictions.
Hire additional key personnel
We plan to hire personnel and employ consultants with Internet e-commerce
experience to complement our current management who are experienced in the
auction industry. We anticipate adding up to 15 new employees with e-commerce,
software development and software maintenance experience during 2000.
Summary of Operating Budget
Set forth below are our estimated cash operating budgets for operations,
technology purchases, research and development and implementing our expansion
strategy for the four fiscal quarters ending September 30, 2000:
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Marketing $ 1,125,000
Ongoing research and development 675,000
Expansion of inventories 3,000,000
Servers and operating systems 1,200,000
Geographic expansion 7,500,000
Additional working capital to fund ongoing obligations 1,500,000
------------
Required Capital: $15,000,000
The Company's operating budget for the period beginning October 1, 1999 through
September 30, 2000 is estimated to be approximately $15 million. We do not
anticipate that we will generate sufficient revenues from our operations to
finance our plan of operations through September 30, 1999. See "Summary of
Operating Budget." We also cannot assure you that our actual expenditures for
such period will not exceed our estimated operating budget. Actual expenditures
will depend on a number of factors, some of which are beyond our control,
including, among other things, the availability of financing on acceptable
terms, acquisition and/or expansion costs, reliability of the assumptions of
management in estimating cost and timing, certain economic factors, the timing
related to development of our technology and launch of our web site and cost
associated with operating our auctions.
We will be required to raise additional capital during the first quarter 2000 to
meet our anticipated cash needs. If we are unable to raise additional financing
on acceptable terms, we may be forced to delay the implementation of certain
portions of our plan of operation, which may adversely affect our business and
results of operations. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Liquidity and Capital Resources."
Selected Financial Data
The following table sets forth selected financial data regarding our
consolidated operating results and financial position. The data has been derived
from our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States or
US GAAP. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation." The following selected financial data is qualified in our
entirety by, and should be read in conjunction with, the consolidated financial
statements and notes thereto included elsewhere in this registration statement.
The pro forma financial data are provided for comparative purposes only and are
not necessarily indicative of results that would have been achieved if the
transactions reflected therein had been effected at the beginning of the period
for which pro forma information is presented or of the results expected for any
subsequent period. The pro forma financial information is unaudited and has been
prepared by management from the audited financial statements of
Ableauctions.com, Inc. (formely J.B. Financial Services, Inc.) for the year
ended December 31, 1998; the unaudited consolidated financial statements of
Ableauctions.com, Inc. for the nine month period ended September 30, 1999; and
the unaudited financial statements of Able Auctions (1991) Ltd. for its fiscal
year ended March 31, 1999.
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<TABLE>
SUMMARY FINANCIAL DATA
Nine Months Ended Fiscal
September 30, Years Ended December 31,
------------------------------------------- ----------------------------------------
Inception
(September 30,
1996) to
1999 1998 30, 1996) to
Statement of Operations Data: Pro Forma 1999 1998 Pro Forma 1998 December 31,
Consolidated Consolidated Consolidated Consolidated non- 1997
(unaudited)(2) (unaudited) (unaudited(3) (unaudited)(1) Consolidated (14 months)
-------------- ------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $1,648,283 $207,936 $ -- $1,160,953 $ -- $ --
Operating Expenses................... 1,547,410 684,628 -- 738,186 944 5,000
Operating income (loss).............. (870,307) (600,567) -- (196,391) (944) (5,000)
Net income (loss) for the period..... (840,212) (571,160) -- (198,451) -- --
Net income (loss) per share.......... (0.06) (0.05) -- (0.02) -- --
</TABLE>
<TABLE>
At September 30, At December 31,
Balance Sheet Data: 1999 ------------------------------------------------
Consolidated 1998 1997
(unaudited)(2) non-Consolidated non-Consolidated
--------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Cash and cash equivalents.............. $ 1,164,680 $ nil $ --
Working Capital (deficit).............. 1,335,172 (944) --
Total Assets........................... 3,742,119 nil --
Total Liabilities...................... 574,300 944 --
Shareholders' Equity................... 3,167,819 (944) --
Long-term Obligations.................. 43,877 nil --
</TABLE>
- ------------------------------
(1) Gives effect to the business combination with Able Auctions (1991) Ltd. as
if it had occurred on January 1, 1998.
(2) Gives effect to the business combination with Able Auctions (1991) Ltd. as
if it had occurred on January 1, 1999.
(3) Consolidated financial statements including Ableauctions.com, Inc. and its
wholly-owned subsidiary Able Auctions (1991) Ltd., acquired on August 24,
1999.
Management's Discussion and Analysis
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operation contains "forward looking
statements". Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
out in this report.
Although management believes that the assumptions made and expectations
reflected in the forward looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to be correct or
that actual future results will not be different from the expectations expressed
in this registration statement.
Our actual results could differ materially from the results projected in the
forward-looking statements as a result of our ability to:
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<PAGE>
o achieve the objectives of our business strategy;
o accelerate or defer operating expenses;
o achieve revenue from our operations; and
o hire new personnel.
and other factors set forth under "Risk Factors" in this registration statement.
The following discussion is qualified by the more complete financial information
contained in our audited financial statements for the for the year ended
December 31, 1998; our unaudited consolidated financial statements for the nine
month period ended September 30, 1999; and our unaudited pro forma consolidated
financial statements for the year ended December 31, 1998 and for the nine month
period ended September 30, 1999. The pro forma financial data are provided for
comparative purposes only and are not necessarily indicative of results that
would have been achieved if the transactions reflected therein had been effected
at the beginning of the period for which pro forma information is presented or
of the results expected for any subsequent period.
Our financial statements have been prepared in accordance with United States
generally accepted accounting principles. The financial statements of Able
Auctions (1991) Ltd. were prepared in accordance with Canadian generally
accepted accounting principles. We believe that there is no material difference
between Canadian GAAP and U.S. GAAP as applied to the financial results reported
in this registration statement.
The following discussion of our results of operations should be read in
conjunction with our audited financial statements and the related notes, the
discussion of Able Auctions (1991) Ltd.'s results of operations discussed below
and the financial statements of Able Auctions (1991) Ltd. and the related notes
included in this registration statement. Able Auctions (1991) Ltd.'s results of
operations prior to our acquisition of Able Auctions (1991) Ltd. on August 23,
1999 are not included in our financial statements.
Overview
We were incorporated in the State of Florida on September 30, 1996 under the
name "J.B. Financial Services, Inc
On August 24, 1999, we acquired all of the issued and outstanding shares of Able
Auctions (1991) Ltd. pursuant to a share purchase agreement with Dexton
Technologies Corporation, the sole shareholder of Able Auctions (1991) Ltd. at
that time. See "Our Acquisition of Able Auctions (1991)."
Upon our acquisition of Able Auctions (1991) Ltd., we acquired all of the assets
and the auction business of Able Auctions (1991) Ltd. We also undertook the
process of designing, building and testing an Internet based e-commerce web site
to broadcast auctions over the Internet. We expect to launch our web site in
late November 1999 and to conduct our first Internet auction in December 1999.
We anticipate our web site will also feature silent auctions, charity auctions
and a retail store.
We are an early stage company and our principal activity to date has been the
acquisition of all the issued and outstanding shares of Able Auctions (1991)
Ltd. Prior to our acquisition of Able Auctions
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<PAGE>
(1991), we were a shell company with no material revenues, expenses, assets or
liabilities. We only recently acquired Able Auctions (1991) Ltd., and we cannot
assure you that we will attain any particular level of revenues or that we will
achieve profitability.
We believe that our historic spending levels and the historic spending levels of
Able Auctions (1991) Ltd. are not indicative of future spending levels because
we are entering a period in which we will increase spending on research and
development, marketing, staffing and other general operating expenses. For these
reasons, we believe our expenses, losses, and deficit accumulated during the
development stage will increase significantly before we generate material
revenues or profits from our operations. In the absence of additional funding,
there is substantial doubt about our ability to continue as a going concern for
a reasonable period of time as set forth in the audited financial statements and
related notes included in this registration statement.
Our Results of Operations
Nine Month Period Ended September 30, 1999, Compared to the Nine Month Period
Ended September 30, 1998
We acquired Able Auction (1991) Ltd. on August 24, 1999. During the nine month
period ended September 30, 1999, we had revenues of $207,936 attributable to the
business operations of Able Auctions (1991) during the period from August 24,
1999 to September 30, 1999. Our operating expenses during the nine month period
ended September 30, 1999 were $684,628 and our net losses for the period were
$571,160. During the nine month period ended September 30, 1998, we were a shell
company with no revenues from operations, no expenses, and no net operating
losses.
We anticipate net operating losses to increase for the foreseeable future as a
result of our aggressive efforts to expand and diversify our auction business
and anticipated development costs related to our web site. We anticipate costs
related to consulting and management fees, salaries, rent, marketing and
promotion, and general overhead to increase during the remainder of 1999.
Year Ended December 31, 1998, Compared to Period From September 30, 1996
(Inception) to December 31, 1997
We were organized in September 30, 1996, and remained inactive until August 24,
1999, when we acquired all of the issued and outstanding shares of Able Auctions
(1991) Ltd.
During the 14 month period from our inception on September 30, 1996 to December
31, 1997, and the year-ended December 31, 1998, we had no revenues from
operations and no material expenses, assets or liabilities.
We incurred expenses and a net loss of $944 for the year ended December 31,
1998, compared to no expenses or losses for the prior year.
We anticipate that the level of spending will increase significantly in future
periods as we undertake activities related to implementing our business plan and
the development of our web site. In addition, we anticipate that our general and
administrative expenses will also significantly increase as a result of the
growth in our research, development, testing and business development programs.
The actual levels
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of research and development, administrative and general corporate expenditures
are dependent on the cash resources available to us.
Able Auctions (1991) Ltd.'s Results of Operations
Nine Month Period Ended September 30, 1999, Compared to the Twelve Month Period
Ended December 31, 1998
Able Auction (1991) had revenues of $1,648,283 for the nine month period ended
September 30, 1999, compared to revenues of $1,160,953 for the twelve month
period ended December 31, 1998. Revenues increased approximately 89.3% on an
annualized basis. We believe that this increase resulted from Able Auction
(1991)'s aggressive efforts to expand and diversify its auction business and
market its business to consignors and bidders.
Able Auction (1991) had net loss of $460,713 for the nine month period ended
September 30, 1999, compared to a modest profit of $66,648 for the twelve month
period ended December 31, 1998. Management attributes this loss to increased
expenses. Able Auction (1991) had operating expenses of $1,133,827 for the nine
month period ended September 30, 1999, compared to operating expenses of
$473,087 for the twelve month period ended December 31, 1998. Management fees
and salary expenses increased substantially from $163,101 for the twelve month
period ended December 31, 1998, to $587,280 for the nine month period ended
September 30, 1999, due primarily to its Internet business development efforts
and the restructuring of its management. Overall, operating expenses increased
approximately 140% for the nine month period ended September 30, 1999 compared
to the twelve month period ended December 31, 1998, on an annualized basis, due
primarily to increased promotional, salaries and administrative costs related to
Able Auction (1991)'s expansion efforts.
Able Auction (1991)'s gross profit margin declined from approximately 47% for
the twelve month ended December 31, 1998 to approximately 41% for the nine month
period ended September 30, 1999. Management attributes this decline to Able
Auction (1991)'s efforts to increase its auction revenue base by accepting lower
margin consignment sales during the nine month period ended September 30, 1999.
Able Auction (1991)'s overall operating expenses increased as a result of Able
Auction (1991)'s efforts to increase auction volume and revenues, its
promotional efforts to increase brand recognition and loyalty.
Liquidity and Capital Resources
From our inception in September 30, 1996 to August 24, 1999, the date we
acquired Able Auctions (1991) Ltd., we had no cash flow from either operations
or investing activities. On August 24, 1999, we raised $3,500,980 in capital
through a private placement, of which we paid a $789,338 loan payable in our
acquisition of Able Auctions (1991) Ltd. and $13,961 due to a shareholder.
Through September 20, 1999, we used cash of $421,834 in operating activities and
$1,131,372 in investing activities, including a $702,526 net investment in Able
Auctions (1991) Ltd. and $428,846 in capital assets related primarily to capital
investments in our auction business and Internet technologies.
Our cash position at September 30, 1999 was $1,164,680, and we had accounts
receivable of $308,987, inventory of $341,064 and prepaid expenses of $50,864.
We had outstanding accounts payable of $375,836, current obligations under
capital leases of $4,587 and loans payable of $150,000 at September
36
<PAGE>
30, 1999. Our working capital position was $1,335,172 on September 30, 1999. We
believe our working capital will be sufficient to satisfy our cash requirements
through to January 31, 2000.
Our operating budget for the period beginning October 1, 1999 through September
30, 2000 is approximately $15 million, of which approximately 50% is anticipated
to be used primarily for expenses related to the acquisition of new auction
facilities, expansion of our inventories, development and marketing of our web
site, and purchase of servers and operating systems. We cannot assure you that
our actual expenditures for this period will not exceed our estimated operating
budget. Actual expenditures will depend on a number of factors, some of which
are beyond our control, including, among other things, timing of our web site
launch, the revenues from our auction operations, the success of our
geographical expansion, the availability of financing on acceptable terms,
reliability of the assumptions of management in estimating cost and timing,
costs related to the development of our web site and technologies, economic
conditions and competitive factors in the auction industry. We estimate that we
will be required to raise approximately $14 million in additional capital during
the first half of 2000 to meet our anticipated cash needs through September 30,
2000. We intend to raise additional capital by issuing equity and/or debt
securities. See "Plan of Operation" and "Summary of Operating Budget."
In their independent auditor's report dated September 9, 1999, Davidson & Co.,
our auditors, expressed substantial doubt about our ability to continue as a
going concern due to our lack of working capital for our planned business
activities. We estimate that our minimum cash requirement for the period from
October 1, 1999 through September 30, 2000 is approximately $4 million,
primarily for expenses related to the operation of our auction business,
development and marketing of our web site, and purchase of servers and operating
systems. As such, we will need to raise at least $2.7 million during the first
half of 2000 to remove the going concern threat raised by our auditors.
We intend to meet our cash requirements through revenues generated from our
operations and private or public placements of our equity or debt. We have not
had any discussions related to raising additional financing, and have no
definitive plan to raise such financing.
Recent Financing
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
<TABLE>
Summary of Transactions
- --------------------------------------------------------------------------------------------------------------
Number of Total Price of
Shares Shares ($)
--------------- ------------------
<S> <C> <C>
Balance as of August 26, 1998 6,250,000 5,000
Issued for consulting and professional services 9,062,500 145,000
Issued in consideration for Able Auctions (1991) Ltd. 1,843,444 73,738
Issued for cash at $3.20 per share(1) 1,094,057 3,500,980
Issued as consideration for Ross Auctioneers & Appraisers Ltd. 60,000 168,000
==================== ====================
TOTAL 18,310,001(2) 3,892,718
==================== ====================
</TABLE>
(1) We issued units consisting of one common share and one-half of a
common share purchase warrant. Each full warrant is exercisable to
acquire an additional common share at $3.20 per share until August 24,
2000 and at $4.00 per share until August 24, 2001.
(2) As at October 22, 1999.
37
<PAGE>
Year 2000 Compliance
The Year 2000 issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were originally
programmed with a two-digit century (i.e., December 31, 1999 would appear as
12/31/99), assuming that all years would be part of the 20th century.
On January 1, 2000, systems with this programming will default to 01/01/1900
instead of 01/01/2000, and calculations using or reporting the date will not be
correct and errors will arise (the "Year 2000 issue"). To prevent this from
occurring, information systems need to be updated to ensure they recognize dates
during and after the year 2000.
The potential exists that we and our subsidiary are exposed to a risk that
certain aspects of their businesses will fail or suffer impairment as a result
of internally operated or externally contracted hardware or software systems and
services not being able to correctly "rollover" dates to the new century. The
risk stems from our reliance on certain hardware, software, and services to
carry out the daily operations of our proposed respective businesses.
The exposure may result from, amongst other things, the use of computers,
general software, and servers for office purposes and data storage; connections
to and use of the services of Internet service providers and telephone companies
for office purposes and customer and investor relations; the software underlying
the operation of the web site and the online business operations; and our
servers.
We have only been operating and developing our Internet business during the last
3 months and the office hardware, administrative general software, custom
developed special purpose software, servers, and services of Internet service
providers and telephone companies have been acquired during this period. To
date, Able Auctions (1991) Ltd. has spent approximately $50,000 replacing
computer hardware, software and other systems related to its auction business
for the purposes of Year 2000 compliance. Our management believes this aspect of
our business is Year 2000 compliant.
In the past several months we have consulted with suppliers of our hardware,
software, and services, and we believe their systems that we intend, directly or
indirectly, to use in our respective businesses are Year 2000 compliant. Our due
diligence also included an evaluation of supplier provided technology and the
implementation of new policies to require our suppliers to confirm that they
have disclosed and will correct Year 2000 compliance issues. We have received
oral or written confirmation from all of our third party providers that their
systems are Year 2000 compliant. Although we are relying primarily on systems,
which we have assurances from vendors to be Year 2000 compliant, we may have to
replace, upgrade, or re-program certain systems to ensure that all interfacing
technology will be Year 2000 compliant when running jointly.
In the event that we incur expenses associated with resolving Year 2000
compliance issues, we intend to expense the operating costs as they are incurred
and capitalize the capital costs as they are incurred. However, our purchases of
hardware and general and specific purpose software have been relatively recent,
and the more expensive of the hardware and general and specific software items
that we have purchased are covered under warranties that will extend over the
rollover period to January 1, 2000. As
38
<PAGE>
a result, we do not expect to incur any major operating or capital expenditures
that would have a material impact on our financial condition or results of
operations.
In order to protect against the possibility of any material disruption in our
operations as the result of the Year 2000 issue, we have taken the following
precautions:
o developed, initiated, and maintained procedures that ensure that the
information stored on the office computer hard drives are backed up on
a regular basis and stored safely;
o copies of the source code for the special purpose software are
maintained in secure offsite locations by the developers of the
software;
o installed a backup server system in the Vancouver office at the
Company's headquarters; and
o implemented a policy of acquiring name brand hardware and retained
experienced consultants on whose warranties we believe that we can
rely.
We do not believe the Year 2000 issue will have any material affect on our
business or that we will have any material expenditures related to problems
arising from the Year 2000 issue. We do not currently anticipate any disruption
in our operations as the result of the Year 2000 issue. Any failure of our
material systems, our vendors' material systems, or the Internet to be Year 2000
compliant may have a material adverse effect on our business and results of
operations. Under the worst case scenario, our management believes systems upon
which the Internet depends would fail and our web site would be inaccessible,
and our internal computer systems would fail. In the event of such worst case
scenario, our management has devised a contingency plan, pursuant to which we
will replace our internal systems and conduct physical auctions from our
existing locations without Internet broadcast. We anticipate that we will be
able to generate revenues from such operations until Internet access is
available. We believe the cost of implementing our contingency plan will be
approximately $50,000, primarily for costs related to replacing our systems.
Quantitative and Qualitative Disclosures About Market Risks
Our financial results are quantified in U.S. dollars and a majority of our
obligations and expenditures with respect to our operations are incurred in U.S.
dollars. A majority of our revenues are derived from the business operations of
our wholly-owned subsidiary, Able Auctions (1991) Ltd., whose primary business
operations are conducted in British Columbia, Canada and in Canadian dollars.
Although we do not believe we currently have any materially significant market
risks relating to our operations resulting from foreign exchange rates, if we
enter into financing or other business arrangements denominated in currency
other than the U.S. dollar or the Canadian dollar, variations in the exchange
rate may give rise to foreign exchange gains or losses that may be significant.
We currently have no material long-term debt obligations. We do not use
financial instruments for trading purposes and we are not a party to any
leverage derivatives. In the event we experience substantial growth in the
future, our business and results of operations may be materially effected by
changes in interest rates and certain other credit risk associated with its
operations.
Item 3. Description of Property.
We currently lease, through our subsidiary, our principal business office
comprising 15,000 square feet at 1963 Lougheed Highway, Coquitlam, British
Columbia, Canada, pursuant to a lease that expires on
39
<PAGE>
December 1, 2001. The monthly payments under the lease are $5,600 (Cdn$8,000)
plus goods and services tax. The lease may be terminated on one month's notice.
We have subleased approximately 22,000 square feet of warehouse and office space
at 8303 129th Street, Surrey, British Columbia, Canada, for the term commencing
January 1, 2000 to January 31, 2002 at the monthly rent of $7,350 (Cdn$10,500)
plus goods and services tax.
We lease our corporate office space at 3112 Boundary Road, Burnaby, British
Columbia, Canada, from Derango Resources Inc., a private company wholly owned by
our President, Abdul Ladha, and his wife, Hanifa Ladha. The term of the lease
commenced September 1, 1999 and continues until August 31, 2004. The annual
basic rent is approximately $20,000 (Cdn$27,991.12), payable in equal monthly
installments of approximately $1,667 (Cdn$2,332.60).
Neither we nor our subsidiary presently own or lease any other property or real
estate.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of October 22, 1999 by: (i)
each person (including any group) known to us to own more than 5% of any class
of our voting securities, (ii) each of our directors and named executive
officers, and (iii) directors and executive officers as a group. Unless
otherwise indicated, the shareholders listed possess sole voting and investment
power with respect to the shares shown.
<TABLE>
Title of Class Name and Address of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership Class(1)
- -------------------- ------------------------------------------------ -------------------------- --------------------
<S> <C> <C> <C>
Common Stock James Bailey 6,093,750 33.28%
10081 Royal Aberdeen Way
Orlando, Florida 32828
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Douglas McLeod 3,750,000 20.48%
688-6 Ishikawa
Fujisawa City, Kanagawa Japan
252-0815
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Dexton Technologies Corporation 1,843,444 10.07%
3112 Boundary Road,
Burnaby, British Columbia Canada
V5M 4A2
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Janus Industries Inc. 1,281,250 7.0%
#3 Henville Building, St. Charles
Nevis, West Indies
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Trans Mutual Growth, Inc 1,250,000 6.83%
P.O. Box 1159-GT
Buckingham Square, West Bay Road
Georgetown, Grand Cayman
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Silicon Capital Corp. 1,641,086(2) 8.70%(2)
Leeward Highway
Providenciales, Turks & Caicos Island
British West Indies
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Abdul Ladha 2,343,444(3) 11.63%(3)
1963 Lougheed Hgwy.
Coquitlam, B.C. Canada
V3N 4W1
- -------------------- ------------------------------------------------ -------------------------- --------------------
</TABLE>
40
<PAGE>
<TABLE>
- -------------------- ------------------------------------------------ -------------------------- --------------------
Title of Class Name and Address of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership Class(1)
- -------------------- ------------------------------------------------ -------------------------- --------------------
<S> <C> <C> <C>
Common Stock Barrett Sleeman 50,000(4) 0.26%(4)
1963 Lougheed Hgwy.
Coquitlam, B.C. Canada
V3N 4W1
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Jeremy Dodd 200,000(4) 1.04%(4)
1963 Lougheed Hgwy.
Coquitlam, B.C. Canada
V3N 4W1
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Richard K. Miller 10,000(4) 0.05%(4)
1963 Lougheed Hgwy.
Coquitlam, B.C. Canada
V3N 4W1
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Jerry Bleet 16,000(5) 0.08%(5)
1963 Lougheed Hgwy.
Coquitlam, B.C. Canada
V3N 4W1
- -------------------- ------------------------------------------------ -------------------------- --------------------
Common Stock Officers and Directors as a Group 2,619,444(6) 13.59%(6)
- -------------------- ------------------------------------------------ -------------------------- --------------------
</TABLE>
(1) Based on an aggregate 18,310,001 shares issued and outstanding as of
October 22, 1999.
(2) Includes 547,029 shares of common stock that may be acquired pursuant to
the exercise of 547,029 share purchase warrants within 60 days of October
22, 1999.
(3) Mr. Ladha is a controlling shareholder of Dexton Technologies Corporation,
which owns 1,843,444 shares of our common stock. Mr. Ladha is the
beneficial owner of such shares.
(4) Consisting of shares of common stock that may be acquired on the exercise
of incentive stock options, at an exercise price of $3.20 per share until
October 14, 2004.
(5) Consisting of 16,000 shares beneficially owned by Mr. Bleet, including
10,000 shares which may be immediately acquired upon the exercise of
incentive stock options.
(6) Consisting of 2,343,444 shares beneficially owned by Abdul Ladha, our
President, which includes options immediately exercisable to acquire
770,000 and 1,843,444 shares owned by Dexton Technologies Corporation, a
company controlled by Mr. Ladha; 200,000 shares which may be immediately
acquired by Jeremy Dodd, the Vice-President of Operations of our
subsidiary, upon the exercise of incentive stock options; 50,000 shares
which may be immediately acquired by Barrett Sleeman, one of our directors,
upon the exercise of incentive stock options; 10,000 shares which may be
immediately acquired by Richard K. Miller, our Vice-President, Finance and
Corporate Development, upon the exercise of incentive stock options; and
16,000 shares beneficially owned by Jerry Bleet, our Vice-President,
Merchandising & Logistics, of which 10,000 shares may be immediately
acquired upon the exercise of incentive stock options. See "Executive
Compensation."
Security Ownership of Management
We are not aware of any arrangement that might result in a change in control in
the future.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles and By-laws.
Our next regular meeting will be held on January 21, 2000. Our executive
officers are appointed by and serve at the pleasure of our Board of Directors.
As at October 22, 1999, the following persons were our directors, executive
officers and/or promoters:
41
<PAGE>
<TABLE>
- ----------------------------------------- ------------------ --------------------------------------------------
<S> <C> <C>
Name and present office held Director, officer Principal occupation and if not at present
or promoter an elected director, occupation during the
since preceding five years
- ----------------------------------------- ------------------ --------------------------------------------------
Abdul Ladha, Director, President, and CEO August 24, 1999 President, Dexton Technologies Corporation and
Able Auctions (1991) Ltd.
Barrett Sleeman, Director August 24, 1999 President, Omicron Technologies Inc.; director of
a number of publicly traded companies
Jeremy Dodd, Vice-President of Operations August 24, 1999 Former owner and operator and current employee and
of Able Auctions (1991) officer of Able Auctions (1991) Ltd.
Richard K. Miller, Vice-President, September 15, 1999 Business and marketing professional; Vice-President
Finance and Corporate Development of Orion Technologies Inc. from 1997 to 1999
Jerry Bleet, Vice-President, Merchandising September 15, 1999 Retail executive; Vice-President, Retail Stores,
& Logistics of London Drugs from 1977 to 1996
Douglas McLeod, Promoter(1) March 1999 Internet Consultant - Director Pawnbroker.com,
Inc. from May 1999 to October 1999; Blue Zone
Entertainment Inc. from May 1999 to present;
President of Eriko Internet, Inc. from April 1999
to October 1999; President, Secretary and
Treasurer of Ableauctions.com, Inc. from July 1999
to August 1999; independent consultant from 1995
to present.
</TABLE>
(1) Douglas McLeod served as an officer and director of Ableauctions.com, Inc.
from July 1999 to August 1999.
The following is a brief biography of each of the Company's directors and
executive officers:
Abdul Ladha, Director, President, and CEO - Age 36
Abdul Ladha, our President and CEO and a Director since August 24, 1997, has
served as President of Able Auctions (1991) since April 1, 1998. Mr. Ladha holds
an honors degree in Electrical Engineering and Mathematics from the University
of British Columbia. In 1985, after completing his academic term at UBC and the
Tri-University Meson Facility (TRIUMF), a nuclear physics research laboratory,
he founded Dexton Enterprises Inc., the operating subsidiary of Dexton
Technologies Corporation, a company listed on the Vancouver Stock Exchange. In
1997, Dexton Technologies acquired Able Auctions (1991) Ltd., BDL's Software
Alley Ltd., and ANO Office Automation. Dexton Technologies is engaged in the
business of the marketing and sale of personal computer hardware and network
systems to corporate and retail customers as well as computer training and
after-sales upgrade and support services.
Mr. Ladha is the Executive Director of CITA - The Canadian Institute for
Technological Advancement, a nonprofit organization dedicated to developing
Canada's technological entrepreneurs sponsored by the UBC, Simon Fraser
University, The Vancouver Board of Trade, the World Trade Centre, Ernst & Young,
and some 60 corporations and institutions.
42
<PAGE>
Barrett E.G. Sleeman, P.Eng., Director - Age 59
Mr. Sleeman, a director of the company since August 24, 1999, is a professional
engineer and the President. From May 1988 to present, Mr. Sleeman has served as
President and a director of Omicron Technologies Inc., whose focus is on the
acquisition, research and development, and marketing of leading edge
technologies for the aerospace, telecommunications, defense, and consumer
electronics industries, as well as Internet-based business concepts, since May
1988. Mr. Sleeman also serves as a director of the following publicly traded
companies: Dexton Technologies Corporation (since April 1997); Industrial
Mineral Park Mining Corporation, a graphite property development company (since
February 1999); and Java Group Inc., currently an oil and gas company (since
November 1997). Mr. Sleeman was also President (October 1996 to October 1997)
and a director (August 1996 to October 1997) of White Hawk Ventures Inc., and
President (August 1995 to April 1997) and a director (March 1995 to January
1998) of Redex Gold Inc., both mining exploration companies.
Jeremy Dodd, Vice-President of Operations - Age 32
Jeremy Dodd, our Secretary and Treasurer since September 15, 1999, began his
career with Able Auctions Liquidators Limited in 1986. Five years later, he
bought the company and formed Able Auctions (1991) Ltd., where he served as
President from November 1993 to April 1998 and Secretary and a director from
July 1991 to April 1998. In March 1998, he sold Able Auctions (1991) Ltd. to
Dexton Technologies Corporation and has directed Able Auctions (1991)'s
operations and its transition to becoming an Internet broadcaster of auctions.
Mr. Dodd was appointed Vice President of Operations of Able Auctions (1999) Ltd.
on August 24, 1999. Mr. Dodd is an auctioneer and bailiff by trade and has
conducted over 2,000 live auctions from Montreal to San Francisco.
Richard K. Miller, Vice-President, Finance and Corporate Development - Age 40
Richard K. Miller, our Vice President of Finance and Corporate Development since
September 15, 1999, has a Bachelor of Commerce from the University of Alberta
and a Master of Business Administration from the Ivey Business School. He is an
experienced business and marketing professional with over 16 years experience in
high technology, e-commerce and payment technology, primarily working with
emerging growth companies.
Mr. Miller was a Senior Account Manager with Rydex Industries Corporation, the
world's leading marine communications software vendor, from 1994 to 1996, and
served as the Vice President, Marketing & Product Management, of Orion
Technologies Inc., an international e-commerce company, from 1997 to 1999.
Jerry Bleet, Vice-President, Merchandising & Logistics - Age 55
Jerry Bleet, our Vice-President of Merchandising and Logistics, received a
Bachelor of Commerce degree from the University of Manitoba. For over 30 years,
Mr. Bleet has been a retail executive with major Canadian retailers and
department stores.
Mr. Bleet served as Vice President, Retail Stores of London Drugs for 18 years
from 1977 to 1996. Mr. Bleet was a key member of the executive management team
that expanded the company from 10 stores
43
<PAGE>
in 1977 to 49 stores with over $900 million in annual revenues. Since leaving
London Drugs in 1996, Mr. Bleet has been an independent consultant to retail
organizations.
Douglas McLeod, Promoter - Age 39
Douglas McLeod served as our President from June 1999 to August 1999, and as
Secretary and a director from June 1999 to September 1999. Mr. McLeod has spent
the last five years as an Internet consultant and is the President, Founder and
Promoter of Eriko Internet Inc. Mr. McLeod attended York University in Toronto,
Ontario from 1992 to 1995 under the University's Bachelor of Arts program. Mr.
McLeod also serves as a director of Ableauctions.com Inc., an Internet provider
of auctions services for retail auction houses, since May 1999 and a director of
Blue Zone International, Inc., a provider of high speed Internet services for
businesses since June 1999.
Other Information
Members of the Board of Directors are elected by our shareholders. Our Board of
Directors meets periodically to review significant developments affecting our
company and to act on matters requiring Board approval. Although the Board of
Directors delegates many matters to others, it reserves certain powers and
functions to itself. This committee is directed to review the scope, cost, and
results of the independent audit of our books and records, the results of the
annual audit with management, and the adequacy of our accounting, financial, and
operating controls; to recommend annually to the Board of Directors the
selection of the independent auditors; to consider proposals made by the
Registrant's independent auditors for consulting work; and to report to the
Board of Directors, when so requested, on any accounting or financial matters.
None of our directors or executive officers is a party to any arrangement or
understanding with any other person pursuant to which that person was elected as
a director or officer of the company.
None of our directors or executive officers has any family relationship with any
other director or officer.
None of our officers or directors have been, in the past five years,: (1)
involved in bankruptcy proceedings; (2) subject to criminal proceedings or
convicted of a criminal act; (3) subject to any order, judgment or decree
entered by any court limiting in any way his or her involvement in any type of
business, securities or banking activities; or (4) subject to any order for
violation of federal or state securities laws or commodities laws.
Item 6. Executive Compensation.
The following table contains information concerning the annual compensation and
long-term compensation to named executive officers during the last three fiscal
years ended December 31, 1998, 1997, and 1996 and the fiscal year ending
December 31, 1999.
44
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long-Term Compensation
------------------------------ ------------------------------------
Awards Pay-outs
------------------------ ---------
Name and Principal Year Salary Bonus ($) Other Restricted Securities LTIP All Other
Position Ended(1) ($) Annual Stock Underlying Payouts Compen
Compen Award(s) Options/ sation ($)
sation($) ($) SARs (#)
- -------------------- --------- -------- --------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DOUGLAS McLEOD(2) 1999 Nil Nil Nil Nil Nil/Nil Nil Nil
President
ABDUL LADHA(3) 1999 Nil Nil Nil Nil 500,000/Nil Nil Nil
President
JEREMY DODD(4) 1999 55,555 66,666 Nil Nil 200,000/Nil Nil Nil
Vice-President of
Operations of Able
Auctions (1991)
</TABLE>
(1) Year ended December 31.
(2) President of the Company from June 22, 1999 to August 24, 1999.
(3) President of Able Auctions (1991) Ltd. from April 1, 1998 to present.
President of the Company from August 24, 1999 to present.
(4) Founder and President of Able Auctions to April 1, 1998. Currently, an
employee and Vice-President of Operations of Able Auctions (1991) Ltd. and
Secretary and Treasurer of the Company from August 24, 1999 to present.
Our directors do not receive any stated salary for their services as directors
or members of committees of the Board of Directors, but by resolution of the
Board, a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Directors may also serve the Company in other capacities as an
officer, agent, or otherwise, and may receive compensation for their services in
that other capacity.
Employment and Consulting Agreements
Under an employment agreement dated April 1, 1998, Able Auctions (1991),
employed Jeremy Dodd, our Secretary and Treasurer, to manage its auction
operation and to serve as an officer of Able Auctions (1991). Able Auctions
(1991) agreed to pay Mr. Dodd a monthly fee of $3,000, increasing by 2.4% on
each anniversary of the agreement. This employment agreement was replaced
effective September 1, 1999 by a verbal agreement whereby Able Auctions employs
Mr. Dodd for an annual salary of $105,000.
We currently have no other employment, consulting, or other service contracts or
arrangements between us or our subsidiary and our directors and/or executive
officers.
45
<PAGE>
Under a consulting agreement dated August 24, 1999, Able Auctions (1991) Ltd.
has engaged Dexton Technologies Corporation to provide consulting services for
one year in connection with the development of Able Auctions' business and
Internet strategy. In consideration of Dexton's services, Able Auctions has paid
to Dexton a fee of $240,000. Abdul Ladha, a director, President, and Chief
Executive Officer of the Company, and Barrett Sleeman, a director of the
Company, are also directors and officers of Dexton Technologies Corporation. Mr.
Ladha is also the controlling shareholder of Dexton. See "Certain Relationships
and Related Transactions - Consulting Agreement with Dexton Technologies
Corporation."
We have engaged North Star Communications, Inc. to provide investor relations
services pursuant to a six month consulting agreement dated September 15, 1999.
We agreed to pay North Star $40,000 per month plus out-of-pocket expenses for
the term of the agreement. We have advanced to North Star $160,000 towards the
out-of-pocket expenses.
In October, 1999, we engaged European Investor Services Ltd. ("EIS") to provide
invest relations and financial media relations services (primarily in Europe)
for a six-month term in consideration of $5,000 per month plus reimbursement of
certain out-of-pocket expenses. We also agreed to pay EIS the daily fee of
$4,000 for each European presentation to qualified investors conducted on our
behalf.
Stock Options
No stock options/SARs were granted to or exercised by named executive officers
during the fiscal year ended December 31, 1998.
See "Executive Compensation - Stock Option Plan" for details of stock options
granted to the Company's directors, executive officers, and consultants during
the current fiscal year ended December 31, 1999.
Stock Option Plan
On October 14, 1999, a majority of our shareholders approved the 1999 Stock
Option Plan (the "Option Plan") as approved by the Board of Directors on October
14, 1999. The Option Plan provides for the grant of incentive and non-qualified
options to purchase up to three million (3,000,000) shares of our common stock
to our officers, directors, employees and other qualified persons as the Plan
Administrator (which currently is the Board of Directors) may select. The Plan
is intended to help attract and retain key Company employees and such other
persons as the Plan Administrator may select and to give such persons an equity
incentive to achieve the objectives of our shareholders.
Incentive stock options may be granted to any individual who, at the time the
option is granted, is an employee of the Company or any related corporation.
Non-qualified stock options may be granted to employees and to such other
persons as the Plan Administrator may select. The Plan Administrator fixes the
exercise price for options in the exercise of its sole discretion, subject to
certain minimum exercise prices in the case of Incentive Stock Options. The
exercise price may be paid in cash, certified check or cashier's check. Options
will not be exercisable until they vest according to a vesting schedule
specified by the Plan Administrator at the time of grant of the option.
Options are non-transferable except by will or the laws of descent and
distribution. With certain exceptions, vested but unexercised options terminate
upon the earlier of: (i) the expiration of the option
46
<PAGE>
term specified by the Plan Administrator at the date of grant (generally ten
years; or, with respect to Incentive Stock options granted to greater-than ten
percent shareholders, a maximum of five years); or (ii) the date of an employee
optionee's termination of employment or contractual relationship with the
Company or any related corporation for cause; (iii) the expiration of three
months from the date of an optionee's termination of employment or contractual
relationship with the Company or any related corporation for any reason, other
than cause, death or disability; and (iv) the expiration of one year from the
date of death of an optionee or cessation of an optionee's employment or
contractual relationship by death or disability. Unless accelerated in
accordance with the Plan, unvested options terminate immediately upon
termination of employment of the optionee by the Company for any reason
whatsoever, including death or disability.
On October 14, 1999, we granted stock options to the following officers,
directors, employees, consultants and other service providers:
<TABLE>
Name of Optionee and Position Number of Options Vesting Schedule
- ----------------------------- ----------------- ----------------
<S> <C> <C>
Abdul Ladha, President & CEO 500,000 100% on grant
Barrett Sleeman, Director 50,000 100% on grant date
Jeremy Dodd, Vice-President of 200,000 25% on grant date and 25% each year
Operations of Subsidiary thereafter
Richard K. Miller, Vice-President, 10,000 100% on grant date
Finance and Corporate Development
Jerry Bleet, Vice-President, Marketing 10,000 100% on grant date
and Logistics
Richie Smallwood, Employee of Able 15,000 one-third on grant date and
Auctions (1991) Ltd. one-third each year thereafter
Linda Wingrove, Employee of Able 5,000 100% on grant date
Auctions (1991) Ltd.
Fred Ramos, Employee of Able Auctions (1991) 5,000 100% on grant date
(1991) Ltd.
Jabeel Janmohamed, Employee of Able 5,000 100% on grant date
Auctions (1991) Ltd.
Paul Piotrowski, Employee of Able 5,000 100% on grant date
Auctions (1991) Ltd.
Matt Seeney, Employee of Able 5,000 100% on grant date
Auctions (1991) Ltd.
Bill Johnson, Employee of Able 2,500 100% on grant date
Auctions (1991) Ltd.
Total 812,500
</TABLE>
These options are exercisable at the price of $3.20 per share until October 14,
2004 or one month after the optionee ceases to serve the Company.
47
<PAGE>
No share purchase options were exercised by our officers, directors and
employees up to October 22, 1999 of the current fiscal year ended December 31,
1999.
Item 7. Certain Relationships and Related Transactions.
Employment Agreements
See "Executive Compensation - Employment and Consulting Agreements" for
particulars regarding Mr. Dodd's employment agreement.
Contribution Agreement
On July 15, 1999, our Board of Directors agreed to accept the contribution from
Douglas McLeod, a former director of our company, of 8,000,000 shares of common
stock in consideration of $100. Mr. McLeod contributed these shares to the
Company to facilitate our acquisition of Able Auctions (1991) and to improve our
ability to raise capital. The shares were returned to our treasury effective
July 19, 1999, and the Company's total issued capital was thereby reduced by
8,000,000 shares.
Acquisition of Able Auctions (1991)
On August 24, 1999, we acquired all the issued and outstanding common shares of
Able Auctions (1991) Ltd. from Dexton Technologies Corporation in consideration
of the payment of $1,027,333 cash and the issuance of 1,843,444 shares of our
common stock, which represents 10.07% of the Company's issued capital as of
October 22, 1999. Dexton is a Canadian corporation that is a reporting company
under British Columbia securities law and whose common shares trade on the
Vancouver Stock Exchange. Abdul Ladha, our President, is also the President and
controlling shareholder of Dexton. Dexton acquired all the issued and
outstanding common shares of Able (1991) from Jeremy Dodd, Vice-President of
Operations of Able (1991), on April 1, 1998 in consideration of the purchase
price of Cdn$275,000. See "Description of Business - Our Acquisition of Able
(1991)" herein for more particulars.
Consulting Agreement with Dexton Technologies Corporation
Effective August 24, 1999, Able Auctions (1991) entered into a consulting
agreement with Dexton Technologies Corporation, which is owned by Abdul Ladha,
our President and Chief Executive Officer. Pursuant to the consulting agreement,
Dexton agreed to provide Able Auctions (1991) with consulting services with
respect to:
o Management and administration of our auction operations;
o Management and administration of our electronic commerce operations;
o Marketing strategies and program administration;
o Developing banner advertising programs, URL link arrangements and
other revenue generation opportunities;
48
<PAGE>
o Identifying potential strategic business opportunities; and
o Strategic corporate development and structuring.
Able Auctions (1991) agreed to pay Dexton consulting fees totaling $240,000 in
consideration for such services. We paid this fee in full on September 15, 1999.
The consulting agreement terminates on August 24, 2000.
Certain Transactions with Dexton
In connection with our acquisition of Able Auctions (1991), we agreed to repay
Dexton approximately $385,000 in liabilities owed by Able Auctions (1991) to
Dexton related to expenses paid by Dexton on behalf of Able Auctions (1991),
computer hardware and software, and other liabilities. We also agreed to repay
Dexton approximately $56,000 in other expenses paid by Dexton on behalf of Able
Auctions (1991), including $5,600 in legal fees related to trademark services,
$3,500 paid to Allaire Corporation for web site development, $1,400 for
insurance expenses, $12,000 for web site development work performed by Dexton
and $32,200 for computer server equipment.
Since our acquisition of Able Auctions (1991), we purchased approximately
$385,000 in computer hardware and software from Dexton, including approximately
$335,000 in computer hardware and servers and $50,000 in computer software.
Dexton charged us 15% above invoice price for these purchases.
Lease Agreement
We lease our corporate office space from Derango Resources Inc., a private
company wholly owned by our President and CEO, Abdul Ladha, and his wife, Hanifa
Ladha. See "Properties."
Management Fee Paid to Jeremy Dodd
In connection with our acquisition of Able Auctions (1991), we agreed to pay
Jeremy Dodd, our Secretary and Treasurer, a bonus of approximately $70,000 owed
by Able Auctions (1991) to Mr. Dodd for services provided prior to August 24,
1999. Dexton paid this bonus on behalf of Able Auctions (1991) to Mr. Dodd in
April 1999. We have not yet reimbursed Dexton.
We believe that the relationships described above are no less favorable to us
than the terms we would otherwise negotiate with independent third parties at
arm's length.
Except for relationships and transactions that we have disclosed in this and
other sections of this registration statement such as (a) the ownership of our
securities and (b) the compensation described herein, to our knowledge, none of
our directors, executive officers, holders of 10% of our outstanding shares of
common stock, or any associate or affiliate of such person, have had a material
interest, direct or indirect, since our inception or in any proposed transaction
which may materially affect us.
Item 8. Description of Securities.
Our authorized capital consists of 50,000,000 common shares with a par value of
$0.001 per share. At October 22, 1999, there were 18,310,001 shares of common
stock issued and outstanding.
49
<PAGE>
All shares of common stock are of the same class and have the same rights,
preferences and limitations. Holders of shares of common stock are entitled to
receive dividends in cash, property, or shares when and if dividends are
declared by our Board of Directors out of funds legally available therefor.
There are no limitations on the payment of dividends. A quorum for a general
meeting of shareholders is one shareholder entitled to attend and vote at the
meeting who may be represented by proxy and other proper authority, holding at
least a majority of the outstanding shares of common stock. Holders of shares of
common stock are entitled to one vote per share of common stock. Upon any
liquidation, dissolution, or winding up of our business, if any, after payment
or provision for payment of all of our debts, obligations, or liabilities, the
proceeds will be distributed to the holders of shares of common stock. There are
no pre-emptive rights, subscription rights, conversion rights, and redemption
provisions relating to the shares of common stock and none of the shares of
common stock carry any liability for further calls.
The rights of holders of shares of common stock may not be modified other than
by vote of majority of the shares of common stock voting on the modification.
Because a quorum for a general meeting of shareholders can exist with one
shareholder (or proxyholder) personally present, the rights of holders of shares
of common stock may be modified by less than a majority of the issued shares of
common stock.
50
<PAGE>
PART II
Item 1. Market Price of and Dividends on Registrant's Common Equity and
Related Stockholder Matters.
On November 27, 1998, our common stock was approved for trading on the OTCBB
under the symbol "JBFL". There was no material market for our common shares
prior to March 31, 1999. Our trading symbol was changed to "ABLC" effective July
21, 1999. The following table sets forth, for the periods indicated, the range
of the high and low bid quotations (as reported by NASD). The bid quotations set
forth below reflect inter-dealer prices, without retail mark-up, mark-down, or
commission, and may not reflect actual transactions:
OTCBB
1999 High Low Volume
----------------- --------------- ------------- ------------
2nd Quarter(1) N/A N/A N/A
----------------- --------------- ------------- ------------
3rd Quarter(2) 16 1 7/8 7,046,525
----------------- --------------- ------------- ------------
(1) No trades of our shares took place on the OTCBB during the second quarter.
(2) Period from July 1, 1999 to October 22, 1999. No trades of our shares took
place in the third quarter until July 21, 1999.
On October 20, 1999, the last reported sale price of our common stock reported
by the NASD was $2.00. As of October 22, 1999, there were 16 holders of record
of our common stock.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements, and other factors deemed relevant by our Board of Directors.
Item 2. Legal Proceedings.
Four actions have been brought in Surrey, British Columbia Small Claims Court
against Able Auctions (1991) Ltd. by Sangat S. Rehal, Surinder K. Rehal, Paulie
Bhambra and Nikki Panasara, each in the amount of approximately $7,000
(Cdn$10,000) for alleged conversion of personal property by Able Auctions. These
actions have not yet been set for trial. We believe these claims are without
merit and we intend to vigorously defend against them.
Other than the foregoing, to the best of our knowledge, we are not subject to
any active or pending legal proceedings or claims against us or any of our
properties. However, from time to time, we may become subject to claims and
litigation generally associated with any business venture.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On July 31, 1999, we replaced Barry L. Friedman as our auditor with Davidson and
Company, Chartered Accountants, of Vancouver, British Columbia, Canada.
51
<PAGE>
Barry L. Friedman, P.C. has not been associated with any of our financial
statements subsequent to the audit report by Barry L. Friedman, P.C. dated
November 10, 1998. The change in independent auditors was effective for the
fiscal year ended December 31, 1998, was approved by our Board of Directors, and
was not due to any disagreement between the Company and Barry L. Friedman, P.C.
on any matter of accounting principles or practices, financial statement
disclosures, or auditing scope or procedure. Our financial statements for the
fiscal year ended December 31, 1998 contain no adverse opinion or disclaimer of
opinion and have not been qualified or modified as to uncertainty, audit scope,
or accounting opinion.
During the period prior to and preceding the change in independent auditors,
there were no disagreements with Barry L. Friedman, P.C. on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Barry L. Friedman, P.C. would have caused them to make reference thereto in
their report on our financial statements for the period. We have authorized
Barry L. Friedman, P.C. to respond fully to any subject matter of any potential
disagreement with respect to our financial statements.
We have not been advised by Barry L. Friedman, P.C. or our current auditors,
Davidson and Company, Chartered Accountants, of any of the following:
(a) lack of internal controls necessary for us to develop reliable financial
statements;
(b) any information that has come to the attention of our auditors that has led
them to no longer be able to rely on management's representations or that
has made them unwilling to be associated with the financial statements
prepared by management;
(c) any need to expand significantly the scope of our auditors' audit or
information that has come to our auditors' attention during the two
financial years prior to and preceding the change in our independent
auditors that, if further investigated, would:
(i) materially impact the fairness or reliability of the previously
issued audit report or the financial statements issued or
covering that period; or
(ii) cause our auditors to become unwilling to rely on management's
representations or that has made them unwilling to be associated
with our financial statements, or due to the replacement of Barry
L. Friedman, P.C. or any other reason, our auditors did not so
expand the scope of the audit or conduct such further
investigation; and
(d) any information that has come to the attention of our auditors that has led
them to conclude that such information materially impacts the fairness or
reliability of the audit reports or the financial statements issued
covering the two financial years prior to and preceding the change in our
independent auditors (including information that, unless resolved, to the
satisfaction of such auditors, would prevent it from rendering an
unqualified audit report on those financial statements) and due to the
replacement of Barry L. Friedman, P.C. or any other reason, any issue has
not been resolved to such auditors' satisfaction prior to Barry L.
Friedman, P.C. replacement.
52
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
Pursuant to a resolution of the Board of Directors dated September 30, 1996, we
initially issued 6,250,000 (post-share splits/consolidation)1 shares of common
stock to an officer of the Company and other related persons at par value. The
issuance of those shares was exempt from registration under the provisions of
Section 4(2) of the Securities Act of 1933, as amended. The issuance of the
shares did not involve a public offering.
In March 1999, we issued 9,062,500 (post-share splits/consolidation)1 shares of
common stock to various individuals in payment of consulting and professional
services. The issuance of the shares was exempt from registration under the
provisions of Section 4(2) of the Securities Act of 1933, as amended. The
issuance of the shares did not involve a public offering.
Pursuant to a resolution of the Board of Directors dated July 20, 1999, we
issued 1,094,057 (post-share splits/consolidation)1 units at the price of $3.20
per unit to raise $3,500,980. Each unit consisted of one share of our common
stock and one-half non-transferable share purchase warrant. The offering was
fully subscribed and the shares and warrants were issued on August 24, 1999 to a
private investor. The offering was not underwritten. The sale was exempt from
registration in reliance upon Rule 506 under Regulation D promulgated under the
Securities Act of 1933, as amended. The issuance of the shares did not involve a
public offering.
On August 24, 1999, we acquired all of the issued and outstanding shares of
common stock of Able Auctions (1991) Ltd., a Canadian corporation that
specializes in auctioning and liquidating a broad range of high quality
products, from Dexton Technologies Corporation, the sole shareholder of Able
Auctions (1991) Ltd. In consideration of the acquisition, we issued 1,843,444
(post-consolidation)1 shares of our common stock to Dexton pursuant to an
exemption from registration pursuant to Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended. The issuance of the shares did not
involve a public offering.
On October 18, 1999, the Company issued 60,000 shares of its common stock at the
deemed price of $2.80 per share to Ross Auctioneers & Appraisers Ltd., a
privately owned Canadian corporation incorporated under the laws of British
Columbia. The Company issued the shares to Ross Auctioneers, a non-U.S. person,
under an asset purchase agreement dated September 20, 1999. We issued the shares
pursuant to an exemption from registration pursuant to Regulation S promulgated
under the Securities Act of 1933, as amended. See "Description of Business - Our
Acquisition of Able (1991)." No offer or sale was made in the United States and
the issuance of the shares did not involve a public offering.
- -------------
1 On September 2, 1998, we amended our Articles of Incorporation to effect a
split of our issued and outstanding share capital on a 200 shares for one share
basis. Prior to the share split, we had 5,000 shares of issued and outstanding
shares of common stock, with a par value of $1.00 and after giving effect to the
share split, such shares were automatically reclassified and changed into
1,000,000 fully-paid and non-assessable shares of common stock, with a par value
of $0.001.
On July 20, 1999 we distributed a dividend of four shares for every share held
by shareholders of record on July 20, 1999. After the dividend, we had
12,125,000 shares of common stock outstanding.
On August 9, 1999 we effected a five shares for one share forward split of our
common shares increasing the total issued share capital from 12,250,000 to
61,250,000.
In September 1999, we amended our Articles of Incorporation to reduce our
authorized capital to 50,000,000 common shares and consolidate our issued and
outstanding common shares by one new share for four old shares. Following the
consolidation, the issued and outstanding common shares of the company was
18,250,000 shares. See "History of Our Corporation."
53
<PAGE>
Item 5. Indemnification of Directors and Officers.
Our Bylaws require us to indemnify to the fullest extent permitted by law each
person that is empowered by law to indemnify. Our Articles of Incorporation
require us to indemnify to the fullest extent permitted by Florida law, each
person that we have the power to indemnify.
Florida law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit, or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if such directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Florida law (for unlawful payment
of dividends, or unlawful stock purchases or redemptions) or (4) a transaction
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted Florida law.
54
<PAGE>
PART F/S
The following financial statements and related schedules are included in this
Item:
Unaudited Financial Statements for the Nine Month Period Ended September 30,
1999 and 1998, consisting of the following:
Unaudited Consolidated Balance Sheets as at September 30, 1999 and 1998;
Unaudited Consolidated Statements of Operations for the nine month period
ended September 30, 1999 and 1998;
Unaudited Consolidated Statements of Cash Flows for the nine month period
ended September 30, 1999 and 1998; and
Notes to Unaudited Consolidated Financial Statements.
Audited Financial Statements for the Fiscal Years Ended December 31, 1998 and
1997, consisting of the following:
Auditors' Reports;
Consolidated Balance Sheets as at December 31, 1998 and 1997;
Consolidated Statements of Operations for the fiscal periods beginning from
inception (September 30, 1996) to December 31, 1996 and for the fiscal
years ended December 31, 1997 and 1998;
Consolidated Statements of Cash Flows for the fiscal periods beginning from
inception (September 30, 1996) to December 31, 1996 and for the fiscal
years ended December 31, 1997 and 1998; and
Notes to Consolidated Financial Statements.
Unaudited Pro Forma Consolidated Financial Statement for the nine month period
ended September 30, 1999 and year ended December 31, 1998.
55
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
September 30, December 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,164,680 $ -
Accounts receivable 308,987 -
Inventory 341,064 -
Prepaid expenses 50,864 -
-------------- ------------
1,865,595 -
Capital assets (Note 6) 1,116,661 -
Trademark 12,613 -
Website development costs (Note 7) 80,123 -
Goodwill (Note 8) 667,127 -
-------------- ------------
$ 3,742,119 $ -
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 375,836 $ 944
Obligations under capital lease 4,587 -
Loan payable 50,000
Loan payable (Note 9) 100,000 -
-------------- ------------
530,423 944
Obligations under capital lease 43,877 -
-------------- ------------
574,300 944
-------------- ------------
Stockholders' equity (Note 1)
Capital stock
Authorized
December 31, 1998 - 62,500,000 common shares with a par value of $0.001
September 30, 1999 - 62,500,000 common shares with a par value of $0.001
Issued and outstanding
December 31, 1998 - 6,250,000 common shares with a par value of $0.001
September 30, 1999 - 18,250,000 common shares with a par value of $0.001 18,250 6,250
Additional paid-in capital 3,707,718 -
Deficit accumulated during the development stage (578,354) (7,194)
Accumulated other comprehensive income (Note 11) 20,205 -
-------------- ------------
3,167,819 (944)
-------------- ------------
$ 3,742,119 $ -
==============================================================================================================================
</TABLE>
Subsequent events (Note 13) On behalf of the Board:
Director
- -------------------------------------------
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Cumulative
Amounts
from
Incorporation
on Three Month Three Month Nine Month Nine Month
September 30, Period Period Period Period
1996 to Ended Ended Ended Ended
September 30, September 30, September 30, September 30, September 30,
1999 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 207,936 $ 207,936 $ - $ 207,936 $ -
COST OF SALES (123,875) (123,875) - (123,875) -
-------------- ------------- ------------ -------------- -------------
84,061 84,061 - 84,061 -
-------------- ------------- ------------ -------------- -------------
EXPENSES
Advertising 7,843 7,843 - 7,843 -
Auction expenses 1,801 1,801 - 1,801 -
Auto 652 652 - 652 -
Consulting 162,244 17,244 - 162,244 -
Freight and brokerage 16,123 16,123 - 16,123 -
Insurance 2,622 2,622 - 2,622 -
Interest and bank charges 4,842 4,842 - 4,842 -
Management fees 241,926 241,926 - 241,926 -
Office and miscellaneous 24,078 18,134 - 18,134 -
Professional fees 43,000 43,000 - 43,000 -
Rent and utilities 17,356 17,356 - 17,356 -
Repairs and maintenance 1,814 1,814 - 1,814 -
Salaries and benefits 51,621 51,621 - 51,621 -
Shareholder information 2,404 2,404 - 2,404 -
Telephone 3,246 3,246 - 3,246 -
Transfer agent 2,476 2,476 - 2,825 -
Travel and entertainment 106,175 106,175 - 106,175 -
-------------- ------------- ------------ -------------- -------------
690,223 539,279 - 684,628 -
-------------- ------------- ------------ -------------- -------------
Loss before other items (606,162) (455,218) - (600,567) -
-------------- ------------- ------------ -------------- -------------
OTHER ITEMS
Interest income (11,115) (11,115) - (11,115) -
Foreign exchange gain (18,292) (18,292) - (18,292) -
-------------- ------------- ------------ -------------- -------------
(29,407) (29,407) - (29,407) -
-------------- ------------- ------------ -------------- -------------
Loss for the period $ (576,755) $ (425,811) $ - $ (571,160) $ -
============================================================================================================================
Basic and diluted loss per share $ (0.03) $ - $ (0.05) $ -
============================================================================================================================
Weighted average number
of shares outstanding 16,525,816 6,250,000 12,547,390 6,250,000
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Three Month Three Month Nine Month Nine Month
Period Ended Period Ended Period Ended Period Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $ (425,811) $ - $ (571,160) $ -
------------- -------------- ------------- -------------
Other comprehensive income, net of tax:
Foreign currency translation adjustments 20,205 - 20,205 -
------------- -------------- -------------- -------------
Consolidated comprehensive loss $ (405,606) $ - $ (550,955) $ -
=============================================================================================================================
Basic and diluted loss per share $ (0.03) $ - $ (0.04) $ -
Weighted average number of shares outstanding 16,525,816 6,250,000 12,547,390 6,250,000
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Deficit
Accumulated Accumulated
Additional Other During the Total
Common Stock Paid-in Comprehensive Development Stockholders'
Shares Amount Capital Income Stage Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued
December 31, 1998 6,250,000 $ 6,250 $ - $ - $ (7,194) $ (944)
Common stock issued
for services 53,750,000 53,750 6,250 - - 60,000
Common stock issued
for services 5,312,500 5,313 79,687 - - 85,000
Return of shares to
Treasury (50,000,000) (50,000) 50,000 - - -
Private placement 1,094,056 1,094 3,499,886 - - 3,500,980
Acquisition of Able
Auctions (1991)
Ltd. 1,843,444 1,843 71,895 - - 73,738
Translation adjustment - - - 20,205 - 20,205
Loss for the period - - - - (571,160) (571,160)
------------- -------------- ------------- ------------- -------------- --------------
Balance, September 30,
1999 18,250,000 $ 18,250 $ 3,707,718 $ 20,205 $ (578,354) $ 3,167,819
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Nine Month Nine Month
Period Ended Period Ended
September 30, September 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN):
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (571,160) $ -
Item not affecting cash:
Consulting fees 145,000 -
Changes in non-cash working capital items:
Inventory (125,870) -
Accounts receivable (168,004) -
Prepaids (14,750) -
Accounts payable 312,950 -
---------------- -------------
Net cash used in operating activities (421,834) -
---------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable (789,338) -
Due to shareholder (13,961) -
Issuance of common shares 3,500,980 -
---------------- -------------
Net cash provided by financing activities 2,697,681 -
---------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Able Auctions (1991) Ltd. net of cash received (702,526) -
Capital assets (428,846) -
---------------- -------------
Net cash used in investing activities (1,131,372) -
---------------- -------------
Change in cash for the period 1,144,475 -
Effect of exchange rates on cash 20,205 -
Cash and cash equivalents, beginning of period - -
---------------- -------------
Cash and cash equivalents, end of period $ 1,164,680 $ -
============================================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 10)
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on September 30, 1996, under the laws of the
State of Florida, as J.B. Financial Services, Inc. The Company in
accordance with SFAS #7, is considered a development stage company.
On October 1, 1996, the Company issued 5,000 shares of common stock with a
par value of $1.00 for services received in the amount of $5,000.
On September 2, 1998, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 6,500
common shares to 50,000,000 common shares. The par value was changed from
$1.00 par to $0.001.
On September 2, 1998, the Company forward split its common stock 200:1,
thus increasing the number of outstanding common stock shares from 5,000
shares to 1,000,000 shares.
On March 26, 1999, the Company issued 53,750,000 shares at a deemed value
of $60,000 as payment of fees for services received.
On April 12, 1999, the Company issued 5,312,500 shares at a deemed value of
$85,000 as payment of fees for services received.
On July 19, 1999, an Article of Amendment was filed with the State of
Florida for the change of the Company's name from J.B. Financial Services,
Inc. to Ableauctions.com, Inc.
On July 19, 1999, the Company received from a shareholder 50,000,000 shares
which were previously issued for services rendered, and returned these
shares to treasury.
On July 20, 1999, the Company authorized a stock dividend of four shares
for every one share of record, increasing the shares issued and outstanding
from 2,450,000 to 12,250,000.
On July 21, 1999, the Company authorized a 5:1 forward share split
increasing the shares issued and outstanding from 12,250,000 to 61,250,000
and the authorized shares to 250,000,000.
On August 24, 1999, the Company issued 4,376,225 (1,094,057 post reverse
stock split units) at a price of US$0.80 per unit for total consideration
of US$3,500,980, through a private placement.
Effective September 5, 1999, the Company effected a 4:1 reverse stock
split. Following consolidation, the issued and outstanding common shares of
the Company is 18,250,000, with a par value of $0.001 and the authorized
share capital is 62,500,000 common shares with a par value of $0.001 per
share.
In the opinion of management, the accompanying financial statements contain
all adjustments necessary (consisting only of normal recurring accruals) to
present fairly the financial information contained therein. These
statements do not include all disclosures required by generally accepted
accounting principles and should be read in conjunction with the audited
financial statements of the Company for the year ended December 31, 1998.
The results of operations for the period ended September 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. Without realization of additional capital,
it would be unlikely for the Company to continue as a going concern. It is
management's plan to seek additional capital through equity financings.
<TABLE>
-------------------------------------------------------------------------- ---------------
September 30, December 31,
1999 1998
-------------------------------------------------------------------------- ---------------
<S> <C> <C>
Deficit accumulated during the development stage $ (578,354) $ (7,194)
Working capital (deficiency) 1,335,172 (944)
==========================================================================================
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
These consolidated financial statements include Ableauctions.com, Inc. and
its wholly-owned subsidiary Able Auctions (1991) Ltd. All significant
inter-company balances and transactions have been eliminated upon
consolidation.
Foreign currency translation
The Company accounts for foreign currency transactions and translation of
foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52").
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Gains and
losses from restatement of foreign currency monetary and non-monetary
assets and liabilities are included in income. Revenues and expenses are
translated at the rates of exchange prevailing on the dates such items are
recognized in earnings.
Financial statements of the Company's Canadian subsidiary, Able Auctions
(1991) Ltd. are translated into U.S. dollars using the exchange rate at the
balance sheet date for assets and liabilities. The functional currency of
Able Auctions (1991) Ltd. is the local currency, the Canadian dollar.
Translation adjustments, if necessary, are recorded as a separate component
of Stockholders' Equity.
Capital assets and amortization
Capital assets will be recorded at cost less accumulated amortization.
Amortization is being calculated using the declining balance method at
rates between 20% to 30% per annum.
Software development
The Company has adopted Statement of Position 98-1 ("SOP 98-1") "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use",
as its accounting policy for internally developed computer software costs.
Under SOP 98-1, computer software costs incurred in the preliminary
development stage are expensed as incurred. Computer software costs
incurred during the application development stage are capitalized and
amortized over the software's estimated useful life.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Revenue recognition
The Company recognizes revenue from auction sales, when sale of item has
been completed and collection of the amount is reasonably assured.
Trademarks
The cost of the trademark acquired is being amortized on a straightline
basis over its life of fifteen years.
Goodwill
Goodwill represents the excess of the cost of companies acquired over the
fair value of their net assets at dates of acquisition and is being
amortized on a straight line basis over 20 years.
Cash and cash equivalents
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
Loss per share
Earnings per share are provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Due to the Company's
simple capital structure, with only common stock outstanding, only basic
loss per share is presented. Basic loss per share is computed by dividing
losses available to common stockholders by the weighted average number of
common shares outstanding during the period.
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Accounting for derivative instruments and hedging activities
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") which
establishes accounting and reporting standards for derivative instruments
and for hedging activities. SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after September 15, 1999. The Company does not
anticipate that the adoption of the statement will have a significant
impact on its financial statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components.
4. CAPITAL STOCK
Stock split and dividend
a) On September 2, 1998, the Company implemented a 200:1 forward stock
split. On July 20, 1999, the Company effected a stock dividend of four
shares for every one share of record. On July 21, 1999, the Company
implemented a 5:1 forward stock split and on September 5, 1999, the
Company implemented a 4:1 reverse stock split. The consolidated
statements of changes in stockholders' equity has been restated to
give retroactive recognition of the stock splits and stock dividend
for all periods presented by reclassifying from common stock to
additional paid-in capital the par value of consolidated shares
arising from the splits and stock dividend. In addition, all
references to number of shares and per share amounts of common stock
have been restated to reflect the stock splits.
b) On March 26, 1999, the Company issued 53,750,000 shares at a deemed
value of $60,000 as payment of fees for services received.
c) On April 12, 1999, the Company issued 5,312,500 shares at a deemed
value of $85,000 as payment of fees for services received.
d) On July 19, 1999, the Company received from a shareholder 50,000,000
shares which were previously issued for services rendered, and
returned these shares to treasury.
e) During the period, the Company completed a private placement whereby
it issued 1,094,057 post consolidation units at a price of $3.20 per
unit for total consideration in the amount of $3,500,980. Each unit
consists of one restricted share and half of a share purchase warrant.
Each whole warrant will entitle the holder to purchase an additional
restricted common share at a price of $3.20 per share until August 24,
2000 and at $4.00 per share until August 24, 2001.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
5. WARRANTS
The Company has 547,029 warrants outstanding. Each warrant will entitle the
holder to purchase a restricted common share at a price of $3.20 per share
until August 24, 2000 and at a price of $4.00 per share until August 24,
2001.
6. CAPITAL ASSETS
<TABLE>
====================================================================================================================
Net Book Value
----------------------------------
(Audited)
Accumulated September 30, December 31,
Cost Amortization 1999 1998
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software $ 108,274 $ - $ 108,274 $ -
Vehicles 66,932 - 66,932 -
Computer 933,019 - 933,019 -
Trailers 3,782 - 3,782 -
Office furniture and equipment 4,654 - 4,654 -
------------- ------------- ------------- ------------
$ 1,116,661 $ - $ 1,116,661 $ -
====================================================================================================================
</TABLE>
7. WEBSITE DEVELOPMENT COSTS
Website development costs of $80,123 (December 31, 1998 - $Nil) is
comprised of hardware and software costs incurred by the Company in
developing its website. The Company's amortization policy concerning these
costs is to amortize the costs over a period of three years commencing from
the date of operations.
8. BUSINESS COMBINATION
During the period, the Company entered into an acquisition agreement
whereby the Company acquired all the outstanding shares of Able Auctions
(1991) Ltd. ("Able") and the assignment of certain trade accounts payable
of Able. The Company issued 1,843,444 of its common shares at a deemed
value of $73,738 and paid US$545,305 to acquire the shares of Able. The
Company also paid an additional US$504,695 for shareholders' loans.
The total purchase price of $1,123,738 has been allocated as follows:
Cash $ 347,474
Accounts receivable 140,982
Inventory 215,194
Prepaid expenses 36,114
Capital assets 780,551
Goodwill 667,127
Accounts payable and accrued liabilities (136,863)
Loan payable (878,377)
Obligation under capital lease (48,464)
--------------
$ 1,123,738
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
9. LOAN
The loan is due October 31, 1999 and bears interest at 12% per annum,
compounded annually.
10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
<TABLE>
---------------------------------------------------------------------------------------------------------------------
Period from
Incorporation
on
Nine Month Nine Month September 30,
Period ended Period ended 1996 to
September 30, September 30, September 30,
1999 1998 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for income taxes $ - $ - $ -
Cash paid for interest $ - $ - $ -
=====================================================================================================================
</TABLE>
During the nine month period ended September 30, 1999 the Company issued
9,062,500 common shares, at a deemed value of $145,000, for consulting
services received, and 1,843,444 shares at a deemed value of $73,738, for
the purchase of Able Auctions (1991) Ltd.
There were no non-cash operating investing and financing transactions
during the nine month period ended September 30, 1998.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME
Total comprehensive loss for the nine month period ended September 30,
1999, and the nine month period ended September 30, 1998 was $(550,955) and
$(Nil), respectively. The only item included in other comprehensive loss is
foreign currency translation adjustments in the amounts of $20,205 for the
nine month period ended September 30, 1999 and $Nil for the nine month
period ended September 30, 1998.
- --------------------------------------------------------------------------------
Foreign Accumulated
Currency Other
Translation Comprehensive
Adjustment Income
- --------------------------------------------------------------------------------
Beginning balance, December 31, 1998 $ - $ -
Current - period change 20,205 20,205
-------------- ---------------
Ending balance, September 30, 1999 $ 20,205 $ 20,205
================================================================================
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999
(Unaudited - Prepared by Management)
================================================================================
12. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
13. SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Company completed the following
transactions:
a) The Company, through its wholly owned subsidiary Able Auctions (1991)
Ltd. acquired all of the property, assets and undertaking of Ross
Auctioneers & Appraisers Ltd. pursuant to an asset purchase agreement.
The purchase price for the assets was $175,000 (CDN$250,000) plus
applicable taxes, which was paid for by the issuance of 60,000 shares
of the Company's common stock at a deemed price of $2.80 per share.
b) The Company through its wholly owned subsidiary Able Auctions (1991)
Ltd. acquired from LJM Computer Resources, a website located at
www.bcbids.com, including all associated intellectual property rights
and software technology for the cash purchase price of $26,600
(CDN$38,000) plus applicable taxes.
c) Able Auctions (1991) Ltd. acquired the domain name "bcbids.com" for
the purchase price of $140 (CDN$200) plus applicable taxes.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
FINANCIAL STATEMENTS
(A Development Stage Company)
DECEMBER 31, 1998
<PAGE>
A Partnership of
Incorporated Professionals
DAVIDSON & COMPANY=========Chartered Accountants================================
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors
J.B. Financial Services, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of J.B. Financial Services, Inc.
as at December 31, 1998 and the related statements of operations, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of J.B. Financial Services, Inc.
as at December 31, 1998 and the results of its operations, changes in
stockholders' equity and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that J.B.
Financial Services, Inc. will continue as a going concern. As discussed in Note
2 to the financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are discussed in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
The audited financial statements as at December 31, 1997 and for the year then
ended and the period from incorporation on September 30, 1996 to December 31,
1996 were audited by another auditor who expressed an opinion without
reservation on those statements in his audit report dated November 10, 1998.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
September 9, 1999
A Member of Accounting Group International
==========================================
Suite 1270, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31
================================================================================
<TABLE>
1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS $ - $ -
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 944 $ -
------------- ------------
Stockholders' equity (Note 1)
Capital stock
Authorized
December 31, 1997 - 62,500,000 common shares with a par value of $0.001
December 31, 1998 - 62,500,000 common shares with a par value of $0.001
Issued and outstanding
December 31, 1997 - 6,250,000 common shares with a par value of $0.001
December 31, 1998 - 6,250,000 common shares with a par value of $0.001 6,250 6,250
Deficit accumulated during the development stage (7,194) (6,250)
------------- ------------
(944) -
------------- ------------
$ - $ -
=============================================================================================================================
</TABLE>
Subsequent events (Note 6)
On behalf of the Board:
Director
- --------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
Cumulative Period from
Amounts from Incorporation
Incorporation on
on September 30,
September 30, 1996
1996 to Year ended Year Ended to
December 31, December 31, December 31, December 31,
1998 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXPENSES
General, selling and administrative $ (5,944) $ (944) $ - $ (5,000)
-------------- ------------- ------------- -------------
Loss for the period $ (5,944) $ (944) $ - $ (5,000)
=============================================================================================================================
Basic and diluted loss per share $ $ 0.00 $ 0.00 $ 0.00
=============================================================================================================================
Weighted average number of shares
of common stock outstanding 6,250,000 6,250,000 6,250,000
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
Deficit
Accumulated
Common Stock During the Total
-------------------------------- Development Shareholders'
Shares Amount Stage Equity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common stock issued October 4, 1996 6,250,000 $ 6,250 $ (1,250) $ 5,000
Loss for the period - - (5,000) (5,000)
-------------- -------------- -------------- --------------
Balance, December 31, 1996 6,250,000 6,250 (6,250) -
Loss for the year - - - -
-------------- -------------- -------------- -------------
Balance, December 31, 1997 6,250,000 6,250 (6,250) -
Loss for the year - - (944) (944)
-------------- -------------- -------------- --------------
Balance, December 31, 1998 6,250,000 $ 6,250 $ (7,194) $ (944)
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
Cumulative Period from
Amounts from Incorporation
Incorporation on
on September 30,
September 30, 1996
1996 to Year Ended Year Ended to
December 31, December 31, December 31, December 31,
1998 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss for the period $ (5,944) $ (944) $ - $ (5,000)
Changes in non-cash working capital items:
Increase in accounts payable 944 944 - -
------------- ------------- ------------ -------------
Net cash used in operating activities (5,000) - - (5,000)
------------- ------------- ------------ -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of common stock 5,000 - - 5,000
------------- ------------- ------------ -------------
CASH FLOWS FROM INVESTING
ACTIVITIES - - - -
------------- ------------- ------------ -------------
Change in cash for the period - - - -
Cash, beginning of period - - - -
------------- ------------- ------------ -------------
Cash, end of period $ - $ - $ - $ -
=============================================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 5)
The accompanying notes are an integral part of these financial statements.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on September 30, 1996, under the laws of the
State of Florida, as J.B. Financial Services, Inc. The Company currently
has no operations and, in accordance with SFAS #7, is considered a
development stage company.
On October 1, 1996, the Company issued 5,000 shares with a par value of
$1,000 for services received in the amount of $5,000.
On September 2, 1998, the State of Florida approved the Company's F
restated Articles of Incorporation, which increased its capitalization from
6,500 common shares to 50,000,000 common shares. The par value was changed
from $1.00 par to $0.001.
On September 2, 1998, the Company forward split its common stock 200:1,
thus increasing the number of outstanding common stock shares from 5,000
shares to 1,000,000 shares.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through a merger with an existing operating
company.
<TABLE>
----------------------------------------------------------------------------------------------------
December 31, December 31,
1998 1997
------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
Deficit accumulated during the development stage $ (7,194) $ (6,250)
Working capital (deficiency) (944) -
====================================================================================================
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Cash and cash equivalents
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
Loss per share
Earnings per share are provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Due to the Company's
simple capital structure, with only common stock outstanding, only basic
loss per share is presented. Basic loss per share is computed by dividing
losses available to common stockholders by the weighted average number of
common shares outstanding during the period.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companiesF to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company does not anticipate that
the adoption of the statement will have a significant impact on its
financial statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company has not yet determined the effect that the adoption
of this statement will have on its financial statements.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total stockholders'
equity as of December 31, 1998.
Comparative figures
Certain comparative figures have been adjusted to conform to the current
year's presentation.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
4. CAPITAL STOCK
Stock split
On September 2, 1998, the Company implemented a 200:1 forward stock split.
On July 21, 1999, the Company implemented a 5:1 forward stock split and on
September 5, 1999, the Company implemented a 4:1 reverse stock split (Note
6). The consolidated statements of changes in stockholders' equity has been
restated to give retroactive recognition of the stock splits for all
periods presented by reclassifying from common stock to additional paid-in
capital the par value of consolidated shares arising from the splits. In
addition, all references to number of shares and per share amounts of
common stock have been restated to reflect the stock splits.
5. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
<TABLE>
Period from
Incorporation
on
September 30,
Year Ended Year Ended 1996 to
December 31, December 31, December 31,
1998 1997 1996
------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C> <C>
Cash paid for income taxes $ - $ - $ -
Cash paid for interest - - -
=================================================================== ================= ================
</TABLE>
There were no non-cash operating, investing and financing transactions
during the periods presented.
6. SUBSEQUENT EVENTS
The following transactions occurred subsequent to December 31, 1998:
i) On July 19, 1999, the Company changed its name from J.B. Financial
Services, Inc. to Ableauctions.com, Inc.
ii) On July 20, 1999, the Company authorized a 5:1 stock split, effected
in the form of a dividend, increasing the shares issued and
outstanding from 2,450,000 to 12,250,000.
iii) On July 21, 1999, the Company authorized a 5:1 forward share split
increasing the shares issued and outstanding from 12,250,000 to
61,250,000 and the authorized shares to 250,000,000.
iv) On August 24, 1999, the Company issued 4,376,225 (1,094,057 post
reverse stock split (Note 6 (vi)) units at a price of US$0.80 per unit
for total consideration of US$3,500,980, through a private placement.
Each unit consists of one restricted common share and 1/2 of a share
purchase warrant. Each whole warrant will entitle the holder to
purchase one additional restricted common share at US$0.80 in the
first year and at US$1.00 in the second year.
<PAGE>
J.B. FINANCIAL SERVICES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
6. SUBSEQUENT EVENTS (cont'd.....)
v) On July 20, 1999, the Company entered into an acquisition agreement
whereby the Company acquired all the outstanding shares of Able
Auctions (1991) Ltd. ("Able") and shareholders' loans. The Company
issued 7,373,775 (1,843,444 post reverse stock split (Note 6 (vi)))
common shares of the Company and paid US$545,305 to acquire the shares
of Able. The Company also paid an additional US$504,695 for
shareholders loans. Completion of the acquisition is subject to
approval by the applicable regulatory authorities.
vi) Effective September 5, 1999, the Company effected a 4:1 reverse stock
split. Following consolidation, the issued and outstanding common
shares of the Company is 18,250,000, with a par value of $0.001 and
the authorized share capital is 62,500,000 common shares with a par
value of $0.001 per share.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
AND
ABLE AUCTIONS (1991) LTD.
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 30, 1999
<PAGE>
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.)
AND
ABLE AUCTIONS (1991) LTD.
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro-forma consolidated statements of operations for the
year ended December 31, 1998 and the nine month period ended September 30, 1999
(the "Pro-forma Financial Statements") of Ableauctions.com, Inc. (formerly J.B.
Financial Services, Inc.) (the "Company") give effect to the following
transactions as of the beginning of the periods indicated for purposes of the
statements of operations:
i) the acquisition by the Company of 100% of the outstanding capital
stock of Able Auctions (1991) Ltd.
The Pro-forma Financial Statements have been prepared by the Company based upon
the financial statements of the Company and Able Auctions (1991) Ltd. The
Pro-forma Financial Statements give effect to the acquisition under the purchase
method of accounting and to certain assumptions and adjustments described more
fully in the accompanying notes. These Pro-forma Financial Statements may not be
indicative of the results that actually would have occurred if the transactions
had been completed on the dates indicated or of the results which may be
obtained in the future. The Pro-forma Financial Statements should be read in
conjunction with the financial statements and notes thereto of the Company and
Able Auctions (1991) Ltd. included elsewhere in this Form 10-SB.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
================================================================================
<TABLE>
Able Pro-forma
Ableauctions Auctions Adjustments Pro-forma
.com, Inc. (1991) Ltd. (Note 2) Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ - $ 1,648,283 $ - $ 1,648,283
COST OF GOODS SOLD - (971,180) - (971,180)
------------ ------------ ------------ -------------
- 677,103 - 677,103
------------ ------------ ------------ -------------
OPERATING EXPENSES
Accounting and legal fees 43,000 5,887 - 48,887
Advertising and promotion - 73,477 - 73,477
Amortization - - 173,880 173,880
Amortization of trademark - - 382 382
Amortization of goodwill - - 25,017 25,017
Amortization of website development costs - - 6,385 6,385
Auction - 6,264 - 6,264
Automobile - 10,113 - 10,113
Bank charges - 43,419 - 43,419
Consulting fees 159,690 8,694 - 168,384
Freight and brokerage - 51,323 - 51,323
Management fees - 303,347 - 303,347
Office - 48,945 - 48,945
Insurance - 9,470 - 9,470
Repairs and maintenance - 18,729 - 18,729
Rent and utilities - 125,221 - 125,221
Salaries and benefits - 283,933 - 283,933
Shareholder information - - - 2,404
Telephone 2,404 26,593 - 26,593
Transfer agent 2,825 - - 2,825
Travel and entertainment - 118,412 - 118,412
------------ ------------ ------------ -------------
207,919 1,133,827 205,664 1,547,410
------------ ------------ ------------ -------------
Loss before other items (207,919) (456,724) (205,664) (870,307)
------------ ------------ ------------ -------------
OTHER ITEMS
Loss on disposal of capital asset - (4,559) - (4,559)
Interest income 15,792 570 - 16,362
Foreign exchange gain 18,292 - - 18,292
------------ ------------ ------------ -------------
34,084 (3,989) - 30,095
------------ ------------ ------------ -------------
Loss for the period $ (173,835) $ (460,713) $ (205,664) $ (840,212)
============================================================================================================================
Basic and diluted loss per share $ (0.01) $ - $ - $ (0.06)
============================================================================================================================
Weighted average number of shares outstanding 12,547,390 - - 15,097,527
============================================================================================================================
</TABLE>
See notes to the pro-forma consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
Able Pro-forma
Ableauctions Auctions Adjustments Pro-forma
.com, Inc. (1991) Ltd. (Note 2) Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ - $ 1,160,953 $ - $ 1,160,953
COST OF GOODS SOLD - (619,158) - (619,158)
----------- -------------- ----------- -------------
- 541,795 - 541,795
----------- -------------- ----------- -------------
OPERATING EXPENSES
Accounting and legal fees 944 6,952 - 7,896
Advertising and promotion - 43,585 - 43,585
Amortization - - 222,407 222,407
Amortization of goodwill - - 33,356 33,356
Amortization of trademark - - 469 469
Amortizaiton of website development costs - - 7,574 7,574
Auction - 7,719 - 7,719
Automobile - 5,713 - 5,713
Bank charges - 13,275 - 13,275
Consulting fees - 2,163 - 2,163
Depreciation - 8,379 - 8,379
Freight and brokerage - 49,951 - 49,951
Office - 42,999 - 42,999
Repairs and maintenance - 802 - 802
Rent and utilities - 87,275 - 87,275
Salaries and benefits - 163,101 - 163,101
Telephone - 22,700 - 22,700
Transfer agent 349 - - 349
Travel and entertainment - 18,473 - 18,473
----------- -------------- ----------- -------------
1,293 473,087 263,806 738,186
----------- -------------- ----------- -------------
Income (loss) before other item (1,293) 68,708 (263,806) (196,391)
----------- -------------- ----------- -------------
OTHER ITEM
Loss on disposal of capital asset - (2,060) - (2,060)
----------- -------------- ----------- -------------
Income (loss) for the year $ (1,293) $ 66,648 $ (263,806) $ (198,451)
=============================================================================== ==============================================
Basic and diluted loss per share $ 0.00 $ - $ - $ (0.02)
==============================================================================================================================
Weighted average number of shares outstanding 6,250,000 - - 9,187,500
==============================================================================================================================
</TABLE>
See notes to the pro-forma consolidated financial statements.
<PAGE>
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
================================================================================
1. BASIS OF PRESENTATION
Business combination of Ableauctions.com, Inc. (formerly J.B. Financial
Services, Inc.) ("Able") and Able Auctions (1991) Ltd. ("AA")
Effective August 24, 1999, a business combination occurred between Able and
AA, whereby Able legally acquired AA as a wholly-owned subsidiary. The
terms of the combination provided that the Company acquired all of the
common shares of AA as well as debt owing to a third party in exchange for
cash payment of US$1,000,000 and the Company issuing 1,843,444 common
shares at a deemed value of US$73,738.
2. PRO-FORMA FINANCIAL INFORMATION
Management has prepared and provided certain pro-forma interim consolidated
financial information to assist readers to understand the nature and effect
of the combination on the unaudited financial statements of Able and AA.
The pro-forma financial information is unaudited and has been prepared from
the audited financial statements of Able for the year ended December 31,
1998 and the unaudited financial statements of AA for the year ended March
31, 1999 and the unaudited interim consolidated financial statements of
Able and AA for the nine month period ended September 30, 1999.
Pro-forma statements of operations and loss per share:
The pro-forma consolidated statements of operations reflect a simple
combination of the results of operations of Able and AA for the year ended
December 31, 1998 and the nine month period ended September 30, 1999 and
includes the following:
i) the amortization of goodwill acquired in the amount of $667,127 over
twenty years;
ii) the amortization of trademarks acquired in the amount of $12,613 over
fifteen years;
iii) the amortization of website development costs acquired in the amount
of $80,123 over five years;
iv) the amortization of capital assets acquired in the amount of
$1,116,661 using the declining balance method, at rates between 20% to
30% per annum; and
v) the impact on the calculation of pro-forma basic loss per share which
is based on the number of shares that would have been outstanding for
the period had the business combination taken place at the beginning
of the fiscal period.
<PAGE>
PART III
Item 1. Index to Exhbits
The following exhibits are included in this Item:
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Exhibit Sequentially
Number Description Number Page
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of J.B. Financial Services, Inc.,
dated September 30, 1996
3.2 Articles of Amendment of J.B. Financial Services, Inc.,
dated September 2, 1998
3.3 Articles of Amendment of J.B. Financial Services, Inc.
changing name to Ableauctions.com, Inc., dated July 19, 1999
3.4 Articles of Amendment of Ableauctions.com, Inc., dated
August 9, 1999
3.5 Articles of Amendment of Ableauctions.com, Inc., dated
September 2, 1999
3.6 Bylaws of J.B. Financial Services, Inc.
10.1 Form of Stock Option Plan
10.2 Form of Stock Option Agreement
10.3 Share Purchase Agreement dated April 1, 1998 among Jeremy
Dodd, Dexton Technologies Corporation, and Able Auctions
(1991) Ltd.
10.4 Share Purchase Agreement dated July 9, 1999 among Dexton
Technologies Corporation, Able Auctions (1991) Ltd., and
Ableauctions.com, Inc., as amended by Addendum dated August
16, 1999
10.5 Contribution Agreement dated July 15, 1999 between Douglas
McLeod and Ableauctions.com, Inc. (then J.B. Financial
Services, Inc.) regarding Mr. McLeod's contribution of
8,000,000 shares of common stock to the Company's treasury
10.6 Asset Purchase Agreement dated September 20, 1999 among
Ross Auctioneers & Appraisers Ltd., Able Auctions (1991)
Ltd., and Ableauctions.com, Inc.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Exhibit Sequentially
Number Description Number Page
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.7 Asset Purchase Agreement dated September 20, 1999 between
John Carrier dba LJM Computer Resources and Able Auctions
(1991) Ltd. regarding the web site located at
www.bcbids.com.
10.8 Bill of Sale dated September 20, 1999 between Ronald H.
Smallwood and Able Auctions (1991) Ltd. regarding the
domain name "bcbids.com".
10.9 Employment Agreement dated September 20, 1999 between Able
Auctions (1991) Ltd. and Richie Smallwood.
10.10 Subscription Agreement dated July 20, 1999 between
Ableauctions.com, Inc. and Silicon Capital Corp.
10.11 Consulting Agreement dated August 24, 1999 between Able
Auctions (1991) Ltd. and Dexton Technologies Corporation
10.12 Investor Relations Agreement dated September 15, 1999
between Ableauctions.com, Inc. and North Star
Communications Inc.
10.13 Investor Relations Agreement dated October 1, 1999 between
Ableauctions.com, Inc. and European Investor Services Ltd.
10.14 Lease Agreement dated September 1, 1999 between Derango
Resources Inc. and Ableauctions.com, Inc.
10.15 Sublease dated August 22, 1999 between HGP Glass Industries
of Canada Inc. and Ableauctions.com, Inc.
16.1 Letter dated November 8, 1999 from Barry L. Friedman, P.C.
to Ableauctions.com, Inc.
27.1 Financial Data Schedule
</TABLE>
Item 2. Description of Exhibits
See Part III, Item 1.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on our behalf by the
undersigned, thereunto duly authorized.
Date: November 18, 1999
/s/ Abdul Ladha
-------------------------------------------
Abdul Ladha, President
<PAGE>
EXHIBIT INDEX
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Exhibit Sequentially
Number Description Number Page
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of J.B. Financial Services, Inc.,
dated September 30, 1996
3.2 Articles of Amendment of J.B. Financial Services, Inc.,
dated September 2, 1998
3.3 Articles of Amendment of J.B. Financial Services, Inc.
changing name to Ableauctions.com, Inc., dated July 19, 1999
3.4 Articles of Amendment of Ableauctions.com, Inc., dated
August 9, 1999
3.5 Articles of Amendment of Ableauctions.com, Inc., dated
September 2, 1999
3.6 Bylaws of J.B. Financial Services, Inc.
10.1 Form of Stock Option Plan
10.2 Form of Stock Option Agreement
10.3 Share Purchase Agreement dated April 1, 1998 among Jeremy
Dodd, Dexton Technologies Corporation, and Able Auctions
(1991) Ltd.
10.4 Share Purchase Agreement dated July 9, 1999 among Dexton
Technologies Corporation, Able Auctions (1991) Ltd., and
Ableauctions.com, Inc., as amended by Addendum dated August
16, 1999
10.5 Contribution Agreement dated July 15, 1999 between Douglas
McLeod and Ableauctions.com, Inc. (then J.B. Financial
Services, Inc.) regarding Mr. McLeod's contribution of
8,000,000 shares of common stock to the Company's treasury
10.6 Asset Purchase Agreement dated September 20, 1999 among
Ross Auctioneers & Appraisers Ltd., Able Auctions (1991)
Ltd., and Ableauctions.com, Inc.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Exhibit Sequentially
Number Description Number Page
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.7 Asset Purchase Agreement dated September 20, 1999 between
John Carrier dba LJM Computer Resources and Able Auctions
(1991) Ltd. regarding the web site located at
www.bcbids.com.
10.8 Bill of Sale dated September 20, 1999 between Ronald H.
Smallwood and Able Auctions (1991) Ltd. regarding the
domain name "bcbids.com".
10.9 Employment Agreement dated September 20, 1999 between Able
Auctions (1991) Ltd. and Richie Smallwood.
10.10 Subscription Agreement dated July 20, 1999 between
Ableauctions.com, Inc. and Silicon Capital Corp.
10.11 Consulting Agreement dated August 24, 1999 between Able
Auctions (1991) Ltd. and Dexton Technologies Corporation
10.12 Investor Relations Agreement dated September 15, 1999
between Ableauctions.com, Inc. and North Star
Communications Inc.
10.13 Investor Relations Agreement dated October 1, 1999 between
Ableauctions.com, Inc. and European Investor Services Ltd.
10.14 Lease Agreement dated September 1, 1999 between Derango
Resources Inc. and Ableauctions.com, Inc.
10.15 Sublease dated August 22, 1999 between HGP Glass Industries
of Canada Inc. and Ableauctions.com, Inc.
16.1 Letter dated November 8, 1999 from Barry L. Friedman, P.C.
to Ableauctions.com, Inc.
27.1 Financial Data Schedule
</TABLE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
J.B. FINANCIAL SERVICES, INC.
The undersigned, acting as Incorporator of a corporation under the Florida
General Cooperation Act, adopts the following Articles of Incorporation for such
corporation:
ARTICLE I
NAME
The name of this corporation is J.B. FINANCIAL SERVICES, INC.
ARTICLE II
DURATION
This Corporation shall have perpetual existence unless dissolved according to
law.
ARTICLE III
BUSINESS
This Corporation is organized to buy and/or sell domestic and imported products
and to do every other act or thing incidental or pertinent to or growing out of
or connected with the aforesaid purpose and in addition, to engage in any other
business or businesses permitted under the laws of the United States and
Florida.
ARTICLE IV
CAPITAL STOCK
The maximum number of shares of stock authorized to be issued by this
Corporation is 6500 shares of capital stock at $1.00 par value, all of which
shall have the same rights and privileges. Each share of capital stock shall
entitle the holder thereof to one (1) vote at any stockholder meeting and
otherwise to participate in all such meetings and the assets of the Corporation.
The stock shall be issued for such consideration as may be determined by the
Board of Directors, which shall have a value at least equal to the full par
value of said shares. The stock may be paid for in lawful money of the United
States of America, or in property, labor or services.
ARTICLE V
PRE-EMPTIVE RIGHTS
The stockholders of this Corporation shall be entitled to purchase ratably
according to their respective holdings, any shares of the Corporation
hereinafter issued or any securities exchangeable for or convertible into such
shares or any warrants or other instruments evidencing rights or options to
subscribe for, purchase, or otherwise acquire such shares, but in either case
only as such prices and during such period or periods and upon such terms and
conditions as may be determined from time to time by the Board of Directors.
<PAGE>
ARTICLE VI
INITIAL REGISTERED OFFICE AND AGENT
The street address of the principal office of this corporation is:
18650 Avenue Capri
Lutz, Florida 33549
The name and address of the Registered Agent of this Corporation is:
David C. Bearden, Esq.
3233 East Bay Drive
Suite 104
Largo, Florida 34641
The corporation shall have the privilege of establishing such other branch
offices in any other location or any other city or town, in this state or any
other State or County, as may be approved by its Board of Directors.
ARTICLE VII
INITIAL BOARD OF DIRECTORS
This corporation shall have one (1) Director initially. The number of Directors
may be either increased or diminished from time to time by the By-laws, but
shall never be less than one (1). The names and addresses of the initial
directors of this Corporation are:
NAME ADDRESS
James Bailey 18650 Avenue Capri
Lutz, Florida 33549
813-949-4155
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any officer or director or any former officer or
director, to the full extent permitted by law.
ARTICLE IX
AMENDMENT
This Corporation reserves the right to amend or repeal any provisions contained
in these Articles of Incorporation, or any Amendment hereto, and any right
conferred upon the shareholders is subject to this reservation.
<PAGE>
ARTICLE X
INCORPORATOR
The name and address of the person signing these Articles of Incorporation is:
James Bailey
18650 Avenue Capri
Lutz, Florida 33549
IN WITNESS WHEREOF, the undersigned subscriber has executed these Articles
of Incorporation of this Monday, September 9, 1996.
/s/ James Bailey
- ----------------------------------------
STATE OF FLORIDA
COUNTY OF PINELLAS
BEFORE ME, a Notary Public, authorized to take acknowledgements in the
State and County set forth above, James Bailey, who did not take an oath
personally appeared known to me to be the person who executed the foregoing
Articles of J.B. FINANCIAL SERVICES, INC., and he acknowledged before me that he
executed these Articles of Incorporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in Pinellas County, Florida, this Monday, September 9, 1996.
/s/ signed
-----------------------------------------
Notary Public
My commission expires:
<PAGE>
ACCEPTANCE OF DESIGNATION AS REGISTERED AGENT
I HEREBY ACCEPT the designation of Registered Agent to accept service of
process for J.B. FINANCIAL SERVICES, INC.
/s/ David C. Bearden
-----------------------------------------
DAVID C. BEARDEN, ESQ.
STATE OF FLORIDA
COUNTY OF PINELLAS
BEFORE ME, a Notary Public, authorized to take acknowledgements in the
State and County set forth above personally appeared, DAVID C. BEARDEN, known to
me to be the person who executed the foregoing Acceptance of Designation as
Registered Agent, and he acknowledged before me that he executed the same.
IN WITNESS WHEREOF, I now hereunto set my hand and affixed my official seal
in Pinellas County, Florida, this Monday, September 9, 1996.
/s/ signed
-----------------------------------------
Notary Public
/s/ signed
-----------------------------------------
Printed Name
My commission expires:
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO
J.B. FINANCIAL SERVICES, INC.
The undersigned, being the sole director and president of J.B. Financial
Services, Inc., does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be J.B. FINANCIAL SERVICES, INC.
ARTICLE II
PURPOSE
This Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000 shares of
common stock, $0.001 par value.
ARTICLE V
PLACE OF BUSINESS
The address of the principal place of business of this corporation in the
State of Florida shall be 1008 Royal Aberdeen Way, Orlano, Fl. 32828. The Board
of directors may at any time and from time move the principal office of this
corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
directors. The number of such directors shall not be less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
<PAGE>
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No share holder shall have any right to acquire share or other securities
of the corporation except to the extent to such right may be granted by an
amendment to these Articles of Incorporation or by a resolution of the Board of
Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-Laws, or the Florida
Corporation Act notwithstanding, by-laws not be adopted, modified, amended or
repealed by the shareholders of the Corporation except upon the affirmative vote
of a simple majority vote of the holders of all the issued and outstanding
shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of books. The Board of Directors shall make the reasonable
rules to determine at what times and place and under what conditions the
books of the Corporation shall be open to inspection by shareholders or a
duly appointed representative of a shareholder.
9.2 Control Share Acquisition. The provisions relating to any control share
acquisition as contained in Florida Statutes now, or hereinafter amended,
and any successor provision shall not be applied to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of the votes at a
meeting of shareholder's shall constitute a quorum.
9.4 Required Vote. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
<PAGE>
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition the Corporation shall have the power, in its by-laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the best interest of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any person,
firm or corporation shall be affected by the fact that any officer or director
of this corporation is such other party or is, or at some time in the future
becomes, an officer, director or partner of such other contracting party, or has
now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of
shareholders and directors of the corporation on August 26, 1998 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed these
Articles of Incorporation on this 26th day of August 1998.
/s/ James Bailey
- ---------------------------------------
James H. Bailey, President and Sole Director.
The foregoing instrument was acknowledged before me on August 26, 1998, by
James H. Bailey, who is personally known to me.
/s/ signed
- ---------------------------------------
Notary Public
My commission expires:
EXHIBIT 3.3
ARTICLES OF AMENDMENT
OF
ABLEAUCTIONS.COM, INC.
Pursuant to Section 607.1006 of the Florida Business Corporation Act, J.B.
Financial Services, Inc., a Florida corporation (the "Corporation"), DOES HEREBY
CERTIFY AND ADOPT THESE ARTICLES OF AMENDMENT:
FIRST: The name of the Corporation is J.B. Financial Services, Inc.
SECOND: The Articles of Incorporation of this Corporation are amended by
changing ARTICLE I so that, as amended, said ARTICLE I shall read as
follows:
ARTICLE I
The name of the Corporation shall be ABLEAUCTIONS.COM, INC.
THIRD: This amendment was adopted on July 15, 1999.
FOURTH: The number of votes cast for the amendment by the shareholders was
sufficient for approval. Shareholders of the Corporation holding common shares
constituting approximately 82.4% of the issued and outstanding shares of the
Corporation, acting by consent in lieu of a special meeting, duly authorized and
adopted this amendment to the Articles of Incorporation of the Corporation, and
written notice of the adoption of the amendment has been given as provided in
Section 607.0705 of the Florida Business Corporation Act to every shareholder
entitled to such notice.
FOURTH: Said resolution was duly adopted in accordance with the provisions
of Section 607.1003 of the Florida Business Corporation Act.
DATED this 15th day of July, 1999.
By: /s/ Doug McLeod
----------------------------------------
Doug McLeod
Title: President
<PAGE>
City of Tokyo )
) ss.
County/City of Japan )
On the 15th day of July, 1999, personally appeared before me, a Notary
Public, Doug McLeod, President of the Corporation, who acknowledged that he
executed the above.
/s/ signed
----------------------------------------
CONSUL OF CANADA
TOKYO, JAPAN
EXHIBIT 3.4
ARTICLES OF AMENDMENT
OF
ABLEAUCTIONS.COM, INC.
Pursuant to Section 607.1006 of the Florida Business Corporation Act,
ABLEAUCTIONS.COM, INC., a Florida corporation (the "Corporation"), DOES HEREBY
CERTIFY AND ADOPT THESE ARTICLES OF AMENDMENT:
FIRST: The name of the Corporation is ABLEAUCTIONS.COM, INC.
SECOND: The Articles of Incorporation of this Corporation are amended by
changing ARTICLE IV so that, as amended, said ARTICLE IV shall read as
follows:
ARTICLE IV
The capital stock of the Corporation shall consist of Two Hundred
Fifty Million (250,000,000) shares of common stock, with a par value
of $0.001 per share.
THIRD: This amendment was adopted on August 5, 1999.
FOURTH: The number of votes cast for the amendment by the shareholders was
sufficient for approval. Shareholders of the Corporation holding common shares
constituting approximately 85% of the issued and outstanding shares of the
Corporation, acting by consent in lieu of a special meeting, duly authorized and
adopted this amendment to the Articles of Incorporation of the Corporation, and
written notice of the adoption of the amendment has been given as provided in
Section 607.0705 of the Florida Business Corporation Act to every shareholder
entitled to such notice.
FOURTH: Said resolution was duly adopted in accordance with the provisions
of Section 607.1003 of the Florida Business Corporation Act.
DATED this 5th day of August, 1999.
By: /s/ Doug McLeod
----------------------------------------
Doug McLeod
Title: President
EXHIBIT 3.5
ARTICLES OF AMENDMENT
OF
ABLEAUCTIONS.COM, INC.
Pursuant to Section 607.10025(2) of the Florida Business Corporation Act,
ABLEAUCTIONS.COM, INC., a Florida corporation (the "Corporation"), DOES HEREBY
CERTIFY AND ADOPT THESE ARTICLES OF AMENDMENT:
FIRST: The name of the Corporation is ABLEAUCTIONS.COM, INC.
SECOND: The Board of Directors of the Corporation, acting by consent
in lieu of a special meeting, duly authorized and adopted this
amendment to the Articles of Incorporation of the Corporation on
August 24, 1999, pursuant to Section 607.10025(2) of the Florida
Business Corporation Act, to effect a combination of the Corporation's
common shares of common stock (the "Share Combination"), and written
notice of the adoption of the amendment will be given as provided in
Section 607.10025(5) of the Florida Business Corporation Act to every
shareholder entitled to such notice.
THIRD: This amendment to the Articles of Incorporation of the
Corporation does not adversely affect the rights or preferences of the
holders of any outstanding class of the Corporation's shares and (b)
the percentage of authorized shares remaining after this amendment to
the Articles of Incorporation of the Corporation will not exceed the
percentage of authorize shares remaining unissued before this
amendment to the Articles of Incorporation of the Corporation.
FOURTH: The number of shares of common stock subject to the Share
Combination is 73,000,000 shares and the number of shares of common
stock which will result from the Share Combination is 18,250,000.
FIFTH: The Articles of Incorporation of this Corporation are amended
by changing ARTICLE IV so that, as amended, said ARTICLE IV shall read
as follows:
ARTICLE IV
The capital stock of the Corporation shall consist of Sixty-Two
Million Five Hundred Thousand (62,500,000) shares of common
stock, with a par value of $0.001 per share. The 73,000,000
shares of issued and outstanding common shares of the
Corporation, with a par value of $0.001, either issued and
outstanding or held by the Corporation as treasury stock,
immediately prior to 5:00 P.M. (Eastern Standard Time) on
September 5, 1999, shall be automatically reclassified and
changed
<PAGE>
(without any further act) into 18,250,000 fully-paid and
non-assessable shares of common stock of the Corporation, with a
par value of $0.001.
SIXTH: This amendment shall be effective at 5:00 P.M. (Eastern Standard
Time) on September 5, 1999.
SEVENTH: This amendment to the Articles of Incorporation was duly adopted
in accordance with the provisions of Section 607.10025 of the Florida
Business Corporation Act. "Shareholder action not required."
DATED this 24th day of August, 1999.
By: /s/ Doug McLeod
----------------------------------------
Doug McLeod
Title: President
EXHIBIT 3.6
BY-LAWS
of
J.B. FINANCIAL SERVICES, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of this
corporation shall be held on the 30th day of June of each year or at such other
time and place designated by the Board of Directors of the corporation. Business
transacted at the annual meeting shall include the election of directors of the
corporation. If the designated day shall fall on a Sunday or legal holiday, then
the meeting shall be held on the first business day thereafter.
Section 2. Special Meetings. Special meetings of the shareholders shall be
held when directed by the President or the Board of Directors, or when requested
in writing by the holders of not less than 10% of all the shares entitled to
vote at the meeting. A meeting requested by shareholders shall be called for a
date not less than 3 nor more than 30 days after the request is made, unless the
shareholders requesting the meeting designate a later date. The call for the
meeting shall be issued by the Secretary, unless the President, Board of
Directors, or shareholders requesting the meeting shall designate another person
to do so.
Section 3. Place. Meetings of shareholders shall be held at the principal
place of business of the corporation or at such other place as may be designated
by the Board of Directors.
Section 4. Notice. Written notice stating the place, day and hour of the
meeting and in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 3 nor more than 30 days
before the meeting, either personally or by first class mail, or by the
direction of the President, the Secretary or the officer or persons calling the
<PAGE>
2
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on a new record date entitled to vote at such meeting.
Section 6. Shareholder Quorum and Voting. A majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided by
law.
Section 7. Voting of Shares. Each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Section 8. Proxies. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
No proxy shall be valid after the duration of 11 months from the date thereof
unless otherwise provided in the proxy.
<PAGE>
3
Section 9. Action by Shareholders Without a Meeting. Any action required by
law or authorized by these by-laws or the Articles of Incorporation of this
corporation or taken or to be taken at any annual or special meeting of
shareholders, or any action which may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Qualification. Directors need not be residents of this state or
shareholders of this corporation.
Section 3. Compensation. The Board of Directors shall have authority to fix
the compensation of directors.
Section 4. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
Section 5. Number. This corporation shall have a minimum of 1 director but
no more than 7.
<PAGE>
4
Section 6. Election of Term. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the next shareholder meeting or until his earlier resignation, removal
from office or death. If no shareholder meeting takes place, each director shall
continue serve until such meeting takes place. At each shareholder the
shareholders shall elect directors to hold office until the next succeeding
shareholder meeting. Each director shall hold office for a term for which he is
elected and until his successor shall have been elected and qualified or until
his earlier resignation, removal from office or death.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
Section 8. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
Section 9. Quorum and Voting. A majority of the number of directors fixed
by these by-laws shall constitute a quorum for the transaction of business. The
act of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 10. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in
<PAGE>
5
such resolution shall have and may exercise all the authority of the Board of
Directors, except as is provided by law.
Section 11. Place of Meeting. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the corporation or
as otherwise determined by the Directors.
Section 12. Time, Notice and Call of Meetings. Regular meetings of the
Board of Directors shall be held without notice on the first Monday of the
calendar month two (2) months following the end of the corporation's fiscal, or
if the said first Monday is a legal holiday, then on the next business day.
Written notice of the time and place of special meetings of the Board of
Directors shall be given to each director by either personal delivery, telegram
or cablegram at least three (3) days before the meeting or by notice mailed to
the director at least 3 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose, of any regular
or special meeting of the Board of Directors need by specified in the notice of
waiver of notice of such meeting. A majority of the directors present, whether
or not a quorum exists, may adjourn any meeting of the Board of Directors to
another time and place. Notice of any such adjourned meeting shall be given to
the directors who were not present at the time of the adjournment, and
<PAGE>
6
unless the time and place of adjourned meeting are announced at the time of the
adjournment, to the other directors. Meetings of the Board of Directors may be
called by the chairman of the board, by the president of the corporation or by
any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone call or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Section 13. Action Without a Meeting. Any action, required to be taken at a
meeting of the Board of Directors, or any action which may be taken at a meeting
of the Board of Directors or a committee thereof, may be taken without a meeting
if a consent in writing, setting forth the action so to be taken, is signed by
such number of the directors, or such number of the members of the committee, as
the case may be, as would constitute the requisite majority thereof for the
taking of such actions, is filed in the minutes of the proceedings of the board
or of the committee. Such actions shall then be deemed taken with the same force
and effect as though taken at a meeting of such board or committee whereat all
members were present and voting throughout and those who signed such action
shall have voted in the affirmative and all others shall have voted in the
negative. For informational purposes, a copy of such signed actions shall be
mailed to all members of the board or committee who did not sign said action,
provided however, that the failure to mail said notices shall in no way
prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this corporation shall consist of a
president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or
<PAGE>
7
appointed by the Board of Directors from time to time. Any two or more offices
may be held by the same person.
Section 2. Duties. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the
corporate records except the financial records; shall record the minutes of all
meetings of the shareholders and Board of directors, send all notices of all
meetings and perform such other duties as may be prescribed by the Board of
Directors or the President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
Section 3. Removal of Officers. An officer or agent elected or appointed by
the Board of Directors may be removed by the board whenever in its judgment the
best interests of the corporation will be saved thereby. Any vacancy in any
office may be filed by the Board of Directors.
<PAGE>
8
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of shares in this corporation shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificate shall be issued for any share until such share is fully paid.
Section 2. Form. Certificates representing shares in this corporation shall
be signed by the President or Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of this corporation or a facsimile
thereof.
Section 3. Transfer of Stock. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
Section 4. Lost, Stolen or Destroyed Certificates. If the shareholder shall
claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity in such amount and with such sureties, if any, as
the board may reasonably require.
ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committee of directors.
This corporation shall keep at its registered office, or principal place of
business a record of its shareholders, giving the names and addresses of all
shareholders and the number of shares held by each.
<PAGE>
9
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. Any person who shall have been
a holder of record of shares of voting trust certificates therefor at least six
months immediately preceding his demand or shall be the holder of record of, or
the holder of record of voting trust certificates for, at least five percent of
the outstanding shares of the corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose its relevant
books and records of accounts, minutes and records of shareholders and to make
extracts therefrom.
Section 3. Financial Information. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement. The balance sheets and profit
and loss statements shall be filed in the registered office of the corporation
in this state, shall be kept for at least five years, and shall be subject to
inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
EXHIBIT 10.1
ABLEAUCTIONS.COM, INC.
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, $0.001 par value (the "Common Stock"), of
ABLEAUCTIONS.COM, INC., a Nevada corporation (the "Company"). Stock options
granted under this Plan that qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options." Incentive Stock Options and stock options that do not
qualify under Section 422 of the Code ("Non-Qualified Stock Options") granted
under this Plan are referred to collectively as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees and to provide an equity incentive to consultants and other persons
selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered initially by the Board of Directors of the
Company (the "Board"), except that the Board may, in its discretion, establish a
committee composed of two (2) or more members of the Board or two (2) or more
other persons to administer the Plan, which committee (the "Committee") may be
an executive, compensation or other committee, including a separate committee
especially created for this purpose. The Committee shall have the powers and
authority vested in the Board hereunder (including the power and authority to
interpret any provision of the Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. A majority of the members of
the Committee shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of the members present. Any action may be taken by a
written instrument signed by all of the members of the Committee and any action
so taken shall be fully effective as if it had been taken at a meeting. The
Board or, if applicable, the Committee is referred to herein as the "Plan
Administrator."
The Plan shall be administered by the Board or by the Committee which, for
the purposes hereof, shall be composed of two (2) or more members of the Board
who are "Non-Employee Directors" (as defined below), and, as applicable, outside
directors. The term "outside director" shall have the meaning assigned to it
under Section 162(m) of the Code (as amended from time to time) and the
regulations (or any successor regulations) promulgated thereunder ("Section
162(m) of the Code"). The term "Non-Employee Director" shall have the meaning
assigned to it under Rule 16b-3 (as amended from time to time) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor rule or regulatory requirement.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (i) construe and interpret this Plan; (ii) define the terms used
in the Plan; (iii) prescribe, amend and rescind the rules and regulations
relating to this Plan; (iv) correct any defect, supply any omission or reconcile
any inconsistency in this Plan; (v) grant Options under this Plan; (vi)
determine the individuals to whom Options shall be granted under this Plan and
whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option;
(vii) determine the time or times at which Options shall be granted under this
Plan; (viii) determine the number of shares of Common Stock subject to each
Option, the exercise price of each Option, the duration of each Option and the
times at which each Option shall become exercisable; (ix) determine all other
terms and conditions of the Options; and (x) make all other determinations and
interpretations necessary and advisable for the administration of the Plan. All
decisions, determinations and interpretations made by the Plan
-1-
<PAGE>
Administrator shall be binding and conclusive on all participants in the Plan
and on their legal representatives, heirs and beneficiaries.
The Board or, if applicable, the Committee may delegate to one or more
executive officers of the Company the authority to grant Options under this Plan
to employees of the Company who, on the Date of Grant, are not subject to
Section 16 of the Exchange Act with respect to the Common Stock
("Non-Insiders"), and are not "covered employees" as such term is defined for
purposes of Section 162(m) of the Code ("Non-Covered Employees"), and in
connection therewith the authority to determine: (i) the number of shares of
Common Stock subject to such Options; (ii) the duration of the Option; (iii) the
vesting schedule for determining the times at which such Option shall become
exercisable; and (iv) all other terms and conditions of such Options. The
exercise price for any Option granted by action of an executive officer or
officers pursuant to such delegation of authority shall not be less than the
fair market value per share of the Common Stock on the Date of Grant. Unless
expressly approved in advance by the Board or the Committee, such delegation of
authority shall not include the authority to accelerate vesting, extend the
period for exercise or otherwise alter the terms of outstanding Options. The
term "Plan Administrator" when used in any provision of this Plan other than
Sections 2, 5(f), 5(m), and 11 shall be deemed to refer to the Board or the
Committee, as the case may be, and an executive officer who has been authorized
to grant Options pursuant thereto, insofar as such provisions may be applied to
persons that are Non-Insiders and Non-Covered Employees and Options granted to
such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any Related Corporation
(as defined below) ("Employees"). Non-Qualified Stock Options may be granted to
Employees and to such other persons other than directors who are not Employees
as the Plan Administrator shall select. Options may be granted in substitution
for outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. Any person to whom an
Option is granted under this Plan is referred to as an "Optionee." Any person
who is the owner of an Option is referred to as a "Holder."
As used in this Plan, the term "Related Corporation" shall mean any
corporation (other than the Company) that is a "Parent Corporation" of the
Company or "Subsidiary Corporation" of the Company, as those terms are defined
in Sections 424(e) and 424(f), respectively, of the Code (or any successor
provisions) and the regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of two million (2,000,000) shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with respect to
which Options may be granted hereunder is subject to adjustment as set forth in
Section 5(m) hereof. In the event that any outstanding Option expires or is
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option granted to
the same Optionee or to a different person eligible under Section 3 of this
Plan; provided however, that any canceled Options will be counted against the
maximum number of shares with respect to which Options may be granted to any
particular person as set forth in Section 3 hereof.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the
-2-
<PAGE>
Plan Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Plan Administrator in connection with the grant of an Option, all Options
shall be Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive Stock
Option plans of the Company, a Related Corporation or a predecessor corporation)
shall not exceed $100,000, or such other limit as may be prescribed by the Code
as it may be amended from time to time. Any portion of an Option which exceeds
the annual limit shall not be void but rather shall be a Non-Qualified Stock
Option.
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has deemed
to be the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common Stock at
which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion; provided that the per share exercise price for
an Incentive Stock Option or any Option granted to a "covered employee" as such
term is defined for purposes of Section 162(m) of the Code ("Covered Employee")
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith;
provided further, that with respect to Incentive Stock Options granted to
greater-than-ten percent (> 10%) shareholders of the Company (as determined with
reference to Section 424(d) of the Code), the exercise price per share shall not
be less than one hundred ten percent (110%) of the fair market value per share
of the Common Stock at the Date of Grant as determined by the Plan Administrator
in good faith; and, provided further, that Options granted in substitution for
outstanding options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization
involving such other corporation and the Company or any subsidiary of the
Company may be granted with an exercise price equal to the exercise price for
the substituted option of the other corporation, subject to any adjustment
consistent with the terms of the transaction pursuant to which the substitution
is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to paragraph 5(g) below, the expiration date of the Option,
which date shall not be later than ten (10) years from the Date of Grant in the
case of Incentive Stock Options; provided, that the expiration date of any
Incentive Stock Option granted to a greater-than-ten percent ( > 10%)
shareholder of the Company (as determined with reference to Section 424(d) of
the Code) shall not be later than five (5) years from the Date of Grant. In the
absence of action to the contrary by the Plan Administrator in connection with
the grant of a particular Option, and except in the case of Incentive Stock
Options as described above, all Options granted under this Section 5 shall
expire ten (10) years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at the
time of grant of the Option prior to the provision of services with respect to
which such Option is granted; provided, that if no vesting schedule is specified
at the time of grant, the Option shall vest according to the following schedule:
-3-
<PAGE>
Number of Years Percentage of Total
Following Date of Grant Option Vested
- ------------------------------------- ----------------------------------
One 20%
Two 40%
Three 60%
Four 80%
Five 100%
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services related
to the achievement of the performance objectives. Performance objectives shall
be expressed in terms of one or more of the following: return on equity, return
on assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or the
Company's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated basis), a Related Corporation, or a
subdivision, operating unit, product or product line of either of the foregoing.
Performance objectives may be absolute or relative and may be expressed in terms
of a progression or a range. An Option that is exercisable (in full or in part)
upon the achievement of one or more performance objectives may be exercised only
following written notice to the Optionee and the Company by the Plan
Administrator that the performance objective has been achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by
the Plan Administrator at such times and in such amounts as it shall determine
in its sole discretion. The vesting of Options also shall be accelerated under
the circumstances described in Section 5(m) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events: (i) the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5(d) above; (ii) the date of an Optionee's termination of
employment or contractual relationship with the Company or any Related
Corporation for cause (as determined in the sole discretion of the Plan
Administrator); (iii) the expiration of three (3) months from the date of an
Optionee's termination of employment or contractual relationship with the
Company or any Related Corporation for any reason whatsoever other than cause,
death or Disability (as defined below) unless, in the case of a Non-Qualified
Stock Option, the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option; or (iv) the expiration of
one year from termination of an Optionee's employment or contractual
relationship by reason of death or Disability (as defined below) unless, in the
case of a Non-Qualified Stock Option, the exercise period is extended by the
Plan Administrator until a date not later than the expiration date of the
Option. Upon the death of an Optionee, any vested Options held by the Optionee
shall be exercisable only by the person or persons to whom such Optionee's
rights under such Option shall pass by the Optionee's will or by the laws of
descent and distribution of the state or county of the Optionee's domicile at
the time of death and only until such Options terminate as provided above. For
purposes of the Plan, unless otherwise defined in the Agreement, "Disability"
shall mean medically determinable physical or mental impairment which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months or that can be expected to result in death. The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan, determine
the date of an Optionee's termination of employment or contractual relationship.
-4-
<PAGE>
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability. For purposes of this Plan, transfer of employment between or among
the Company and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Company or any Related Corporation. For
purposes of this subsection, employment shall be deemed to continue while the
Optionee is on military leave, sick leave or other bona fide leave of absence
(as determined by the Plan Administrator). The foregoing notwithstanding,
employment shall not be deemed to continue beyond the first ninety (90) days of
such leave, unless the Optionee's re-employment rights are guaranteed by statute
or by contract.
(h) Exercise of Options.
Options shall be exercisable, in full or in part, at any time after
vesting, until termination. If less than all of the shares included in the
vested portion of any Option are purchased, the remainder may be purchased at
any subsequent time prior to the expiration of the Option term. No portion of
any Option for less than fifty (50) shares (as adjusted pursuant to Section 5(m)
below) may be exercised; provided, that if the vested portion of any Option is
less than fifty (50) shares, it may be exercised with respect to all shares for
which it is vested. Only whole shares may be issued pursuant to an Option, and
to the extent that an Option covers less than one (1) share, it is
unexercisable.
Options or portions thereof may be exercised by giving written notice
to the Company, which notice shall specify the number of shares to be purchased,
and be accompanied by payment in the amount of the aggregate exercise price for
the Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or in the case of a Non-Qualified
Stock Option, transferee who takes title to such Option in the manner permitted
by subsection 5(k) hereof. It shall be a condition precedent to the exercise of
any Option granted hereunder that the Holder shall enter into a Stock Transfer
Agreement with the Company.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be
paid to the Company in cash or by certified or cashier's check. In addition, the
Holder may pay for all or any portion of the aggregate exercise price by
complying with one or more of the following alternatives:
(1) by delivering to the Company shares of Common Stock previously
held by such Holder, or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares of Common
Stock received or withheld shall have a fair market value at the date of
exercise (as determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a sufficient
portion of the shares and deliver directly to the Company the amount of sale or
margin loan proceeds to pay the exercise price; or
(3) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
(j) Rights as a Shareholder.
A Holder shall have no rights as a shareholder with respect to any
shares covered by an Option until such Holder becomes a record holder of such
shares, irrespective of whether such Holder has given notice of exercise.
Subject to the provisions of Section 5(m) hereof, no rights shall accrue to a
Holder and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
-5-
<PAGE>
distributions or other rights declared on, or created in, the Common Stock for
which the record date is prior to the date the Holder becomes a record holder of
the shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or (except in the case of an
Incentive Stock Option) pursuant to a qualified domestic relations order, and
shall not be subject to execution, attachment or similar process; provided
however, that any Agreement may provide or be amended to provide that a
Non-Qualified Stock Option to which it relates is transferable without payment
of consideration to immediate family members of the Optionee or to trusts or
partnerships or limited liability companies established exclusively for the
benefit of the Optionee and the Optionee's immediate family members. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares shall
comply with all relevant provisions of law, including, without limitation,
Section 162(m) of the Code, any applicable state securities laws, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder
and the requirements of any stock exchange or automated inter-dealer quotation
system of a registered national securities association upon which such shares
may then be listed, and such issuance shall be further subject to the approval
of counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of such
shares. The inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful issuance and sale
of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares.
As a condition to the exercise of an Option, the Plan Administrator
may require the Holder to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws.
(2) The Holder shall pay to the Company by certified or cashier's
check, promptly upon exercise of an Option or, if later, the date that the
amount of such obligations becomes determinable, all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon exercise of an Option or from a transfer
or other disposition of shares of Common Stock acquired upon exercise of an
Option or otherwise related to an Option or shares of Common Stock acquired in
connection with an Option. Upon approval of the Plan Administrator, a Holder may
satisfy such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock
previously held by such Holder or by the Company withholding shares of
Common Stock otherwise deliverable pursuant to the exercise of the Option,
which shares of Common Stock received or withheld shall have a fair market
value at the date of exercise (as determined by the Plan Administrator)
equal to any withholding tax obligations arising as a result of such
exercise, transfer or other disposition;
-6-
<PAGE>
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Company to pay any
withholding taxes due under this Paragraph 2, with such repayment terms as
the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met and that the Holder has paid or
otherwise satisfied any withholding tax obligation as described in (2) above.
(m) Stock Dividend or Reorganization.
(1) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, subject to applicable law, with respect to
each outstanding Option, proportionately adjust the number of shares of Common
Stock subject to such Option and/or the exercise price per share so as to
preserve the rights of the Holder substantially proportionate to the rights of
the Holder prior to such event, and to the extent that such action shall include
an increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan Administrator,
the Company, the Company's shareholders, or any Holder.
(2) In the event that the presently authorized capital stock of the
Company is changed into the same number of shares with a different par value, or
without par value, the stock resulting from any such change shall be deemed to
be Common Stock within the meaning of the Plan, and each Option shall apply to
the same number of shares of such new stock as it applied to old shares
immediately prior to such change.
(3) If the Company shall at any time declare an extraordinary dividend
with respect to the Common Stock, whether payable in cash or other property, the
Plan Administrator may, subject to applicable law, in the exercise of its sole
discretion and with respect to each outstanding Option, proportionately adjust
the number of shares of Common Stock subject to such Option and/or adjust the
exercise price per share so as to preserve the rights of the Holder
substantially proportionate to the rights of the Holder prior to such event, and
to the extent that such action shall include an increase or decrease in the
number of shares of Common Stock subject to outstanding Options, the number of
shares available under Section 4 of this Plan shall automatically be increased
or decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company, the Company's shareholders, or any
Holder.
(4) The foregoing adjustments in the shares subject to Options shall
be made by the Plan Administrator, or by any successor administrator of this
Plan, or by the applicable terms of any assumption or substitution document.
(5) The grant of an Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, consolidate or dissolve,
to liquidate or to sell or transfer all or any part of its business or assets.
-7-
<PAGE>
6. EFFECTIVE DATE; TERM.
Incentive Stock Options may be granted by the Plan Administrator from time
to time on or after the date on which this Plan is adopted (the "Effective
Date") through the day immediately preceding the tenth anniversary of the
Effective Date. Non-Qualified Stock Options may be granted by the Plan
Administrator on or after the Effective Date and until this Plan is terminated
by the Board in its sole discretion. Termination of this Plan shall not
terminate any Option granted prior to such termination. Any Incentive Stock
Options granted by the Plan Administrator prior to the approval of this Plan by
the shareholders of the Company in accordance with Section 422 of the Code shall
be granted subject to ratification of this Plan by the shareholders of the
Company within twelve (12) months before or after the Effective Date. Any Option
granted by the Plan Administrator to any Covered Employee prior to the approval
of this Plan by the shareholders of the Company in accordance with such Code
provision shall be granted subject to ratification of this Plan by the
shareholders of the Company within twelve (12) months before or after the
Effective Date. If such shareholder ratification is sought and not obtained, all
Options granted prior thereto and thereafter shall be considered Non-Qualified
Stock Options and any Options granted to Covered Employees will not be eligible
for the exclusion set forth in Section 162(m) of the Code with respect to the
deductibility by the Company of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company or any Related
Company, express or implied, that the Company or any Related Company will employ
or contract with an Optionee for any length of time, nor shall it interfere in
any way with the Company's or, where applicable, a Related Company's right to
terminate Optionee's employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
-8-
<PAGE>
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this
Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; provided however, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof shall be made over the objection of
such Holder; further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated without
the consent of Holders. The Plan Administrator may condition the effectiveness
of any such amendment on the receipt of shareholder approval at such time and in
such manner as the Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or regulatory
requirement. Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive Options
under this Plan who are foreign nationals or employed outside the United States
to recognize differences in local law, tax policy or custom.
Effective Date: -------------------.
ABLEAUCTIONS.COM, INC.
- ----------------------------------
Secretary
-9-
EXHIBIT 10.2
ABLEAUCTIONS.COM, INC.
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of the 14th day of October, 1999 (the
"Date of Grant") between ABLEAUCTIONS.COM, INC., a Florida corporation (the
"Company"), and o (the "Optionee"), of o.
WHEREAS the Company's Board of Directors (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock without par value of the Company (the "Common Stock");
WHEREAS the Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options");
WHEREAS the Board has authorized the grant to the Optionee of an option to
purchase a total of o shares of Common Stock (the "Option"), which Option is
intended to be (select one):
X an Incentive Stock Option
-----
a Non-Qualified Stock Option
-----
NOW THEREFORE the Company agrees to offer to the Optionee the option to
purchase, on the terms and conditions set forth herein and in the Plan, o shares
of Common Stock. Capitalized terms not otherwise defined herein will have the
meanings ascribed to them in the Plan.
1. Exercise Price. The exercise price of the Option will be $3.20 per share.
2. Limitation on the Number of Shares. If the Option granted is an Incentive
Stock Option, the number of shares that may be acquired on exercise thereof is
subject to the limitations set forth in Section 5(a) of the Plan.
3. Vesting Schedule. The Option is exercisable in accordance with the following
vesting schedule:
(a) 33.33% of the Option may be exercised after the Date of Grant;
(b) 66.67% of the Option may be exercised after October 14, 2000; and
(c) 100% of the Option may be exercised after October 14, 2001.
<PAGE>
2
4. Option Not Transferable. The Option may not be transferred, assigned,
pledged, or hypothecated in any manner (whether by operation of law or
otherwise) other than by will, by applicable laws of descent and distribution,
or (except in the case of an Incentive Stock Option) pursuant to a qualified
domestic relations order, and will not be subject to execution, attachment, or
similar process; provided however that if the Option represents a Non-Qualified
Stock Option, the Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. On any attempt to transfer, pledge, hypothecate, or
otherwise dispose of the Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or on the sale, levy or attachment, or
similar process on the rights and privileges conferred by the Plan, the Option
will terminate and become null and void.
5. Investment Intent. By accepting the Option, the Optionee represents and
agrees that none of the shares of Common Stock purchased on exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Option, that the Optionee sign an undertaking, in the form reasonably
specified by the Company, that the shares are being purchased only for
investment and without any then-present intention to sell or distribute the
shares.
6. Termination of Employment and Options. A vested Option will terminate, to the
extent not previously exercised, on the occurrence of the first of the following
events:
(a) Expiration: October 14, 2004; except that the expiration date of any
Incentive Stock Option granted to a greater-than-ten-percent (>10%)
shareholder of the Company will not be later than five years from the
Date of Grant;
(b) Termination for Cause: The date of an Optionee's termination of
employment or contractual relationship with the Company or any Related
Corporation for cause (as determined in the sole discretion of the
Plan Administrator);
(c) Termination Due to Death or Disability: The expiration of one year
from the date of the death of the Optionee or cessation of an
Optionee's employment or contractual relationship by reason of
Disability (as defined in Section 5(g) of the Plan). If an Optionee's
employment or contractual relationship is terminated by death, any
Option held by the Optionee will be exercisable only by the person or
persons to whom the Optionee's rights under the Option will pass by
the Optionee's will or by the laws of descent and distribution;
(d) Termination Due to Cessation of Service as a Director: The expiration
of three months from the date an Optionee, if a director of the
Company, ceases to serve as a director of the Company; or
(e) Termination for Any Other Reason: The expiration of three months from
the date of an Optionee's termination of employment or contractual
relationship with the Company or any Related Corporation for any
reason whatsoever other than cause, death or Disability (as defined in
Section 5(g) of the Plan).
<PAGE>
3
Each unvested Option granted pursuant hereto will terminate immediately on
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend, or similar alteration
of the shares of Common Stock covered by this Agreement, the number of shares
and exercise price will be proportionately adjusted as set forth in Section 5(m)
of the Plan.
8. Exercise of Option. The vested portion of the Option will be exercisable, in
full or in part, at any time after vesting, until termination; provided however
that any Optionee who is subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934 with respect to the Common
Stock will be precluded from selling or transferring any Common Stock or other
security underlying an Option during the six months immediately following the
grant of that Option. If less than all of the shares included in the vested
portion of the Option are purchased, the remainder may be purchased at any
subsequent time before the expiration of the Option term. No portion of the
Option for less than 100 shares (as adjusted pursuant to Section 5(m) of the
Plan) may be exercised; provided that if the vested portion of the Option is
less than 100, it may be exercised with respect to all shares for which it is
vested. Only whole shares may be issued pursuant to the Option, and to the
extent that the Option covers less than one share, it is unexercisable.
Each exercise of the Option must be by means of delivery of a notice of
election to exercise (which may be in the form attached hereto as Exhibit A) to
the Company's President at its principal executive office, specifying the number
of shares of Common Stock to be purchased and accompanied by payment in cash by
certified or cashier's cheque in the amount of the full exercise price for the
Common Stock to be purchased. In addition to payment in cash by certified or
cashier's cheque, an Optionee or transferee of an Option may pay for all or any
portion of the aggregate exercise price by complying with one or more of the
following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
that person or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares
of Common Stock received or withheld will have a fair market value at
the date of exercise (as determined by the Plan Administrator) equal
to the aggregate purchase price to be paid by the Optionee on
exercise;
(b) by delivering a properly signed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a
sufficient portion of the shares and deliver directly to the Company
the amount of sale or margin loan proceeds to pay the exercise price;
or
<PAGE>
4
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
9. Holding Period for Incentive Stock Options. In order to obtain the tax
treatment provided for Incentive Stock Options by Section 422 of the Code, the
shares of Common Stock received on exercise of any Incentive Stock Option
pursuant to this Agreement must be sold, if at all, after a date which is later
of two years from the date of this Agreement or one year from the date on which
the Option is exercised. The Optionee agrees to report sales of shares before
the above determined date to the Company within one business day after the sale
is concluded. The Optionee also agrees to pay to the Company, within five
business days after the sale is concluded, the amount necessary for the Company
to satisfy its withholding requirement required by the Code in the manner
specified in Section 5(l)(2) of the Plan. Nothing in this Section 9 is intended
as a representation that Common Stock may be sold without registration under
state and federal securities laws or an exemption therefrom, or that
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Option are subject to
the provisions of the Plan, as it may from time to time be amended, and any
inconsistencies between this Agreement and the Plan, as it may be from time to
time amended, will be governed by the provisions of the Plan, a copy of which
has been delivered to the Optionee and which is available for inspection at the
Company's principal offices.
11. Professional Advice. The acceptance of the Option and the sale of Common
Stock issued pursuant to the exercise of the Option may have consequences under
federal and state tax and securities laws which may vary depending on the
individual circumstances of the Optionee. Accordingly, the Optionee acknowledges
that he or she has been advised to consult his or her personal legal and tax
advisor in connection with this Agreement and his or her dealings with respect
to the Option for the Common Stock. Without limiting other matters to be
considered, the Optionee should consider whether, on exercise of the Option, the
Optionee must file an election with the Internal Revenue Service pursuant to
Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be granted
under the Plan will be exclusively within the discretion of the Plan
Administrator, and nothing contained in the Plan will be construed as giving any
person any right to participate under the Plan. The grant of an Option will in
no way constitute any form of agreement or understanding binding on the Company
or any Related Company, express or implied, that the Company or any Related
Company will employ or contract with an Optionee for any length of time, nor
will it interfere in any way with the Company's or, where applicable, a Related
Company's right to terminate the Optionee's employment at any time, which right
is hereby reserved.
13. Entire Agreement. This Agreement is the only agreement between the Optionee
and the Company with respect to the Option, and this Agreement and the Plan
supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Option.
<PAGE>
5
14. Notices. Any notice required or permitted to be made or given hereunder will
be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: ABLEAUCTIONS.COM, INC.
3112 Boundary Road
Burnaby, British Columbia V5M 4A2
Canada
Attention: Abdul Ladha
The Optionee: o[name]
o[address]
ABLEAUCTIONS.COM, INC.
Per:
- ------------------------------
Abdul Ladha, President
- ------------------------------
Signature of Optionee
o
- ------------------------------
Print Name
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF COMMON STOCK ON EXERCISE OF THIS OPTION. ACCORDINGLY, THIS OPTION
CANNOT BE EXERCISED UNLESS THE OPTION AND THE SHARES OF COMMON STOCK TO BE
ISSUED ON EXERCISE ARE REGISTERED OR AN EXEMPTION FROM REGISTRATION REQUIREMENTS
IS AVAILABLE.
THE SHARES OF COMMON STOCK ISSUED PURSUANT TO THE EXERCISE OF THIS OPTION WILL
BE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF
1933 AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER
STATE AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. THE COMPANY IS NOT OBLIGED TO REGISTER THE SHARES OF COMMON STOCK OR
TO MAKE AVAILABLE ANY EXEMPTION FROM REGISTRATION.
<PAGE>
2
EXHIBIT A
Notice of Election to Exercise
This Notice of Election to Exercise will constitute proper notice pursuant
to Section 5(h) of the 1999 Stock Option Plan (the "Plan") of ABLEAUCTIONS.COM,
INC. (the "Company") and Section 8 of the Stock Option Agreement dated as of the
14th day of October, 1999 between the Company and the undersigned (the
"Agreement").
The undersigned elects to exercise the Optionee's option to purchase
__________ shares of the common stock of the Company at a price of $3.20 per
share, for aggregate consideration of $____________, on the terms and conditions
set forth in the Agreement and the Plan. The aggregate consideration, in the
form specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has signed this Notice this ________ day of _____________,
_________.
- ----------------------------------------------------
Signature
- ----------------------------------------------------
Name (typed or printed)
EXHIBIT 10.3
SHARE PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 1st day of April, 1998.
AMONG:
JEREMY DODD, Businessman, of 1963 Lougheed Highway,
Coquitlam, British Columbia, V5M 4A2
(hereinafter referred to as the "Vendor")
OF THE FIRST PART
AND:
DEXTON TECHNOLOGIES CORPORATION, a company incorporated
pursuant to the laws of British Columbia and having its
registered and records office located at 1700 - 1185 West
Georgia Street, Vancouver, British Columbia, V6E 4E6
(hereinafter referred to as the "Purchaser")
OF THE SECOND PART
AND:
ABLE AUCTIONS (1991) LTD., a company incorporated pursuant
to the laws of British Columbia and having its registered
and records office located at 15152 Fraser Highway, Surrey,
British Columbia, V3R 3P1
(hereinafter referred to as the "Company")
OF THE THIRD PART
WHEREAS:
A. The Vendor is the registered and beneficial owner of 100% of the issued and
outstanding common shares of the Company; and
B. The Vendor has agreed to sell and the Purchaser has agreed to purchase 100%
of the issued and outstanding common shares of the Company, subject to the
following terms and conditions.
<PAGE>
2
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the
promises, covenants, terms, conditions representations and warranties
hereinafter set forth, the parties hereto agree each with the other as follows:
1. INTERPRETATION
1.1 Where used in this Agreement, each of the following words will have
the following meanings:
(a) "Accounts Receivable" means all of the trade accounts, notes and other
debts arising out of the operation of the Business owing to the
Company as at the Closing Date, whether due or to become due as at or
after the Closing Date, and which are described in Schedule "E"
together with those accounts receivable arising in the normal and
ordinary course of the business between the date specified in Schedule
"E" and the Closing Date;
(b) "Act" means the Securities Act of British Columbia and the Rules
thereunder, both as amended from time to time;
(c) "Assets" means all of personal property, choses in action, intangible
or intellectual property, including patents, copyrights, trade-marks,
trade names or licenses, and all other assets of whatsoever nature
owned by the Company, including those described in Schedule "B";
(d) "Business" means the business carried on by the Company described as
the sale of used office equipment in the cities of Coquitlam and
Richmond;
(e) "Closing Date" means the date of closing of the transactions
contemplated hereby as defined in paragraph 6.1 of this Agreement;
(f) "Company" means Able Auctions (1991) Ltd.;
(g) "Contracts" means all of the material commitments, agreements,
contracts, arrangements, instruments, leases and other documents
entered into by the Company, by which the Company is bound or to which
the Company or the Assets are subject (other than the Permitted Liens)
and which are described in Schedule "F";
(h) "Exchange" means the Vancouver Stock Exchange;
(i) "Indebtedness" means any and all trade accounts, debts, duties,
endorsements, guarantees, liabilities, obligations, responsibilities
and undertakings of the Company assumed, created, incurred or made,
whether voluntary or involuntary, however incurred or made or arising,
whether due or not due (except accrued employees' salaries which are
not yet due), absolute, inchoate or contingent, liquidated or
<PAGE>
3
unliquidated, determined or undetermined, direct or indirect, express
or implied, and whether the Company may be liable individually or
jointly with others, which are described in Schedule "C" (other than
Permitted Liens), as at the date specified in Schedule "C";
(j) "Lien" means any mortgage, debenture, charge, hypothecation, pledge,
lien or other security interest or encumbrance of whatever kind or
nature, regardless of form and whether consensual or arising by laws,
statutory or otherwise, that secures the payment of any Indebtedness
or the performance of any obligation or creates in favour of or grants
to any Person any proprietary right;
(k) "Person" means an individual, corporation, body corporate,
partnership, joint venture, society, association, trust or
unincorporated organization or any trustee, executor, administrator,
or other legal representative;
(l) "Permitted Liens" means the Liens described in Schedule "D";
(m) "Purchaser" means Dexton Technologies Corporation;
(n) "Shares" means 100 Class "A" shares in the capital of the Company,
representing 100% of the issued and outstanding shares of the Company,
to be transferred to the Purchaser hereunder; and
(o) "Vendor" means Jeremy Dodd.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this agreement, including the preamble and the
schedules hereto, as it may from time to time be supplemented or
amended in effect;
(b) all references in this Agreement to a designated "paragraph" or other
subdivision or to a Schedule is to the designated paragraph or other
subdivision of, or Schedule, to this Agreement;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular paragraph or other subdivision or Schedule;
(d) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the
scope, extent or intent of this Agreement or any provision hereof;
(e) the singular of any term includes the plural, and vice versa, the use
of any term is equally applicable to any gender and, where applicable,
a body corporate, the word "or" is not exclusive and the word
"including" is not limited (whether or not non-limited language, such
as "without limitation" or "but not limited" to words of
<PAGE>
4
similar import, is used with reference thereto);
(f) any accounting term not otherwise defined has the meanings assigned to
it in accordance with generally accepted accounting principles
applicable to Canada;
(g) any reference to a statute includes and is a reference to that statute
and to the regulations made pursuant thereto, with all amendments made
thereto and in force from time to time, and to any statute or
regulations that may be passed which has the effect of supplementing
or superseding that statute or regulations;
(h) except as otherwise provided, any dollar amount referred to in this
Agreement is in Canadian funds; and
(i) any other term defined within the text of this Agreement has the
meaning so ascribed.
1.3 The following are the Schedules to this Agreement:
Schedule Description
-------- -----------
A Financial Statements of the Company
B List of Assets
C List of Indebtedness
D List of Permitted Liens
E List of Accounts Receivable
F List of Contracts
G Terms of Employment
H Consulting Agreements
2. PURCHASE AND SALE OF SHARES
2.1 Subject to the conditions and upon the terms hereinafter set forth,
the Purchaser agrees to purchase and the Vendor agrees to sell the Shares.
2.2 The purchase price for the Shares will be $275,000 to be paid by the
Purchaser as follows:
(a) by the payment to the Vendor of the cash sum of $175,000 on the
Closing Date; and
(b) by the payment to the Vendor of the cash sum of $100,000 within 120
days of the Closing Date, less applicable deductions pursuant to
paragraph 3.2 hereof.
<PAGE>
5
3. REPRESENTATIONS AND WARRANTIES OF THE VENDOR
3.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents and warrants to the Purchaser as follows:
(a) the Vendor is the registered holder and beneficial owner of the
Shares, being all of the issued and outstanding shares in the capital
of the Company, and the Vendor has no other interest, legal or
beneficial, direct or indirect, in any other securities in the capital
of the Company or in the Assets or Business of the Company;
(b) the Shares are free and clear of all liens, mortgages, encumbrances,
security instruments, equities or claims of any nature or kind
whatsoever, and to the best of the knowledge of the Vendor, the Shares
are validly issued and outstanding as fully paid and non-assessable;
(c) no Person has any agreement or option or a right capable of becoming
an agreement for the purchase of the Shares;
(d) the execution and delivery of this Agreement and the completion of the
transaction contemplated hereby has been duly and validly authorized
by all necessary corporate action on the part of the Vendor and the
Company;
(e) the Vendor has the power and capacity and good and sufficient right
and authority to enter into this Agreement on the terms and conditions
herein set forth and to transfer the legal and beneficial title and
ownership of the Shares to the Purchaser;
(f) this Agreement constitutes a legal, valid and binding obligation of
the Vendor and the Company enforceable against the Vendor and the
Company in accordance with its terms except as may be limited by laws
of general application affecting the rights of creditors;
(g) the performance of this Agreement will not be in violation of any
agreement or other instrument to which the Vendor is a party;
(h) the Vendor is a resident of Canada as that term is defined in
the Income Tax Act (Canada);
(i) the Company is a corporation duly incorporated and validly existing
under the laws of the Province of British Columbia, and will on the
Closing Date be in good standing with respect to the filing of annual
reports and has the power, authority and capacity to enter into this
Agreement and to carry out its terms;
(j) the authorized capital of the Company is 10,000 shares without par
value divided into 5,000 Class "A" and 5,000 Class "B" shares of which
there are currently 100 Class "A" shares issued and outstanding held
by the Vendor;
<PAGE>
6
(k) no Person has any agreement or option or a right capable of becoming
an agreement:
(i) to require the Company to issue any further or other
securities in its capital or to convert or exchange any
securities into or for shares in the capital of the Company;
(ii) for the purchase, subscription, allotment or issuance of any
of the unissued shares in the capital of the Company;
(iii) to require the Company to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in the
capital of the Company;
(l) the unaudited financial statements of the Company for the period ended
November 30, 1997, which will be attached hereto as Schedule "A", are
substantially true and correct in every material respect and present
fairly the financial position of the Company and the results of its
operations for the periods then ended, in accordance with generally
accepted accounting principles applied on a basis consistent with that
of previous years;
(m) since November 30, 1997:
(i) there have been no material adverse changes in the corporate
or financial affairs or operations of the Company;
(ii) the Company has discharged or satisfied or paid any Liens or
Indebtedness other than current Indebtedness in the ordinary
course of business;
(iii) no single capital expenditure has been authorized or made by
the Company which exceeds $5,000 without full disclosure to
the Purchaser;
(iv) neither the Company has waived or surrendered any right of
material value;
(n) there is no Indebtedness of the Company which is not disclosed or
reflected in Schedules "A" and "C", and the Company has not
guaranteed, or agreed to guarantee, any debt, liability or other
obligation of any Person;
(o) on the Closing Date the Indebtedness of the Company (including the
Permitted Liens) will not exceed $5,000;
(p) the Company is not indebted nor under obligation to the Vendor or any
of the directors, officers, employees or affiliates of the Company and
specifically the Company is not liable to pay any outstanding salaries
or wages, except in the ordinary course of business;
(q) neither the Vendor nor any officer, director or employee of the
Company is indebted or under obligation to the Company on any account
whatsoever;
<PAGE>
7
(r) no dividends or other distribution on any shares in the capital of the
Company have been made, declared or authorized;
(s) the Company has the corporate power to own the Assets owned by it as
shown in Schedule "B", and to carry out the Business and is duly
registered and qualified to carry on business in the Province of
British Columbia and all other jurisdictions in which it does so;
(t) the Company has good and marketable title or rights to and possession
of all the Assets free and clear of all Liens, except the Permitted
Liens, and neither the Vendor nor any of his family or affiliates own
any Assets used by the Company;
(u) since November 30, 1997, the Company has conducted the Business in the
ordinary course and has maintained the Assets in good condition,
repair and working order and suitable in all respects for the use to
which they are intended;
(v) the Accounts Receivable of the Company are bona fide and collectible
and are not subject to defences, counterclaims or set-off;
(w) the memorandum and articles of the Company have not been altered since
the incorporation of the Company, except as disclosed in the minute
books of the Company, and all such alterations have been duly approved
and registered with the Registrar of Companies for the Province of
British Columbia;
(x) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the
knowledge of the Vendor threatened against or affecting the Company at
law or in equity or before or by any court or federal, provincial,
state, municipal or other governmental authority, department,
commission, board, bureau or agency;
(y) to the best knowledge of the Vendor, the Company is not in breach or
violation of any laws, ordinances, statutes, regulations, by-laws,
judgments, orders or decrees to which it is subject or which apply to
it or of any patents, copyrights, trade-marks or licenses held by any
other Person;
(z) the Company has obtained all permits, certificates, approvals,
registrations and licenses which are required for the operation of the
Business as it is presently being conducted, and no violations thereof
have been experienced, noted, or recorded, and no proceeding is
pending or threatened to revoke or limit any of them;
(aa) the Company has not experienced nor is the Vendor aware of any
occurrence or event which has had, or might reasonably be expected to
have, a materially adverse effect on the Business or the results of
its operations;
<PAGE>
8
(ab) all material transactions of and the Company have been promptly and
properly recorded or filed in or with its respective books and
records, and the minute books of the Company contain all records of
the meetings and proceedings of shareholders and directors thereof;
(ac) the performance of this Agreement and the completion of the
transactions contemplated hereby will not conflict with or be in
violation of the articles of incorporation and by-laws of the Company
or of any agreement or other instrument to which the Vendor or the
Company is a party and will not give any Person any right to terminate
or cancel any agreement or any right, license, permit or other benefit
enjoyed by the Company and will not result in the creation or
imposition of any lien, encumbrance or restriction of any nature
whatsoever in favour of a third party upon or against the assets of
the Company;
(ad) the Company does not own, directly or indirectly, any shares or
interest in any other Person;
(ae) the only present directors and officers of the Company are as follows:
Name: Positions:
----- ----------
Jeremy Dodd President/Secretary/Director
(af) set out in Schedule "F" is a true and correct listing of the only
valid and outstanding Contracts of the Company;
(ag) all of the Contracts set out in Schedule "F" have been approved by the
Board of Directors of the Company and the Company is not in material
breach of any of the terms, conditions, covenants or provisions of, is
in default under, or has done or omitted to do anything which, with
the giving of notice or lapse of time or both, would constitute a
breach of or default under any Contract;
(ah) the name of each present employee of the Company, the duration of the
employment of each such employee with the Company and the
remuneration, benefit obligations of the Company, and accrued vacation
pay in respect of each such employee is accurately set out in Schedule
"G", and the full amounts of salaries, pensions, bonuses, commissions
and other remuneration of any nature, including severance pay and
unpaid earned wages of the present or former officers, directors,
employees, salesmen, consultants and agents of the Company, as at the
Closing Date, will have been paid up to the most recent pay day;
(ai) since November 30, 1997, the Company has not increased the pay of or
paid or agreed to pay any pension, bonus, share of profits or other
similar benefit to or for the benefit of any agent, employee, director
or officer of the Company;
<PAGE>
9
(aj) the Company does not have any Contracts, pension plans, profit sharing
plans, bonus plans, undertakings, or arrangements whether oral,
written or implied with employees, lessees, licensees, managers,
accountants, suppliers, agents, distributors, officers, directors,
lawyers, or others which cannot be terminated on not more than one
month's notice;
(ak) there are no pension, profit sharing, incentive, bonus or similar
plans or other compensation plans affecting the Company and the
Company has no unfunded or unpaid liability in respect of any such
plans except for the monthly remittances paid in respect of U.I.C.,
C.P.P. and Workers' Compensation;
(al) the Company has been assessed for federal and provincial income tax
for all years to and including the period ended November 30, 1997, and
the Company has withheld and remitted to Revenue Canada, or other
applicable tax collecting authority all amounts required to be
remitted to them respecting payments to employees or to non-residents,
or otherwise and has paid all instalments of corporate taxes due and
payable;
(am) all tax returns, filings and reports of the Company required by law to
be filed prior to the date hereof including all provincial, federal
and state income tax returns, all returns and filings pertaining to
compensation of employees of the Company for job related injuries
required pursuant to any state or federal law and any other tax
returns applicable to the Company have been filed and are true,
complete and correct, and all taxes and other government charges
including all income, excise, sales, business and property taxes and
other rates, charges, assessment, levies, duties, taxes,
contributions, fees and licences required to be paid have been paid,
and if not required to be paid as at the date hereof, have been
accrued in the financial statements contained in Schedule "A" hereto;
(an) adequate provision has been made for taxes payable by the Company for
which tax returns are not yet required to be filed and there are no
agreements, waivers or other arrangements providing for an extension
of time with respect to the filing of any tax return by or payment of
any tax, governmental charge or deficiency by the Company, and to the
knowledge of the Vendor, there are no contingent tax liabilities or
any grounds which would prompt a re-assessment;
(ao) the Company has made all elections required to be made under
applicable income tax legislation in Canada, or other tax legislations
in connection with any distributions by the Company and all such
elections were true and correct and in the prescribed forms and were
made within the prescribed time periods.
3.2 The representations, warranties, covenants and agreements by the
Vendor contained in this Agreement or any certificates or documents delivered
pursuant to the provisions hereof or in connection with the transaction
contemplated hereby will be true at and as of the Closing Date of this Agreement
as though such representations and warranties were made at and as of such time.
Notwithstanding any investigations or inquiries made by the Purchaser prior to
the execution of this
<PAGE>
10
Agreement or the waiver of any condition by the Purchaser, the representations,
warranties, covenants and agreements of the Vendor will survive the execution
and closing of this Agreement and notwithstanding the purchase and sale herein
provided for, will continue in full force and effect for one year from the
Closing Date. In the event that any of the representations and warranties herein
are found to be incorrect or there is a breach of any covenant or agreement of
the Vendor, which incorrectness or breach will result in any loss or damage
sustained directly or indirectly by the Purchaser, then the Vendor will pay the
amount of such loss or damage to the Purchaser within thirty (30) days of
receiving notice thereof and the Purchaser will be entitled to deduct such sum
from the balance of the purchase price due 120 days from the Closing Date.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Vendor to enter into and consummate this
Agreement, the Purchaser represents and warrants to the Vendor as follows:
(a) the Purchaser is a corporation duly incorporated and validly existing
under the laws of the Province of British Columbia, and is in good
standing with respect to the filing of annual reports with the
Registrar of Companies for British Columbia;
(b) the execution and delivery of this Agreement and the completion of the
transaction contemplated hereby has been duly and validly authorized
by all necessary corporate action on the part of the Purchaser;
(c) this Agreement constitutes a legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with
its terms except as may be limited by laws of general application
affecting the rights of creditors;
(d) the Purchaser is a "reporting issuer" in British Columbia within the
meaning of the Act;
(e) the Purchaser is a resident of Canada within the meaning of the Income
Tax Act (Canada);
(f) the Purchaser is not a "non-Canadian" for purposes of and within the
meaning of the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.);
(g) the execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein to the
Purchaser, and the completion of the transactions contemplated hereby,
will not constitute or result in a violation or breach or default
under:
(i) any term or provision of any of the memorandum, articles, or
other constating documents of the Purchaser;
<PAGE>
11
(ii) the terms of any indenture, agreement, instrument or
understanding or other obligation or restriction to which
the Purchaser is a party or by which it is bound; or
(iii) any term or provision of any licenses, registrations or
qualification of the Purchaser or any court, governmental
authority or regulatory body or any applicable law or
regulation of any jurisdiction.
5. COVENANTS OF THE PARTIES
5.1 Between the date of this Agreement and the Closing date, the Company
will not:
(a) issue, or enter into any agreements to issue, any securities of the
Company, including without limitation, shares, warrants, options,
convertible securities or rights to purchase shares;
(b) redeem, purchase or otherwise acquire or commit to acquire any shares
in the capital of the Company;
(c) amend its Charter documents;
(d) effect any subdivision, consolidation or reclassification of any of
the shares of the Company;
(e) enter into any Contracts of any nature whatsoever except with
the prior written consent of the Purchaser;
(f) purchase or sell any Assets of the Company except inventory bona fide
sold in the ordinary course of business to Persons at arm's length to
the Company and its directors and officers;
(g) make any capital expenditure in excess of $5,000.
5.2 The Vendor and the Company will prior to the Closing Date:
(a) permit, at all reasonable times, the Purchaser and its representatives
full access during normal business hours to the Assets, books and
records, Contracts, minute book and share register of the Company and
give the Purchaser and its representatives such information about the
Company as may be reasonably required;
(b) terminate all Contracts, whether written or verbal, for the provision
of management, administrative or consulting services by the Vendor;
and
(c) deliver to the Purchaser the unaudited financial statements of the
Company for the period ended November 30, 1997, to be attached hereto
as Schedule "A".
<PAGE>
12
5.3 The Vendor and the Purchaser will complete an inspection and inventory
of the Assets upon execution of this Agreement.
5.4 Between the date of this Agreement and the Closing Date, the Vendor
will:
(a) cause the Company to conduct the Business and affairs diligently and
only in the ordinary course;
(b) cause the Company to preserve and maintain the customers, suppliers
and goodwill of the Company and the Assets and the Business;
(c) cause the Company to preserve and maintain the customers, suppliers
and goodwill of the Company and the Assets and the Business;
(d) not permit the Company to make or agree to make any payment to any
director, officer, employee or agent of the Company except in the
ordinary course of business and at the regular rates of salary and
commission for such person or as reasonable reimbursement for expenses
incurred by such person in connection with the Company.
6. CLOSING MATTERS
6.1 In this Agreement, the "Closing Date" means the date mutually agreed
to by the parties which will be within five business days of the receipt of the
approval which may be required by paragraph 6.2 and the fulfilment or waiver of
all other conditions of closing, which approval and conditions must be obtained,
fulfilled or waived not later than March 31, 1998. If the transactions
contemplated hereby do not close by March 31, 1998, then this Agreement will be
terminated unless the parties mutually agree to extend the Closing Date, such
extension not to be unreasonably withheld. On the Closing Date, the Vendor and
the Purchaser will complete the transactions contemplated by this Agreement and
deliver the documents herein described to complete the transactions. The closing
will be held at such place as mutually agreed by the parties, failing which the
closing will be held at the offices of Page Fraser & Associates, Suite 1700,
1185 West Georgia Street, Vancouver, British Columbia, the solicitors for the
Purchaser.
6.2 The obligations of the parties to complete the transactions
contemplated by this Agreement may be subject to the acceptance for filing by
the Exchange of this Agreement. The parties agree to cooperate fully in the
obtaining of such approval if necessary and agree to provide such further and
other documents and assurances to obtain such approval, provided that no such
documents and assurances change the substance of this Agreement.
6.3 The obligation of the Purchaser to complete the transactions
contemplated hereby is subject to the following conditions that:
(a) the Company has an aggregate cash balance in all its bank accounts of
at least $15,000 on the Closing Date;
<PAGE>
13
(b) the Company has no Indebtedness (including the Permitted Liens) in
excess of $5,000 on the Closing Date;
(c) the Vendor and the Purchaser have completed an inspection and
inventory of the Assets satisfactory to the Purchaser;
(d) the representations and warranties of the Vendor as set forth in
paragraph 3.1 hereof will be true and correct in every particular as
if such warranties and representations had been made by the Vendor on
the Closing Date;
(e) all covenants and agreements to be performed by the Vendor and the
Company hereunder will have been performed or complied with;
(f) all documents to be delivered by the Vendor under paragraph 6.5 will
have been delivered.
The conditions set forth in this paragraph 6.3 are for the exclusive
benefit of the Purchaser and may be waived by it in writing in whole or in part
on or before the Closing Date, but save as so waived, the completion by the
Purchaser of the transactions contemplated hereby will not prejudice or affect
in any way the rights of the Purchaser in respect of the warranties and
representations of the Vendor set forth in paragraph 3.1 and such warranties and
representations of the Vendor will survive the Closing Date for a period of one
year.
6.4 The obligations of the Vendor to complete the transactions
contemplated hereby are subject to the following conditions that:
(a) the representations and warranties of the Purchaser as set forth in
paragraph 4.1 hereof will be true and correct in every particular as
if such warranties and representations had been made by the Purchaser
on the Closing Date;
(b) all covenants and agreements to be performed by the Purchaser
hereunder will have been performed or complied with;
(c) all documents to be delivered by the Purchaser under paragraph 6.6
will have been delivered.
The conditions set forth in this paragraph 6.4 are for the exclusive
benefit of the Vendor and may be waived by him in writing in whole or in part on
or before the Closing Date, but save as so waived, the completion by the Vendor
of the transactions contemplated hereby will not prejudice or affect in any way
the rights of the Vendor in respect of the warranties and representations of the
Purchaser set forth in paragraph 4.1 and such warranties and representations of
the Purchaser will survive the Closing Date for a period of one year.
<PAGE>
14
6.5 On the Closing Date, the Vendor will deliver or cause to be delivered
to the Purchaser the following:
(a) all corporate records, books of account, Contracts, registers and
documents of the Company, including the minute book and corporate seal
of the Company;
(b) a legal opinion of the solicitors of the Vendor or the Company that
the Shares were legally created, and are fully paid and
non-assessable; and that the Company has taken all necessary corporate
actions to authorize and approve the transfer of the Shares to the
Purchaser; and that the transfer will not breach or cause a breach of
any terms of the memorandum and articles of the Company;
(c) certificate of the Vendor confirming the amount of the Indebtedness of
the Company, the accurateness of all representations and warranties
contained in paragraph 3.1 hereof, the fulfilment of all covenants and
conditions hereunder, unless waived, and such other matters as the
Purchaser may reasonably require;
(d) sequential resignations in writing of all current directors and
officers of the Company, except for the Vendor, and sequential
appointments of two new directors and officers of the Company as
nominated by the Purchaser evidenced by duly executed resolutions of
the directors of the Company;
(e) duly executed resolutions of the Company changing the authorized
signatories of all corporate bank accounts to nominees of the
Purchaser, and changing the registered and records office of the
Company to the office of the Purchaser;
6.6 On the Closing Date, the Purchaser will deliver to the Vendor the
following:
(a) the sum of $175,000 in cash;
(b) a copy of the approval letter, if any, required under paragraph 6.2
hereof; and
(c) Consulting Agreements, duly executed by the Company and substantially
in the form attached hereto as Schedule "H".
7. TRANSACTION EXPENSES
7.1 Each party to this Agreement will bear all costs and expenses incurred
by it in negotiating this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. All costs and expenses related to
satisfying any condition or fulfilling any covenant contained in this Agreement
will be borne by the party whose responsibility it is to satisfy the condition
or fulfil the covenant in question. Without limiting the generality of the
foregoing, the Purchaser will bear all costs and expenses related to obtaining
the approval of the Exchange which may be required by paragraph 6.2, except to
the extent that any documentation or information is required to be provided by
the Vendor to complete the same, in which event the cost of providing that
documentation or information will be to the account of the Vendor.
<PAGE>
15
8. INDEMNITY
8.1 The Vendor will indemnify and hold harmless the Purchaser from and
against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or nonfulfillment of any
covenant on the part of the Vendor or the Company under this Agreement
or from any misrepresentation in or omission from any certificate or
other instrument furnished or to be furnished by the Vendor to the
Purchaser hereunder;
(b) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses incidental to the
foregoing;
provided that the Purchaser will have provided to the Vendor written notice of
its claim for such indemnification on or before the day which is one year from
the Closing Date.
9. NOTICES
9.1 All notices, requests, demands and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered by courier
or sent by prepaid registered mail addressed to the addressee at the address
appearing on the first page hereof or to such other address as may be given in
writing by the parties hereto, and will be deemed to have been received, if
delivered, on the date of delivery and if mailed as aforesaid, then on the sixth
business day following the posting thereof.
10. GENERAL
10.1 This Agreement will enure to the benefit of and will be binding upon
the parties and their heirs, executors, administrators, successors and assigns.
10.2 Time will be of the essence of this Agreement.
10.3 The terms and provisions herein contained constitute the entire
agreement between the parties and will supersede all previous oral or written
communications regarding the purchase and sale of the Shares.
10.4 If any part of this Agreement is held invalid or unenforceable by a
Court of law, then this Agreement will be read as if such invalid or
unenforceable provision were removed.
10.5 This Agreement may be executed in several parts in the same form and
such parts as so executed will together form one original agreement, and such
parts will be read together and construed as if all signing parties hereto had
executed one copy of this Agreement.
10.6 This Agreement will be governed by and construed in accordance with
the laws of the Province of British Columbia and the parties will attorn to the
jurisdiction of the Courts thereof.
<PAGE>
16
IN WITNESS WHEREOF the parties have duly executed this Agreement on the day
and year first above written.
SIGNED, SEALED AND DELIVERED by )
JEREMY DODD in the presence of: )
)
/s/ Edison Ho )
- ----------------------------- )
Signature )
)
5990 6th Street ) /s/ Jeremy Dodd
- ----------------------------- ) ------------------------------
Address ) JEREMY DODD
)
Accountant )
- ----------------------------- )
Occupation )
THE CORPORATE SEAL of DEXTON )
TECHNOLOGIES CORPORATION was )
hereto affixed in the presence of: )
)
)
/s/ Abdul Ladha ) c/s
- ----------------------------- )
)
)
- ----------------------------- )
)
THE CORPORATE SEAL of ABLE )
AUCTIONS (1991) LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Jeremy Dodd ) c/s
- ----------------------------- )
)
- ----------------------------- )
)
This is page 16 of the Share Purchase Agreement dated for reference the 1st day
of April, 1998 among Jeremy Dodd, Dexton Technologies Corporation and Able
Auctions (1991) Ltd.
<PAGE>
SCHEDULE "A"
Financial Statements
Unaudited Financial Statements for the Company for the period ended
November 30, 1997.
<PAGE>
SCHEDULE "B"
List of Assets
Description Number of Items
----------- ---------------
Office Desks 284
Used Chairs 872
New Chairs 41
Filing Cabinets 205
Bookshelves 50
Miscellaneous Tables 143
Boardroom Tables 24
Dividers 156
Miscellaneous Items 164
Computers 7
Printers 5
Copiers 6
Fax Machines 2
Safe 1
Miscellaneous Electronics 25
Total Value = $100,000.00
<PAGE>
SCHEDULE "C"
List of Indebtedness as at April 1, 1998
----------------------------------------
There is no indebtedness in the Company.
<PAGE>
SCHEDULE "D"
List of Permitted Liens
-----------------------
There are no Permitted Liens of the Company.
<PAGE>
SCHEDULE "E"
List of Accounts Receivable as at April 1, 1998
-----------------------------------------------
There are no Accounts Receivable.
<PAGE>
SCHEDULE "F"
List of Contracts
-----------------
There are no material contracts.
<PAGE>
SCHEDULE "G"
Terms of Employment
-------------------
There are no employees of the Company, except such employees as are reflected
in the Employment Agreements attached hereto as Schedule "H".
<PAGE>
SCHEDULE "H"
Employment Agreements
---------------------
(Attach agreements here)
EXHIBIT 10.4
SHARE PURCHASE AGREEMENT
DATED FOR REFERENCE THE 9th DAY OF JULY 1999 (the "Reference Date"),
BETWEEN: DEXTON TECHNOLOGIES CORPORATION, a corporation incorporated
under the laws of the Province of British Columbia having a
place of business at 3112 Boundary Road, Burnaby, British
Columbia, V5M 4A2
(the "Shareholder");
AND: ABLE AUCTIONS (1991) LTD., a corporation incorporated under
the laws of the Province of British Columbia having a place of
business at 1963 Lougheed Highway, Coquitlam, British
Columbia, V3K 3T8
("Able Auctions");
AND: ABLEAUCTIONS.COM, INC. (formerly J.B. FINANCIAL SERVICES, INC.),
a company incorporated under the laws of the State of Florida
having a place of business at 688 - 6 Ishikawa, Kanagawa,
Japan, 252 0815
(the "Purchaser");
WHEREAS:
A. The authorized share capital of Able Auctions consists of 10,000 shares
without par value divided into 5,000 Class "A" shares and 5,000 class "B"
shares, of which only 100 Class "A" shares (the "Able Auctions Shares") are
issued and outstanding;
B. The Shareholder is the registered and beneficial owner of all the Able
Auctions Shares;
C. Able Auctions owes the Shareholder a total of CDN$1,304,843 comprised of a
shareholder loan of CDN$741,000 (the "Shareholder Loan") and indebtedness of
CDN$563,843 (the "Indebtedness"); and
D. The Shareholder has agreed to sell the Able Auctions Shares and the
Shareholder Loan to the Purchaser and the Purchaser has agreed to purchase the
Able Auctions Shares and the Shareholder Loan from the Shareholder in exchange
for cash and voting common shares of the Purchaser, on the following terms and
conditions;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree (the
"Agreement") as follows:
1. SHARE PURCHASE
1.1 Subject to the terms and conditions of this Agreement, the Shareholder
agrees to sell to the Purchaser and the Purchaser agrees to purchase from the
Shareholder, all of the Able Auctions Shares and the Shareholder Loan, for a
total purchase price (the "Purchase Price") of CDN$1,562,900 (determined as of
the Reference Date, using an agreed exchange rate of CDN$1.46 = US$1.00),
comprised of CDN$1,541,000 (the "Cash Portion") and 1,500,000 voting common
shares of the
<PAGE>
Purchaser (the "JBF Shares") with an aggregate value of US$15,000 (at the deemed
price of US$0.01 per JBF Share).
1.2 The Purchase Price shall be allocated as follows:
(a) CDN$821,900 to the Able Auctions Shares, comprised of the value of the
JBF Shares plus CDN$800,000 of the Cash Portion; and
(b) CDN$741,000 to the Shareholder Loan, comprised of the balance of the
Cash Portion.
1.3 The issuance of the JBF Shares has not been approved or disapproved by the
United States Securities and Exchange Commission, any state securities agency,
or any foreign securities agency, and the Purchaser is not registered under the
United States Securities Exchange Act of 1934.
1.4 The transactions contemplated under this Agreement (the "Transactions")
shall be completed (the "Completion") at the offices of the Purchaser's
solicitors, Messrs. Campney & Murphy, 2100 - 1111 West Georgia Street,
Vancouver, British Columbia, or at such other place as may be agreed between the
parties, at 11:00 o'clock a.m. local time in Vancouver, B.C., or at such other
time as may be agreed between the parties, (the "Time of Closing") on 10 August
1999, or on such other date as may be agreed between the parties, (the "Closing
Date").
1.5 The Purchaser has paid to the Shareholder's solicitors, Page Fraser &
Associates, in trust, a deposit of US$50,000 (the "Deposit"), which shall be
handled as follows:
(a) the Deposit shall be held in trust in U.S. currency until disbursed as
described below, and any interest earned on the Deposit shall be paid
to the Law Society of British Columbia;
(b) if the Transactions complete as contemplated herein, then the Deposit
shall be converted into Canadian currency on the Closing Date and paid
in accordance with Article 6 of this Agreement on Completion on
account of the Cash Portion;
(c) if the Shareholder removes or waives all of the conditions for its
benefit, but any of the Transactions do not complete due to default or
breach of the Purchaser, then CDN$25,000 of the Deposit shall be
converted into Canadian currency and paid to the Shareholder as
liquidated damages in full and final satisfaction of any claim the
Shareholder may have, and the balance of the Deposit shall be repaid
to the Purchaser in U.S. currency;
(d) if either the Shareholder or the Purchaser does not remove or waive a
condition for its benefit, then the Deposit shall be repaid to the
Purchaser in U.S. currency and the parties shall have no further
obligations to each other;
(e) if the Purchaser removes or waives all of the conditions for its
benefit, but any of the Transactions do not complete due to default or
breach of the Shareholder or Able Auctions, then the Deposit shall be
repaid to the Purchaser in U.S. currency without prejudice to any
other claim the Purchaser may have; or
(f) as may otherwise be directed by the parties jointly in writing or by
order of a Court of competent jurisdiction.
-2-
<PAGE>
2. CONDITIONS PRECEDENT
2.1 The Purchaser's obligation to carry out the terms of this Agreement and to
complete its transactions contemplated under this Agreement is subject to the
fulfilment to the satisfaction of the Purchaser of each of the following
conditions that:
(a) on or before 30 July 1999 (the "Subject Removal Date"), the Purchaser
shall have been able to complete the Purchaser's Investigation
(defined below) with results to its reasonable satisfaction;
(b) on or before the Subject Removal Date, the Purchaser shall have
restructured or otherwise altered its share capital so that the
Purchaser's authorized capital is sufficient to permit issuance of the
JBF Shares, and so that immediately after issuance of the JBF Shares
and completion of the Financing (defined below), the number of the JBF
Shares shall be equal to at least 10% of the total number of shares of
the Purchaser issued and outstanding (the "Outstanding Shares");
(c) on or before the Closing Date, the Purchaser shall have arranged a
financing (the "Financing") to raise at least US$3,000,000 but not
more than US$3,600,000, to complete at the Time of Closing,
immediately after issuance of the JBF Shares, to be used to pay the
Cash Portion and otherwise for the Purchaser's working capital
purposes, through issuance of shares and share purchase warrants
expected to be priced at US$3.00 per unit, with each unit expected to
be comprised of one share of the Purchaser and one-half of a warrant
to purchase one further share of the Purchaser for US$3.00 in the
first year following the issuance of the units, or US$3.50 per share
in the second year following issuance of the units;
(d) on or before the Subject Removal Date, the directors and, if required,
the shareholders of the Purchaser shall have approved this Agreement
and all the transactions of the Purchaser contemplated hereunder;
(e) at the Time of Closing, the solicitors for the Shareholder shall
provide an opinion dated as of the Closing Date, substantially in the
form of Schedule A to this Agreement (the "Able Auctions Solicitor
Opinion");
(f) at the Time of Closing, the Shareholder shall provide originally
executed written confirmation from Canadian Imperial Bank of Commerce
("CIBC") that, upon receipt of the Cash Portion, CIBC will release the
security registered at the British Columbia Personal Property Security
Registry (the "PPSR") under base registration no.s 7862078 and 7921207
(the "CIBC Security") and all other claims against and security
granted by Able Auctions;
(g) as of the Time of Closing, the Shareholder and Able Auctions shall
have complied with all of their respective covenants and agreements
contained in this Agreement; and
(h) as of the Time of Closing, the representations and warranties of the
Shareholder contained in this Agreement or contained in any
certificates or documents delivered by the Shareholder pursuant to
this Agreement shall be completely true as if such representations and
warranties had been made as of the Time of Closing.
-3-
<PAGE>
The conditions set forth above are for the exclusive benefit of the Purchaser
and may be waived by the Purchaser in whole or in part at any time at or before
the Time of Closing.
2.2 The Shareholder's obligations to carry out the terms of this Agreement and
to complete its transactions contemplated under this Agreement are subject to
the fulfilment to its satisfaction of each of the following conditions that:
(a) on or before the Subject Removal Date, the Shareholder shall have been
able to complete the Shareholder's Investigation (defined below) with
results to its reasonable satisfaction;
(b) on or before the Subject Removal Date, the Purchaser shall have
restructured or otherwise altered its share capital so that the
Purchaser's authorized capital is sufficient to permit issuance of the
JBF Shares, and so that immediately after issuance of the JBF Shares
and completion of the Financing, the number of the JBF Shares shall be
equal to at least 10% of the Outstanding Shares;
(c) on or before the Closing Date, the Purchaser shall have arranged the
Financing to complete immediately after the issuance of the JBF
Shares;
(d) at the Time of Closing, the solicitors for the Purchaser shall provide
an opinion dated as of the Closing Date, substantially in the form of
Schedule B to this Agreement (the "JBF Solicitor Opinion");
(e) on or before the Subject Removal Date, the directors and, if required,
the shareholders of the Shareholder shall have approved this Agreement
and all the transactions of the Shareholder contemplated hereunder;
(f) as of the Time of Closing, the Purchaser shall have complied with all
of its covenants and agreements contained in this Agreement; and
(g) at the Time of Closing, the representations and warranties of the
Purchaser contained in this Agreement or contained in any certificates
or documents delivered by it pursuant to this Agreement shall be
completely true as if such representations and warranties had been
made by the Purchaser as of the Time of Closing.
The conditions set forth above are for the exclusive benefit of the Shareholder
and may be waived by it in whole or in part at or before the Time of Closing.
2.3 The parties acknowledge and agree each with the other that this Agreement
and all of the Transactions are subject to receipt of any regulatory approvals
that may be required under applicable laws, including the approval of the
Vancouver Stock Exchange. If any such approvals are required but are not
obtained by the Subject Removal Date, then this Agreement shall terminate and be
of no further force and effect.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
3.1 The Shareholder and Able Auctions jointly and severally covenant and agree
with the Purchaser that each of the Shareholder and Able Auctions shall:
-4-
<PAGE>
(a) from and including the Reference Date through to and including the
Time of Closing, permit the Purchaser, through its directors,
officers, employees and authorized agents and representatives, at the
Purchaser's own cost, full access to Able Auctions' books, records and
property including, without limitation, all of the assets, contracts
and minute books of Able Auctions, so as to permit the Purchaser to
make such investigation (the "Purchaser's Investigation") of Able
Auctions as the Purchaser considers advisable;
(b) use its reasonable best efforts to obtain any regulatory approvals for
this Agreement and the transactions contemplated hereunder required by
applicable laws on or before the Closing Date;
(c) provide to the Purchaser all such further documents, instruments and
materials and do all such acts and things as may be required by the
Purchaser to obtain any regulatory approvals that may be required
under applicable laws;
(d) from and including the Reference Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of the
Shareholder, Able Auctions or either of them contained in this
Agreement or any certificates or documents delivered by them or either
of them pursuant to this Agreement remain true and correct;
(e) from and including the Reference Date through to and including the
Time of Closing, preserve and protect all of the goodwill, assets,
business and undertaking of Able Auctions and, without limiting the
generality of the foregoing, carry on the business of Able Auctions in
a reasonable and prudent manner;
(f) from and including the Reference Date through to and including the
Time of Closing, keep confidential all discussions and communications
(including all information communicated therein) between the parties,
and all written and printed materials of any kind whatsoever exchanged
by the parties, except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by the Purchaser, the Shareholder and Able
Auctions shall arrange for any director, officer, employee, authorized
agent or representative of the Shareholder or Able Auctions to enter
into, and the Shareholder and Able Auctions themselves shall enter
into, a non-disclosure agreement with the Purchaser in a form
acceptable to the Purchaser acting reasonably; and
(g) prior to the Closing Date, Able Auctions shall repay the Indebtedness
to the Shareholder in full.
-5-
<PAGE>
3.2 The Shareholder and Able Auctions jointly and severally covenant and agree
with the Purchaser that, from and including the Reference Date through to and
including the Time of Closing, the Shareholder and Able Auctions shall:
(a) not do any act or thing that would render any representation or
warranty of the Shareholder, Able Auctions or either of them contained
in this Agreement or any certificates or documents delivered by them
or either of them pursuant to this Agreement untrue or incorrect; and
(b) not sell, encumber or dispose of, or negotiate with any other person
in respect of a sale, encumbrance or disposition of, any of the Able
Auctions Shares or any goodwill, assets, business or undertaking of
Able Auctions, other than a sale of part of the assets of Able
Auctions in the ordinary course of Able Auctions' business.
3.3 The Shareholder and Able Auctions jointly and severally acknowledge to and
agree with the Purchaser that the Purchaser's Investigation shall in no way
limit or otherwise adversely affect the rights of the Purchaser as provided for
hereunder in respect of the representations and warranties of the Shareholder
and Able Auctions or either of them contained in this Agreement or in any
certificates or documents delivered by them or either of them pursuant to this
Agreement.
3.4 The Purchaser covenants and agrees with the Shareholder and with Able
Auctions that the Purchaser shall:
(a) permit the Shareholder, through its directors, officers, employees and
authorized agents and representatives, at the Shareholder's own cost,
full access to the Purchaser's books, records and property so as to
permit the Shareholder to make such investigation (the "Shareholder's
Investigation") of the Purchaser as the Shareholder considers
advisable;
(b) use its reasonable best efforts to obtain any regulatory approvals for
this Agreement and the transactions contemplated hereunder required by
applicable laws on or before the Closing Date;
(c) provide to the Shareholder all such further documents, instruments and
materials and do all such acts and things as may be required by the
Shareholder to obtain any regulatory approvals that may be required
under applicable laws;
(d) from and including the Reference Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of the Purchaser
contained in this Agreement or in any certificates or documents
delivered by it pursuant to this Agreement remain true and correct;
and
(e) from and including the Reference Date through to and including the
Time of Closing, subject to its legal reporting obligations, keep
confidential all discussions and communications (including all
information communicated therein) between the parties, and all written
and printed materials of any kind whatsoever exchanged by the parties,
except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
-6-
<PAGE>
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by the Shareholder or by Able Auctions, the
Purchaser shall arrange for any director, officer, employee,
authorized agent or representative of the Purchaser to enter into, and
the Purchaser itself shall enter into, a non-disclosure agreement with
the Shareholder and Able Auctions in a form acceptable to the
Shareholder and Able Auctions acting reasonably; and
(e) cause Able Auctions to hire the Shareholder, commencing on the Closing
Date, to provide Able Auctions with consulting services for a one year
period through such senior employees or officers of the Shareholder
and at such times and on such terms as the Purchaser may reasonably
require, in consideration of the Purchaser paying the Shareholder
consulting fees totalling US$240,000, payable as to US$120,000 on the
Closing Date and the balance of US$120,000 on April 1, 2000, subject
to such approvals and conditions as may be required by any regulatory
authority having jurisdiction.
3.5 The Purchaser covenants and agrees with the Shareholder and with Able
Auctions that, from and including the Reference Date through to and including
the Time of Closing, the Purchaser shall not do any act or thing that would
render any representation or warranty of the Purchaser contained in this
Agreement or any certificates or documents delivered by it pursuant to this
Agreement untrue or incorrect.
3.6 The Purchaser acknowledges to and agrees with the Shareholder that the
Shareholder's Investigation shall in no way limit or otherwise adversely affect
the rights of the Shareholder as provided for hereunder in respect of the
representations and warranties of the Purchaser contained in this Agreement or
in any certificates or documents delivered by the Purchaser pursuant to this
Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Purchaser to enter into this Agreement and complete
its transactions contemplated hereunder, the Shareholder and Able Auctions
jointly and severally represent and warrant to the Purchaser that:
(a) Able Auctions was and remains duly incorporated and validly existing
under the laws of the British Columbia and Able Auctions:
(i) is not subject to the reporting requirements of the British
Columbia Securities Act (the "B.C. Act");
(ii) has the power, authority and capacity to enter into this
Agreement and carry out its terms; and
-7-
<PAGE>
(iii) is in good standing with respect to the filing of annual
reports required under the laws of British Columbia;
(b) the authorized and issued share capital of Able Auctions is as set
forth in paragraph A of the recitals to this Agreement;
(c) the Able Auctions Shares are and will on the Closing Date immediately
prior to Completion be validly issued and outstanding fully paid and
non-assessable common shares of Able Auctions registered in the name
of, and legally and beneficially owned by, the Shareholder, free and
clear of all voting restrictions, other than restrictions in the
articles of Able Auctions, liens, charges or encumbrances of any kind
whatsoever, the transfer of the Able Auctions Shares to the Purchaser
will be exempt from registration and prospectus requirements under
applicable securities laws, and the Purchaser will not be subject to
any hold periods in respect of the Able Auctions Shares;
(d) except for the Able Auctions Shares, there are no documents,
instruments or other writings of any kind whatsoever which constitute
a "security" of Able Auctions as that term is defined in the B.C. Act
and, except as is provided for by operation of this Agreement, there
are no options, agreements or rights of any kind whatsoever to acquire
all or any part of the Able Auctions Shares or any interest in them
from the Shareholder, or to acquire any other shares of Able Auctions
from Able Auctions;
(e) the constating documents of Able Auctions have not been altered since
the incorporation of Able Auctions;
(f) all of the material transactions of Able Auctions have been promptly
and properly recorded or filed in or with the books or records of Able
Auctions and the minute books of Able Auctions contain all records of
the meetings and proceedings of Able Auctions' Shareholder and
directors since its incorporation;
(g) Able Auctions holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
(h) Able Auctions is the registered and beneficial owner of all of the
properties and assets used by Able Auctions and which are necessary or
useful in the conduct of its business (collectively the "Assets"),
including without limitation the domain name "Ableauctions.com" (the
"Domain Name") and the other assets listed on Schedule C to this
Agreement;
(i) Able Auctions has the corporate power to own the Assets and to carry
on the business carried on by it, and Able Auctions is duly qualified
to carry on business in all jurisdictions in which it carries on
business;
(j) on the Closing Date, Able Auctions will have good and marketable
exclusive title to the Assets free and clear of all liens, charges and
encumbrances of any kind whatsoever, and in particular:
(i) Able Auctions is the sole and exclusive legal and beneficial
owner of the Domain Name, free and clear of all encumbrances
whatsoever, and is not a party to or bound by any contract
or any other obligation whatsoever that limits or
-8-
<PAGE>
impairs its ability to sell, transfer, assign or convey, or
that otherwise affects, the Domain Name;
(ii) Able Auctions is the registered owner of the Domain Name,
and all fees or other costs associated with maintaining the
registration of the Domain Name have been paid for the 1999
calendar year and the registration of the Domain Name is in
good standing with Network Solutions, Inc.;
(iii) no other person has been granted any interest in or right to
use all or any portion of the Domain Name;
(iv) the Shareholder shall cause the security granted by Able
Auctions to Royal Bank of Canada and registered at the PPSR
under base registration no. 7675103 (the "Royal Bank
Security") to be completely paid out prior to the Closing
Date, and shall without delay obtain and file a release at
the PPSR and report the discharge registration particulars
to the Purchaser; and
(v) the Shareholder shall cause the CIBC security to be
completely paid out on the Closing Date, and shall without
delay obtain and file a release and report the discharge
registration particulars to the Purchaser;
(k) to the best of the Shareholder's knowledge, and to the best of Able
Auctions' knowledge, the use of the Assets, including without
limitation the Domain Name, by Able Auctions does not infringe upon or
induce or contribute to the infringement of any intellectual property
rights, domestic or foreign, of any other person;
(l) each item of machinery and equipment of any kind whatsoever comprised
in the Assets is in reasonable operating condition and in a state of
reasonable maintenance and repair taking into account its age and use;
(m) all of the bank accounts and safety deposit boxes of Able Auctions are
listed on Schedule C to this Agreement;
(n) the books and records of Able Auctions (collectively the "Able
Auctions Records"), full access to which has been or will be prior to
the Subject Removal Date provided by Able Auctions to the Purchaser,
are true and correct in every material respect and present fairly and
accurately the financial position and results of the operations of
Able Auctions for the periods indicated, and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis;
(o) the Able Auctions Records disclose all material financial transactions
of Able Auctions since Able Auctions' incorporation and such
transactions have been fairly and accurately recorded;
(p) except as disclosed in the Able Auctions Records:
(i) no dividends or other distributions of any kind whatsoever
on any shares in the capital of Able Auctions have been
made, declared or authorized;
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<PAGE>
(ii) neither the Shareholder nor any other officer, director or
employee of Able Auctions is indebted or under obligation to
Able Auctions on any account whatsoever; and
(iii) Able Auctions has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any kind whatsoever
of any person, firm or corporation of any kind whatsoever;
(q) there are no material liabilities of Able Auctions, whether direct,
indirect, absolute, contingent or otherwise, which are not disclosed
or reflected in the Able Auctions Records;
(r) Able Auctions is indebted to the Shareholder in the amounts of the
Shareholder Loan and the Indebtedness, each of which represents funds
actually advanced by the Shareholder to Able Auctions and/or the fair
market value of assets transferred by Shareholder to Able Auctions
free and clear of all encumbrances, and:
(i) the Shareholder is the owner of the Shareholder Loan free
and clear of all liens, charges and encumbrances of any kind
whatsoever;
(ii) the Shareholder has good and sufficient right and authority
to transfer the ownership of the Shareholder Loan to the
Purchaser free and clear of all liens, charges and
encumbrances of any kind whatsoever;
(iii) the amount of the Shareholder Loan is $741,000 and the
amount of the Indebtedness is $563,843, and each is payable
by Able Auctions to the Shareholder on demand, without
interest;
(iv) there are no agreements which restrict the right of the
Shareholder, or which will restrict the right of the
Purchaser, to make demand for payment of the Shareholder
Loan or which restrict the disposition of the Shareholder
Loan by the Shareholder to the Purchaser as contemplated by
this Agreement or which document the terms and conditions of
the Shareholder Loan, there are no terms and conditions of
the Shareholder Loan whether in writing, verbal or by
conduct, which are not specified in this paragraph, and
there is no promissory note or other note evidencing the
Shareholder Loan;
(v) each of the Shareholder Loan and the Indebtedness is a
legal, valid and binding obligation of Able Auctions, which
obligation remains in full force and effect and has not been
amended, and the obligation of Able Auctions to make payment
on demand has not been waived; and
(vi) there are no claims or rights which have been advanced by
Able Auctions against the Shareholder or which might in the
future or with the passage of the time or upon the
occurrence of any event be advanced by Able Auctions against
the Shareholder as a claim of setoff or which would in any
way reduce the amount to which the Shareholder is entitled
to be paid in respect of the Indebtedness or the Shareholder
Loan or, after assignment of the Shareholder Loan, the
Purchaser is entitled to be paid in respect of the
Shareholder Loan;
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<PAGE>
(s) any accounts receivable of Able Auctions shown in the Able Auctions
Records are bona fide, good and collectible without setoff or
counterclaim;
(t) except as disclosed in the Able Auctions Records:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of Able
Auctions or any damage, loss or other change of any kind
whatsoever in circumstances materially affecting the
business or Assets of Able Auctions or the right or capacity
of Able Auctions to carry on its business;
(ii) Able Auctions has not waived or surrendered any right of any
kind whatsoever of material value;
(iii) except as permitted under this Agreement, Able Auctions has
not discharged, satisfied or paid any lien, charge or
encumbrance of any kind whatsoever or obligation or
liability of any kind whatsoever other than current
liabilities in the ordinary course of its business;
(iv) the business of Able Auctions has been carried on in the
ordinary course; and
(v) no new machinery or equipment of any kind whatsoever has
been ordered by, or installed or assembled on the premises
of, Able Auctions;
(u) the directors, officers, key employees and independent contractors and
consultants of Able Auctions and all of their compensation
arrangements with Able Auctions, whether as directors, officers or
employees of, or as independent contractors or consultants to, Able
Auctions, are as listed on Schedule D to this Agreement;
(v) no payments of any kind whatsoever have been made or authorized by
Able Auctions to or on behalf of the Shareholder or to or on behalf of
any of the directors, officers, key employees, independent contractors
or consultants of Able Auctions except in accordance with those
compensation arrangements specified on Schedule D to this Agreement or
except as contemplated by this Agreement;
(w) there are no pensions, profit sharing, group insurance or similar
plans or other deferred compensation plans of any kind whatsoever
affecting Able Auctions other than those specified on Schedule D to
this Agreement;
(x) Able Auctions is not now, and has never been, a party to any
collective agreement with any labour union or other association of
employees of any kind whatsoever, no collective bargaining agent has
been certified in respect of Able Auctions and there is no application
pending for certification of a collective bargaining agent in respect
of Able Auctions;
(y) the contracts and agreements included on Schedule D to this Agreement
and those additional contracts and agreements specified on Schedule E
to this Agreement (collectively the "Material Contracts") constitute
all of the material contracts and agreements of Able Auctions;
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<PAGE>
(z) except as is noted on the appropriate Schedule to this Agreement, the
Material Contracts are in good standing in all material respects and
not in default in any material respect;
(aa) Able Auctions has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way (except by the Permitted
Encumbrances), or permitted any third party access to any of the
Assets the value of which may be compromised by such access, including
in particular the source code to any computer software or any trade
secret information included in the Assets, except only in accordance
with the terms of the Material Contracts;
(bb) all tax returns and reports of Able Auctions required by law to have
been filed have been filed and are substantially true, complete and
correct and all taxes and other government charges of any kind
whatsoever of Able Auctions have been paid or accrued in the Able
Auctions Records;
(cc) Able Auctions has not:
(i) made any election under any applicable tax legislation with
respect to the acquisition or disposition of any property at
other than fair market value;
(ii) acquired any property from a person with whom Able Auctions
was not dealing with at arm's length for proceeds greater
than the fair market value thereof; or
(iii) disposed of anything to a person with whom Able Auctions was
not dealing with at arm's length for proceeds less than the
fair market value thereof;
(dd) Able Auctions has made all elections required to have been made under
any applicable tax legislation in connection with any distributions
made by it and all such elections were true and correct and filed in
the prescribed form and within the prescribed time period;
(ee) adequate provision has been made for taxes payable by Able Auctions
for the current period for which tax returns are not yet required to
be filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by Able Auctions;
(ff) Able Auctions does not have any contingent tax liabilities of any kind
whatsoever, and there are no grounds which would prompt a reassessment
of Able Auctions, including for aggressive treatment of income or
expenses in earlier tax returns filed;
(gg) there are no amounts outstanding and unpaid for which Able Auctions
has previously claimed a deduction under any applicable tax
legislation;
(hh) Able Auctions has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns
required by it to be made or filed under the provisions of all
applicable statutes requiring the making of collections, deductions,
remittances or payments of any kind whatsoever in those jurisdictions
in which Able Auctions carries on business;
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<PAGE>
(ii) there are no actions, suits, judgements, investigations or proceedings
of any kind whatsoever outstanding, pending or threatened against or
affecting the Shareholder or Able Auctions at law or in equity or
before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau or agency of any
kind whatsoever (collectively, "Actions"), except only a total of four
claims by Sangat S. Rehal, Surinder K. Rehal, Paulie Bhambra and Nikki
Panasara, each in the amount of CDN$10,000 and not yet set down for
trial, for alleged conversion of personal property by Able Auctions,
and there is no basis for those claims or for any other Actions;
(jj) to the best of their knowledge, Able Auctions is not in breach of any
law, ordinance, statute, regulation, by-law, order or decree of any
kind whatsoever;
(kk) each of the Shareholder and Able Auctions have good and sufficient
power, authority and capacity to enter into this Agreement and
complete their respective transactions contemplated under this
Agreement on the terms and conditions set forth herein;
(ll) the Shareholder is not a "U.S. Person", the definition of which
includes, but is not limited to, an individual resident in the United
States and an estate or trust of which any executor or administrator
or trustee, respectively, is a U.S. Person, any partnership or
corporation organized or incorporated under the laws of the United
States, and any partnership or corporation organized or incorporated
under the laws of any foreign jurisdiction by a U.S. Person
principally for the purposes of investing in securities not registered
under the United States Securities Act of 1933 (the "1933 Act");
(mm) the Shareholder was outside the United States at the time of execution
and delivery of this Agreement;
(nn) no offers to sell the JBF Shares were made by any person to the
Shareholder while the Shareholder was in the United States;
(oo) the JBF Shares are not being acquired, directly or indirectly, for the
account or benefit of a U.S. person or a person in the United States;
(pp) the Shareholder acknowledges that the JBF Shares have not been
registered under the 1933 Act and that the Purchaser has no obligation
or present intention of filing a registration statement under the 1933
Act in respect of the JBF Shares, and the Shareholder undertakes and
agrees that it will not offer or sell the JBF Shares unless the JBF
Shares are sold in accordance with Regulation S under the 1933 Act,
the JBF Shares are registered under the 1933 Act and the securities
laws of all applicable states of the United States, or the JBF Shares
are sold pursuant to an available exemption for such registration
requirements;
(qq) the execution and delivery of this Agreement, the performance of their
respective obligations under this Agreement and the Completion will
not:
(i) conflict with, or result in the breach of or the acceleration of
any indebtedness under, or constitute default under, any of the
constating documents of Able Auctions or any of the terms of any
indenture, mortgage, agreement, lease, licence or other
instrument of any kind whatsoever to which Able Auctions, the
Shareholder or either of them is a party or by which either of
them is bound, or
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<PAGE>
any judgement or order of any kind whatsoever of any court or
administrative body of any kind whatsoever by which either of
them is bound; nor
(ii) result in the violation of any law or regulation of any kind
whatsoever by either the Shareholder or by Able Auctions;
(rr) neither Able Auctions nor the Shareholder has incurred any liability
for agency, brokerage, referral or finder's fees, commissions or
compensation of any kind whatsoever with respect to this Agreement or
any transaction contemplated under this Agreement; and
(ss) the representations and warranties of the Shareholder and Able
Auctions contained in this Agreement disclose all material facts
specifically relating to the transactions involving the Shareholder
and Able Auctions contemplated under this Agreement which materially
and adversely affect, or in the future may materially and adversely
affect, their respective abilities to perform their respective
obligations under this Agreement or the value of the Able Auctions
Shares or the Assets as of the Reference Date.
4.2 The certificates representing the JBF Shares will bear a legend stating that
such shares have not been registered under the 1933 Act or the securities laws
of any state of the United States and may not be offered for sale or sold unless
registered under the 1933 Act and the securities laws of all applicable states
of the United States or an exemption from such registration requirements is
available.
4.3 The Shareholder understands and agrees that there may be material tax
consequences to a shareholder in respect of an acquisition or disposition of the
JBF Shares, and that the Purchaser gives no opinion and makes no representation
with respect to the tax consequences to the Shareholder under United States,
state, local or foreign tax law in respect of the Shareholder's acquisition or
disposition of the JBF Shares.
4.4 The Shareholder consents to the Purchaser making a notation on its records
or giving instructions to any transfer agent of the Purchaser in order to
implement the restrictions on transfer set forth and described herein.
4.5 The representations and warranties of the Shareholder and Able Auctions
contained in this Agreement shall be true at the Time of Closing as though they
were made at the Time of Closing and they shall survive the Completion and
remain in full force and effect thereafter for the benefit of the Purchaser.
4.6 In order to induce the Shareholder to enter into this Agreement and complete
its transactions contemplated hereunder, the Purchaser represents and warrants
to the Shareholder that:
(a) the Purchaser was and remains duly incorporated and validly existing
under the laws of the State of Florida, and the Purchaser is in good
standing with respect to the filing of annual reports required under
the laws of Florida and all filings required under applicable
securities laws;
(b) as of the Reference Date, the authorized share capital of the
Purchaser consisted of 50,000,000 common shares having a par value of
US$0.001 each, and there were 10,450,000 Outstanding shares;
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<PAGE>
(c) the common shares of the Purchaser are quoted for trading on the
National Association of Securities Dealers Over-the-Counter Bulletin
Board;
(d) other than the cancellation of 8,000,000 of the Outstanding Shares, a
5:1 split of the remaining Outstanding Shares to increase the total
number of Outstanding Shares to 12,250,000, and the issuance of up to
1,200,000 common shares in the course of the Financing, there are no
commitments, plans or arrangements of any kind whatsoever to issue
shares of the Purchaser, nor are there any outstanding options,
warrants, convertible securities or other rights of any kind
whatsoever calling for the issuance of any of the unissued shares or
other securities of the Purchaser;
(e) the JBF Shares to be issued on Completion will be, when issued,
validly issued as fully paid and non-assessable, will be issued
pursuant to exemptions from registration and prospectus requirements
available under applicable securities laws, and will be subject to a
hold period of not more than one year;
(f) the Purchaser has good and sufficient power, authority and capacity to
enter into this Agreement and complete its transactions contemplated
under this Agreement on the terms and conditions set forth herein; and
(g) the execution and delivery of this Agreement, the performance of its
obligations under this Agreement and the Completion will not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, the constating documents of the Purchaser or
the terms of any indenture, mortgage, agreement, lease,
licence or other instrument of any kind whatsoever to which
the Purchaser is a party or by which it is bound, or any
judgment or order of any kind whatsoever of any Court or
administrative body of any kind whatsoever by which the
Purchaser is bound; nor
(ii) result in the violation of any law or regulation of any kind
whatsoever by the Purchaser.
(h) the Articles of Incorporation of the Purchaser were filed on 30
September 1996 with the Secretary of State of Florida Articles of
Amendment were filed on 2 September 1998, and there are no other
documents amending such Articles which have been filed or
contemplated, except Articles of Amendment to change the name of the
Purchaser before the Closing Date;
(i) all of the material transactions of the Purchaser have been promptly
and properly recorded or filed in or with the books or records of the
Purchaser and the minute books of the Purchaser contain all records of
the meetings and proceedings of the Purchaser's Shareholder and
directors since its incorporation;
(j) the Purchaser holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on; and
(k) the Purchaser owns no material assets other than cash and carries on
no active business.
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<PAGE>
4.7 The representations and warranties of the Purchaser contained in this
Agreement, except for the number of Outstanding Shares set forth in subparagraph
4.6(b) of this Agreement, shall be true at the Time of Closing as though they
were made at the Time of Closing, and they shall survive the Completion and
remain in full force and effect thereafter for the benefit of the Shareholder.
5. INDEMNITIES
5.1 Notwithstanding the Completion of the transactions contemplated under this
Agreement or the Purchaser's Investigation, the representations, warranties and
acknowledgements of the Shareholder, Able Auctions or either of them contained
in this Agreement or any certificates or documents delivered by them or either
of them pursuant to this Agreement shall survive the Completion and shall
continue in full force and effect thereafter for one year for the benefit of the
Purchaser. If any of the Actions result in settlement or judgement against Able
Auctions, or if any of the representations, warranties or acknowledgements given
by the Shareholder, Able Auctions or either of them is found to be untrue or
there is a breach of any covenant or agreement in this Agreement on the part of
the Shareholder, Able Auctions or either of them, then the Shareholder and Able
Auctions shall jointly and severally indemnify and save harmless the Purchaser
from and against any and all liability, claims, debts, demands, suits, actions,
penalties, fines, losses, costs (including legal fees, disbursements and taxes
as charged on a lawyer and own client basis), damages and expenses of any kind
whatsoever which may be brought or made against the Purchaser by any person,
firm or corporation of any kind whatsoever or which may be suffered or incurred
by the Purchaser, directly or indirectly, arising out of or as a consequence of
any of the Actions or any such misrepresentation or breach of warranty,
acknowledgement, covenant or agreement. Without in any way limiting the
generality of the foregoing, this shall include any loss of any kind whatsoever
which may be suffered or incurred by the Purchaser, directly or indirectly,
arising out of any material assessment or reassessment levied upon Able Auctions
for tax, interest and/or penalties relating to any period of business operations
up to and including the Closing Date and all claims, demands, costs (including
legal fees, disbursements and taxes as charged on a lawyer and own client basis)
and expenses of any kind whatsoever in respect of the foregoing.
6. CLOSING
6.1 At the Time of Closing, the Shareholder shall deliver to the solicitors for
the Purchaser:
(a) a certified true copy of the resolutions of the directors of Able
Auctions evidencing that the directors of the Able Auctions have
approved this Agreement and all of the transactions of Able Auctions
contemplated hereunder, specifically referring to:
(i) the assignment of the Shareholder Loan and the exchange and
transfer of the Able Auctions Shares from the Shareholder to
the Purchaser as provided for in this Agreement;
(ii) the cancellation of the share certificates (the "Old Share
Certificates") representing the Able Auctions Shares held as
set forth in paragraph B of the recitals to this Agreement;
and
(iii) the issuance of a new share certificate (the "New Share
Certificate") representing the Able Auctions Shares
registered in the name of the Purchaser;
(b) the Old Share Certificates;
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<PAGE>
(c) the New Share Certificate;
(d) the Able Auctions Solicitor Opinion;
(e) an assignment of the Shareholder Loan duly executed by the Shareholder
in favour of the Purchaser;
(f) a general release of all claims whatsoever against or in respect of
Able Auctions, including the Indebtedness but excluding the
Shareholder Loan;
(g) a certificate of confirmation from the Shareholder substantially in
the form of Schedule F to this Agreement;
(h) consent of Abdul Ladha to act as a director and President of the
Purchaser;
(i) a certified true copy of resolutions of the directors of Able Auctions
appointing Jeremy Dodd as Vice-President, Operations of Able Auctions;
(j) a management consulting agreement between the Shareholder and Able
Auctions in the form of Schedule H to this Agreement, duly executed by
the Shareholder; and
(k) any other materials that are, in the opinion of the solicitors for the
Purchaser, reasonably required to complete the transactions
contemplated under this Agreement.
6.2 At the Time of Closing, the Purchaser shall deliver to the solicitors for
the Shareholder:
(a) certified true copies of the resolutions of the directors and, if
shareholder approval is required, of the Shareholder of the Purchaser,
evidencing that the directors and, as applicable, the Shareholder, of
the Purchaser have approved this Agreement and all of the transactions
of the Purchaser contemplated hereunder;
(b) either the original share certificates representing the JBF Shares, or
written confirmation from the Purchaser's transfer agent that the JBF
Shares have been issued and registered in the name of the Shareholder
and will be delivered to the Shareholder as soon as is reasonably
practicable;
(c) a direction for Page Fraser & Associates to release the Deposit to
CIBC in trust for the Shareholder;
(d) the balance of the Cash Portion, calculated after deduction of the
Deposit converted from U.S. funds to Canadian funds on the Closing
Date, by way of wire transfer, bank draft, certified cheque or
solicitor's trust cheque, payable to CIBC in trust for the
Shareholder;
(e) the JBF Solicitor Opinion;
(f) a certificate of confirmation signed by a director or officer of the
Purchaser substantially in the form of Schedule G to this Agreement;
(g) resignation of Doug McLeod as President of the Purchaser;
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<PAGE>
(h) a certified true copy of resolutions of the directors of the Purchaser
appointing Abdul Ladha as a director and President of the Purchaser;
and
(i) a management consulting agreement between the Shareholder and Able
Auctions in the form of Schedule H to this Agreement, duly executed by
Able Auctions.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of the
essence of this Agreement and any waiver by the parties of this paragraph 7.1 or
any failure by them to exercise any of their rights under this Agreement shall
be limited to the particular instance and shall not extend to any other instance
or matter in this Agreement or otherwise affect any of their rights or remedies
under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the recitals
to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties hereto
in respect of the matters referred to herein and there are no representations,
warranties, covenants or agreements, expressed or implied, collateral hereto
other than as expressly set forth or referred to herein.
7.4 The headings in this Agreement are for reference only and do not constitute
terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms, require
performance by a party to this Agreement subsequent to the Closing Date of this
Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this Agreement
or any provision of this Agreement shall be valid and binding upon the parties
hereto unless such alteration, amendment, modification or interpretation is in
written form executed by the parties directly affected by such alteration,
amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same shall
be deemed to include the plural or the feminine or the body corporate as the
context may require.
7.8 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as any party may, either before or
after the Closing Date, reasonably require in order to carry out the full intent
and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under this
Agreement shall be in writing and shall be delivered by prepaid registered mail,
by e-mail or by telecopy to the appropriate party at the address as first set
out above or to such other addresses or by such other means as may be designated
in writing by the parties hereto in the manner provided for in this paragraph,
and if mailed as aforesaid shall be deemed to have been received on the date
that is five business days after such mailing, or if delivered by e-mail or
telecopy, then on the date transmission completes.
7.10 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein.
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<PAGE>
7.11 This Agreement may be signed by the parties in as many counterparts as may
be deemed necessary, each of which so signed shall be deemed to be an original,
and all such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Reference Date:
THE CORPORATE SEAL of )
DEXTON TECHNOLOGIES CORPORATION )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
/s/ Abdul Ladha )
- ------------------------------------------- )
Name: Abdul Ladha )
------------------------------------- )
Title: President )
------------------------------------ )
THE CORPORATE SEAL of )
ABLE AUCTIONS (1991) LTD. )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
/s/ Abdul Ladha )
- ------------------------------------------- )
Name: Abdul Ladha )
------------------------------------- )
Title: President )
------------------------------------ )
THE CORPORATE SEAL of )
ABLEAUCTIONS.COM, INC. (formerly )
J.B. FINANCIAL SERVICES, INC.) )
was hereunto affixed in the presence )
of its authorized signatory(ies): ) c/s
)
/s/ Doug McLeod )
- ------------------------------------------- )
Name: Doug McLeod )
------------------------------------- )
Title: President )
------------------------------------ )
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<PAGE>
SCHEDULE A
Able Auctions Solicitor Opinion
-------------------------------
(letterhead of solicitors for the Shareholder and Able Auctions)
*, 199*
- -------------------------
c/o Campney & Murphy
Barristers and Solicitors
P.O. Box 48800
2100-1111 West Georgia Street
Vancouver, B.C. V7X 1K9
Attention: *
Dear Sirs:
Re: Share Purchase Agreement (the "Agreement") dated for reference the
9th day of July, 1999 between Dexton Technologies Corporation
(the "Shareholder"), Able Auctions (1991) Ltd. ("Able Auctions") and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.)
(the "Purchaser")
We are the solicitors for the Shareholder and for Able Auctions. We provide this
opinion pursuant to subparagraphs * and * of the Agreement. We have also acted
as counsel for Able Auctions and the Shareholder in connection with the
negotiation, execution and completion of the Agreement.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
1. Able Auctions is a company duly incorporated and validly existing under the
laws of the Province of British Columbia. Able Auctions is in good standing
with respect to the filing of annual reports with the Registrar of
Companies for the Province of British Columbia.
<PAGE>
2. To the best of our knowledge, Able Auctions has all requisite corporate
power and authority to conduct the business now carried on by it, and to
own its property and assets as described in the Agreement and Able Auctions
has all requisite corporate power and authority to enter into and to
perform its obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by Able Auctions.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by Able Auctions
will conflict with or constitute a breach or default under the constating
documents of Able Auctions or any commitment, agreement or other instrument
to which Able Auctions is a party or by which it is bound.
5. To the best of our knowledge, there are no claims, judgement, actions,
suits, litigation, proceedings or investigations, actual, pending or
threatened against Able Auctions which might materially affect any
business, properties, assets, prospects or conditions, financial or
otherwise, of Able Auctions or which could result in any material liability
to Able Auctions, other than a total of four claims by Sangat S. Rehal,
Surinder K. Rehal, Paulie Bhambra and Nikki Panasara, each in the amount of
CDN$10,000 and not yet set down for trial, for alleged conversion of
personal property by Able Auctions.
6. The authorized capital of Able Auctions consists of 10,000 shares without
par value divided into 5,000 Class "A" shares and 5,000 Class "B" shares of
which only 100 Class "A" shares (the "Able Auctions Shares") are validly
authorized, created, allotted, issued and outstanding, and, to the best of
our knowledge, are fully paid for and non-assessable, as at the date
hereof.
7. All necessary steps and corporate action and proceedings have been taken to
effect the valid transfer of the Able Auctions Shares to the Purchaser as
contemplated under the Agreement. The Purchaser is the registered owner of
the Able Auctions Shares on the books and records of Able Auctions.
The opinion expressed is subject to the qualification that enforceability of the
Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
*
Per:
*
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<PAGE>
SCHEDULE B
JBF Solicitor Opinion
---------------------
(letterhead of solicitors for the Purchaser)
*, 199*
*
c/o *
Attorneys at Law
*
Attention: *
Dear Sirs:
Re: Share Purchase Agreement (the "Agreement") dated for reference the
9 day of July, 1999 between Dexton Technologies Corporation
(the "Shareholder"), Able Auctions (1991) Ltd. ("Able Auctions") and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.)
(the "Purchaser")
We are the solicitors the Purchaser. We provide this opinion pursuant to
subparagraphs * and * of the Agreement. We have acted as counsel for the
Purchaser in connection with the * of the Agreement.
We have considered * such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have * assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
*
Based on and subject to the foregoing, we are of the opinion that:
1. The Purchaser is a company duly incorporated and validly existing under the
laws of the State of Florida. The Purchaser is in good standing with
respect to the filing of annual reports with the Registrar of Companies for
the State of Florida.
2. The Purchaser has all requisite corporate power and authority to enter into
and to perform its obligations under the Agreement.
<PAGE>
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by the Purchaser.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by the Purchaser
will conflict with or constitute a breach of or default under the
constating documents of the Purchaser or any commitment, agreement or other
instrument to which the Purchaser is a party or by which it is bound.
5. As at the Closing Date of the Agreement, the authorized capital of the
Purchaser consisted of 50,000,000 common shares with a par value of
U.S.$0.001 per share, of which * shares are validly authorized, created,
allotted, issued and outstanding, and, to the best of our knowledge, fully
paid for and non-assessable.
6. All necessary steps and corporate action and proceedings have been taken to
effect the valid issuance of the JBF Shares to the Shareholder as
contemplated under the Agreement and, upon issuance, delivery and receipt
of the consideration described in the Agreement, will be validly issued,
fully paid and non-assessable.
The opinion expressed is subject to * the qualification that enforceability of
the Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
*
Per:
*
-2-
<PAGE>
SCHEDULE C
Able Auctions Assets
--------------------
All rights, title and interest in and to all tangible and intangible property
associated with the business (the "Business") carried on at, through or in
association with the internet domain name "Ableauctions.com" (the "Domain
Name"), and all related internet website development (collectively, the
"Website"), including without limitation:
(i) the contractual right to maintain registration of the Domain Name
with Internic (Network Solutions Inc.);
(ii) all URL's associated with the Domain Name or the Website;
(iii) all databases, books and records relating to the Business
including, without limitation, all recorded information relating
to customers of the Business, and advertisers on and visitors to
the Website;
(iv) copyright in all graphics and text displayed at the Website;
(v) copyright in all customized (non-retail) software relating to the
Website or used in the Business;
(vi) all trade-mark and trade name rights that the Shareholder may
have anywhere in the world in respect of the Business, the
Website or the Domain Name;
(vii) all goodwill associated with the Business, the Website or the
Domain Name;
(viii) one DEC Alpha server;
(ix) one IBM video server;
(x) Cold Fusion, JAVA and HTML source code for auction software;
(xi) all incidental furniture and fixtures used in the Business; and
(xii) all inventory and equipment associated with the Business.
Permitted Encumbrances
----------------------
NIL.
<PAGE>
SCHEDULE D
Able Auctions Directors, Officers, Employees, Contractors and Consultants
<TABLE>
Name Relationship Details Compensation Arrangement
- ---- ------------ ------- ------------------------
<S> <C> <C> <C>
Jeremy Dodd Officer President $ 75.000.00 per year, plus 10% net profit
Linda Wingrove Employee Accountant $ 20.000.00 per year
Jenn Hingston Employee Administrative Assistant $ 18,720.00 per year
Ian McIntosh Employee Sales Manager $ 36,000.00 per year, plus 1% store sales
over $750.000
Dave McMillan Employee Sales Person $ 19,200.00 per year
Bill Johnson Employee Auction Set-up $14.00 per hour
Jeremy Fenn Employee Labourer $10-00 per hour
Shawn Stiles Employee Labourer $10.00 per hour
Henry Richert Employee Labourer $10-00 per hour
Bill Whiting Employee Labourer $10-00 per hour
Terry Pope-Forbes Consultant Purchaser $3,000.00 per month, plus $250/auction
as a caller
Brian Franklin
- -Focus Transport Contractor Mover $23.00 per hour
</TABLE>
<PAGE>
SCHEDULE E
Able Auctions Material Contracts
--------------------------------
1. A month-to-month lease of the Able Auctions Lougheed Highway business
premises at a rental rate of CDN$8,000 per month.
-2-
<PAGE>
SCHEDULE F
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.1(e) of the Share Exchange Agreement dated for
reference the 9th day of July, 1999 (the "Agreement") between Dexton
Technologies Corporation (the "Shareholder"), Able Auctions (1991) Ltd. and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.) (the
"Purchaser"), the undersigned Shareholder hereby confirms to the Purchaser that
the representations and warranties of the Shareholder contained in the Agreement
or contained in any certificates or documents delivered by the Shareholder
pursuant to the Agreement are true and correct in every respect as of the Time
of Closing of the Agreement being 11:00 o'clock a.m. local time in Vancouver,
B.C. on the *, 1999.
Dated at *, this *, 1999.
------------------------------------
*
<PAGE>
SCHEDULE G
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.2(d) of the Share Purchase Agreement dated for
reference the 9 day of July, 1999 (the "Agreement") between Dexton Technologies
Corporation (the "Shareholder"), Able Auctions (1991) Ltd., and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.) (the
"Purchaser"), the Purchaser confirms to the Shareholder that:
(a) the representations and warranties of the Purchaser contained in the
Agreement or contained in any certificates or documents delivered by
it pursuant to the Agreement are true and correct in every respect as
of the Time of Closing of the Agreement, being 11:00 o'clock a.m.
local time in Vancouver, B.C. on the * 1999; and
(b) the Purchaser has arranged an equity financing of * securities to
raise gross proceeds of at least U.S.$3,000,000 immediately after the
transfer of the JBF Shares to the Shareholder.
Dated at Vancouver, British Columbia, this * 1999.
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
Per:
---------------------------------
*, Director
<PAGE>
SCHEDULE H
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT made with effect from the __ day of ______, 1999 (the "Effective
Date")
BETWEEN: Able Auctions (1991) Ltd., of
1963 Lougheed Highway, Coquitlam, British Columbia, V3K 3T8;
(the "Company")
AND: Dexton Technologies Corporation, of
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2;
(the "Consultant")
WHEREAS:
A. The Consultant was formerly the sole shareholder of the Company, and is now
a shareholder of the sole corporate shareholder of the Company;
B. The Consultant has experience in the auction business and in electronic
commerce and has expressed a desire to continue to be involved in the
affairs of the Company;
C. The Company wishes to utilize the Consultant's experience to facilitate the
Company's business; and
D. The Company has agreed to retain the services of the Consultant to provide
the consulting services described in Schedule "A" attached hereto (the
"Services") and the Consultant has agreed to provide the Services to the
Company, in accordance with the terms and conditions contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
of the covenants and agreements herein contained the parties hereto covenant and
agree (the "Agreement") as follows:
1. DEFINITIONS AND INTERPRETATION
1.01 Definitions
In this Agreement, including the recitals and the schedule, the following words
and expressions have the following meanings unless the context otherwise
requires:
(a) "Confidential Information" means all information or data which may,
before or after the date of this Agreement, be delivered or made
available to the Consultant by the Company or by any affiliate of the
Company, all information or data
-31-
<PAGE>
regarding programs, products, services, costs, equipment, operations,
suppliers, employees, contractors, distribution, marketing or
customers relating to the products, all technical information,
procedures, processes, diagrams, specifications, improvements,
formulations, plans and data relating to the business of the Company
or any affiliate of the Company.
(b) "Services" means all services which the Consultant may provide from
time to time for the Company, including, without limitation, those
provided in Schedule "A" hereto.
1.02 Entire Agreement
This Agreement and any documents and agreements to be delivered pursuant to this
Agreement supersede all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Agreement, other than as expressed in
writing in this Agreement. No trade terms or trade usages are to be incorporated
by reference implicitly or otherwise into this Agreement, unless expressly
referred to in this Agreement.
1.03 Amendments
No change or modification of this Agreement will be valid unless it is in
writing and signed by each party to this Agreement.
1.04 Invalidity of Particular Provision
It is intended that all of the provisions of this Agreement will be fully
binding and effective between the parties. If any particular provision or
provisions or a part of one or more is found to be void, voidable or
unenforceable for any reason whatsoever, then the particular provision or
provisions or part of the provision will be deemed severed from the remainder of
this Agreement. The other provisions of this Agreement will not be affected by
the severance and will remain in full force and effect.
1.05 Governing Law
This Agreement will be governed by and construed in accordance with the laws of
the Province of British Columbia and the laws of Canada applicable in such
Province.
2. APPOINTMENT AND AUTHORITY
2.01 Appointment of Consultant
The Company appoints the Consultant as a consultant to the Company to provide
the Services for the benefit of the Company and the Company authorizes the
Consultant to exercise the powers provided under this Agreement. The Consultant
accepts this appointment on the terms and conditions herein set forth.
-32-
<PAGE>
2.02 Consultant's Employees Not Employees of the Company
The parties agree that none of the employees of the Consultant shall be
considered an employee of the Company.
2.03 No Partnership
This Agreement will not be construed as creating a partnership, joint venture or
agency relationship between the parties or any other form of legal association
which would impose liability upon one party for any act or failure to act by the
other party.
3. GENERAL OBLIGATIONS OF THE CONSULTANT
3.01 Limitations
The Consultant shall not be entitled to enter into any commitment, contractual
or otherwise binding upon, or pledge the credit of, the Company without the
express prior written consent of the directors of the Company.
3.02 The Company's Ownership Rights
The Consultant acknowledges and agrees that nothing contained in this Agreement
shall be construed as an assignment to the Consultant of any right, title or
interest in the Confidential Information or in any other tangible or intangible
property of the Company, in respect of which all right, title and interest is
expressly reserved by the Company.
4. COMPENSATION
4.01 Compensation
In full and complete consideration for the performance of the Services by the
Consultant, the Company shall pay the Consultant consulting fees totalling
US$240,000, payable as to US$120,000 on the Effective Date and the balance of
US$120,000 on April 1, 2000, subject to such approvals and conditions as may be
required by any regulatory authority having jurisdiction. 5. TErm
5.01 TERM
This Agreement will take effect on the Effective Date and will continue in full
force and effect for one year unless earlier terminated by one of the parties in
accordance with this Agreement.
5.02 Termination With Notice
Notwithstanding any other provision of this Agreement, the Company may, in its
absolute discretion, at any time upon 48 hour's advance written notice by the
Company to the Consultant, terminate this Agreement without cause and on the
expiration of the 48 hour notice period this
-33-
<PAGE>
Agreement and the Option granted hereunder shall be terminated. Such notice may
expire on any day of the month, but shall not affect the Consultant's
entitlement to payment of all consulting fees payable under section 4.01 hereof,
and any consulting fees which have not yet been paid or which have not yet
become due will be paid on the date of termination.
5.03 Termination Without Notice
The Company may terminate this Agreement immediately and without advance written
notice to the Consultant if:
(a) the Consultant has materially breached its duties under this Agreement
and such breach has not been cured within 7 days after receipt of
notice thereof; or
(b) the Consultant has committed a crime or wrongful act which relates
directly to the performance of this Agreement.
6. GENERAL
6.01 Notices
Any notice, direction, request or other communication required or contemplated
by any provision of this agreement shall be given in writing and shall be given
by delivering or faxing same to the Company or the Consultant, as the case may
be, at the address for that party first set out above. Any such notice,
direction, request or other communication shall be deemed to have been given or
made on the date on which it was delivered or, in the case of fax, on the next
business day after receipt of transmission. Either party may change its fax
number or address for service from time to time by notice in accordance with the
foregoing.
6.02 Assignment
This Agreement is not assignable in whole or in part by the Consultant. Any
attempt to assign any of the rights, or to delegate any of the duties or
obligations of this Agreement is void. Any assignment occurring by operation of
law such as on a bankruptcy or amalgamation will be deemed an event of default
under this Agreement.
6.03 Waiver
No failure or delay of any party in exercising any power or right under this
Agreement will operate as a waiver of such power or right, nor will any single
or partial exercise of any such right or power preclude any further or other
exercise of such right or power under this Agreement. No modification or waiver
of any provision of this Agreement and no consent to any departure by any party
from any provision of this Agreement will be effective unless it is in writing.
Any such waiver or consent will be effective only in the specific instance and
for the specific purpose for which it was given. No notice to or demand on any
party in any circumstances will entitle such party to any other or further
notice or demand in similar or other circumstances.
-34-
<PAGE>
6.04 Enurement
Subject to the restrictions on transfer contained in this Agreement, this
Agreement will enure to the benefit of and be binding on the parties and their
respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
above written.
THE CORPORATE SEAL of )
Able Auctions (1991) Ltd. was hereunto )
affixed in the presence of: )
) c/s
)
- ---------------------------------------- )
Name: )
Title: )
THE CORPORATE SEAL of )
Dexton Technologies Corporation was )
hereunto affixed in the presence of: )
) c/s
)
- ---------------------------------------- )
Name: )
Title: )
-35-
<PAGE>
SCHEDULE "A"
THE SERVICES
------------
The Consultant covenants and agrees with the Company to provide advisory
services to the Company with respect to:
1. the operation of an auction business;
2. the operation of an electronic commerce business;
3. marketing;
4. negotiation of banner advertising, URL link arrangements and other
value-added relationships;
5. identifying potential strategic partnerships and other arrangements; and
6. other related corporate advisory services.
-36-
<PAGE>
ADDENDUM TO SHARE PURCHASE AGREEMENT
DATED FOR REFERENCE THE 16th DAY OF AUGUST 1999 (the "Amendment Date"),
BETWEEN: DEXTON TECHNOLOGIES CORPORATION, a corporation incorporated
under the laws of the Province of British Columbia having a
place of business at 3112 Boundary Road, Burnaby, British
Columbia, V5M 4A2
(the "Shareholder");
AND: ABLE AUCTIONS (1991) LTD., a corporation incorporated under
the laws of the Province of British Columbia having a place of
business at 1963 Lougheed Highway, Coquitlam, British
Columbia, V3K 3T8
("Able Auctions");
AND: ABLEAUCTIONS.COM, INC. (formerly J.B. FINANCIAL SERVICES, INC.),
a company incorporated under the laws of the State of Florida
having a place of business at 688 - 6 Ishikawa, Kanagawa,
Japan, 252 0815
(the "Purchaser");
WHEREAS:
A. The Shareholder, Able Auctions and the Purchaser entered into a Share
Purchase Agreement dated for reference 9 July 1999 (the "Agreement"), pursuant
to which the Purchaser agreed to purchase from the Shareholder and the
Shareholder agreed to sell to the Purchaser 100 Class "A" shares of Able
Auctions (the "Able Auctions Shares") and a shareholder loan of CDN$741,000 (the
"Shareholder Loan"); and
B. The parties have agreed to amend the Closing Date defined in the Agreement,
and the consideration to be paid by the Purchaser to the Shareholder for the
Able Auctions Shares and the Shareholder Loan, and other terms and conditions of
the Agreement as specified in this Addendum;
NOW THEREFORE THIS ADDENDUM (this "Addendum") WITNESSES that in consideration of
the covenants and agreements herein contained, the parties hereto do covenant
and agree as follows:
1. SHARE PURCHASE
1.1 Paragraph 1.1 of the Agreement is hereby amended to provide that the
Shareholder shall transfer all of the Able Auctions Shares to the
Purchaser, and the Purchaser agrees to acquire all of the Able
Auctions Shares, for a total purchase price (the "Purchase Price") of
CDN$1,648,657.11 (determined as of the Reference Date, using an agreed
exchange rate of CDN$1.46 = US$1.00), comprised of CDN$1,541,000 (the
"Cash Portion") and 7,373,775 voting common shares of the Purchaser
(the "JBF Shares") with an aggregate value of US$73,737.75 (at the
deemed price of US$0.01 per JBF Share).
<PAGE>
1.2 Paragraph1.2 of the Agreement is hereby amended to provide that the
Purchase Price shall be allocated as follows:
(a) CDN$907,657.11 to the Able Auctions Shares, comprised of the
value of the JBF Shares plus CDN$800,000 of the Cash Portion; and
(b) CDN$741,000 to the Shareholder Loan, comprised of the balance of
the Cash Portion.
1.3 Paragraph 1.4 of the Agreement is hereby amended to provide that the
Closing Date shall be 24 August 1999, or on such other date as may be
agreed between the parties.
2. CONDITIONS PRECEDENT
2.1 Subparagraph 2.1(a) of the Agreement is hereby amended to provide that
the Subject Removal Date shall be 20 August 1999, or such other date
as may be agreed between the parties.
2.2 Subparagraph 2.1(c) of the Agreement is hereby replaced by the
following:
on or before the Closing Date, the Purchaser shall have arranged a
financing (the "Financing") to raise at least US$3,000,000 but not
more than US$3,600,000, to complete at the Time of Closing,
immediately after issuance of the JBF Shares, to be used to pay the
Cash Portion and otherwise for the Purchaser's working capital
purposes, through issuance of shares and share purchase warrants
expected to be priced at US$0.80 per unit, with each unit expected to
be comprised of one share of the Purchaser and one-half of a warrant
to purchase one further share of the Purchaser for US$0.80 in the
first year following the issuance of the units, or US$1.00 per share
in the second year following issuance of the units.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
3.1 Subparagraph 3.4 of the Agreement is hereby amended by adding the
following:
(g) if the Completion does not occur on the Closing Date for any
reason whatsoever then, unless the parties have agreed to extend
the Closing Date, the Purchaser will change its name as soon as
possible from "Ableauctions.com, Inc." to another name which does
not include "Ableauctions" or any variation thereof.
4. REPRESENTATIONS AND WARRANTIES
4.1 Subparagraph 4.6(d) of the Agreement is hereby replaced by the
following:
other than the cancellation of 8,000,000 of the Outstanding Shares,
two consecutive 5:1 splits of the remaining Outstanding Shares (each
by 4:1 share dividend) to increase the total number of Outstanding
Shares to 61,250,000, and the issuance of up to 4,500,000 common
shares in the course of the Financing, there are no commitments, plans
or arrangements of any kind whatsoever to issue shares of the
Purchaser, nor are there any outstanding options, warrants,
convertible securities or other rights of any kind
-2-
<PAGE>
whatsoever calling for the issuance of any of the unissued shares or
other securities of the Purchaser
5. CLOSING
5.1 Subparagraph 6.1(h) of the Agreement is hereby replaced by the
following:
consent of Abdul Ladha to act as a director and President of the
Purchaser, and consent of Barrett Sleeman to act as a director of the
Purchaser;
5.2 Subparagraph 6.2(h) of the Agreement is hereby replaced by the
following:
a certified true copy of resolutions of the directors of the Purchaser
appointing Abdul Ladha as a director and President of the Purchaser
and Barrett Sleeman as a director of the Purchaser;
6. GENERAL
6.1 Schedules A, B, G and H to this Addendum are hereby substituted for
Schedules A, B, G and H to the Agreement, respectively.
6.2 All terms of the Agreement not specifically amended by this Addendum
or by incorporation of terms the definitions of which have been
changed by this Addendum shall continue in full force and effect,
unamended, subject to any further agreement in writing between the
parties.
6.3 This Addendum may be signed by the parties in as many counterparts as
may be deemed necessary, each of which so signed shall be deemed to be
an original, and all such counterparts together shall constitute one
and the same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Amendment Date:
THE CORPORATE SEAL of )
DEXTON TECHNOLOGIES CORPORATION )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
/s/ Abdul Ladha )
- ----------------------------------------- )
Name: Abdul Ladha )
----------------------------------- )
Title: President )
---------------------------------- )
THE CORPORATE SEAL of )
ABLE AUCTIONS (1991) LTD. )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
/s/ Abdul Ladha )
- ----------------------------------------- )
Name: Abdul Ladha )
----------------------------------- )
Title: President )
---------------------------------- )
-3-
<PAGE>
THE CORPORATE SEAL of )
ABLEAUCTIONS.COM, INC. (formerly )
J.B. FINANCIAL SERVICES, INC.) )
was hereunto affixed in the presence )
of its authorized signatory(ies): ) c/s
)
/s/ Douglas McLeod )
- ----------------------------------------- )
Name: Douglas McLeod )
----------------------------------- )
Title: President )
---------------------------------- )
-4-
<PAGE>
SCHEDULE A
Able Auctions Solicitor Opinion
-------------------------------
(letterhead of solicitors for the Shareholder and Able Auctions)
*, 199*
- -------------------------
c/o Campney & Murphy
Barristers and Solicitors
P.O. Box 48800
2100-1111 West Georgia Street
Vancouver, B.C. V7X 1K9
Attention: *
Dear Sirs:
Re: Share Purchase Agreement (the "Agreement") dated for reference the
9th day of July, 1999 between Dexton Technologies Corporation
(the "Shareholder"), Able Auctions (1991) Ltd. ("Able Auctions") and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.)
(the "Purchaser"), as amended by Addendum dated for reference the
12th day of August, 1999 ( the "Addendum")
We are the solicitors for the Shareholder and for Able Auctions. We provide this
opinion pursuant to subparagraphs * and * of the Agreement, as amended by the
Addendum. We have also acted as counsel for Able Auctions and the Shareholder in
connection with the negotiation, execution and completion of the Agreement and
the Addendum.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
<PAGE>
1. Able Auctions is a company duly incorporated and validly existing under the
laws of the Province of British Columbia. Able Auctions is in good standing
with respect to the filing of annual reports with the Registrar of
Companies for the Province of British Columbia.
2. To the best of our knowledge, Able Auctions has all requisite corporate
power and authority to conduct the business now carried on by it, and to
own its property and assets as described in the Agreement and Able Auctions
has all requisite corporate power and authority to enter into and to
perform its obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement and the Addendum by
Able Auctions.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement, as amended by the
Addendum, by Able Auctions will conflict with or constitute a breach or
default under the constating documents of Able Auctions or any commitment,
agreement or other instrument to which Able Auctions is a party or by which
it is bound.
5. To the best of our knowledge, there are no claims, judgement, actions,
suits, litigation, proceedings or investigations, actual, pending or
threatened against Able Auctions which might materially affect any
business, properties, assets, prospects or conditions, financial or
otherwise, of Able Auctions or which could result in any material liability
to Able Auctions, other than a total of four claims by Sangat S. Rehal,
Surinder K. Rehal, Paulie Bhambra and Nikki Panasara, each in the amount of
CDN$10,000 and not yet set down for trial, for alleged conversion of
personal property by Able Auctions.
6. The authorized capital of Able Auctions consists of 10,000 shares without
par value divided into 5,000 Class "A" shares and 5,000 Class "B" shares of
which only 100 Class "A" shares (the "Able Auctions Shares") are validly
authorized, created, allotted, issued and outstanding, and, to the best of
our knowledge, are fully paid for and non-assessable, as at the date
hereof.
7. All necessary steps and corporate action and proceedings have been taken to
effect the valid transfer of the Able Auctions Shares to the Purchaser as
contemplated under the Agreement as amended by the Addendum. The Purchaser
is the registered owner of the Able Auctions Shares on the books and
records of Able Auctions.
The opinion expressed is subject to the qualification that enforceability of the
Agreement as amended by the Addendum may be limited by applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally, and that
equitable remedies such as the remedies of specific performance or injunction
are in the discretion of the court from which they are sought.
Yours truly,
*
Per:
*
-2-
<PAGE>
SCHEDULE B
JBF Solicitor Opinion
---------------------
(letterhead of solicitors for the Purchaser)
*, 199*
*
c/o *
Attorneys at Law
*
Attention: *
Dear Sirs:
Re: Share Purchase Agreement (the "Agreement") dated for reference the
9th day of July, 1999 between Dexton Technologies Corporation
(the "Shareholder"), Able Auctions (1991) Ltd. ("Able Auctions") and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.)
(the "Purchaser"), as amended by Addendum dated for reference the
12th day of August, 1999 ( the "Addendum")
We are the solicitors the Purchaser. We provide this opinion pursuant to
subparagraphs * and * of the Agreement as amended by the Addendum. We have acted
as counsel for the Purchaser in connection with the o of the Agreement and the
Addendum.
We have considered * such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have * assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
*
Based on and subject to the foregoing, we are of the opinion that:
1. The Purchaser is a company duly incorporated and validly existing under the
laws of the State of Florida. The Purchaser is in good standing with
respect to the filing of annual reports with the Registrar of Companies for
the State of Florida.
<PAGE>
2. The Purchaser has all requisite corporate power and authority to enter into
and to perform its obligations under the Agreement as amended by the
Addendum.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement and the Addendum by
the Purchaser.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement as amended by the
Addendum by the Purchaser will conflict with or constitute a breach of or
default under the constating documents of the Purchaser or any commitment,
agreement or other instrument to which the Purchaser is a party or by which
it is bound.
5. As at the Closing Date of the Agreement, the authorized capital of the
Purchaser consisted of 250,000,000 common shares with a par value of
U.S.$0.001 per share, of which * shares are validly authorized, created,
allotted, issued and outstanding, and, to the best of our knowledge, fully
paid for and non-assessable, based wholly upon and assuming the accuracy of
the attached * from *.
6. All necessary steps and corporate action and proceedings have been taken to
effect the valid issuance of the JBF Shares to the Shareholder as
contemplated under the Agreement as amended by the Addendum and, upon
issuance, delivery and receipt of the consideration described in the
Agreement as amended by the Addendum, will be validly issued, fully paid
and non-assessable.
The opinion expressed is subject to * the qualification that enforceability of
the Agreement as amended by the Addendum may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally, and
that equitable remedies such as the remedies of specific performance or
injunction are in the discretion of the court from which they are sought.
Yours truly,
*
Per:
*
-2-
<PAGE>
SCHEDULE F
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.1(e) of the Share Exchange Agreement dated for
reference the 9th day of July, 1999 (the "Agreement") between Dexton
Technologies Corporation (the "Shareholder"), Able Auctions (1991) Ltd. and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.) (the
"Purchaser"), as amended by Addendum dated for reference the 12th day of August,
1999 ( the "Addendum"), the undersigned Shareholder hereby confirms to the
Purchaser that the representations and warranties of the Shareholder contained
in the Agreement, as amended by the Addendum, or contained in any certificates
or documents delivered by the Shareholder pursuant to the Agreement, as amended
by the Addendum, are true and correct in every respect as of the Time of Closing
of the Agreement being 11:00 o'clock a.m. local time in Vancouver, B.C. on the
*, 1999.
Dated at *, this *, 1999.
------------------------------------
*
<PAGE>
SCHEDULE G
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.2(d) of the Share Purchase Agreement dated for
reference the 9th day of July, 1999 (the "Agreement") between Dexton
Technologies Corporation (the "Shareholder"), Able Auctions (1991) Ltd., and
ABLEAUCTIONS.COM, INC. (formerly J.B. Financial Services, Inc.) (the
"Purchaser"), as amended by Addendum dated for reference the 12th day of August
1999 (the "Addendum") the Purchaser confirms to the Shareholder that:
(a) the representations and warranties of the Purchaser contained in the
Agreement, as amended by the Addendum, or contained in any
certificates or documents delivered by it pursuant to the Agreement,
as amended by the Addendum, are true and correct in every respect as
of the Time of Closing of the Agreement, being 11:00 o'clock a.m.
local time in Vancouver, B.C. on the * 1999; and
(b) the Purchaser has arranged an equity financing of its * securities to
raise gross proceeds of at least U.S.$3,000,000 immediately after the
transfer of the JBF Shares to the Shareholder.
Dated at Vancouver, British Columbia, this * 1999.
ABLEAUCTIONS.COM, INC.
(formerly J.B. Financial Services, Inc.)
Per:
---------------------------------
*, Director
EXHIBIT 10.5
CONTRIBUTION AGREEMENT
J.B. FINANCIAL SERVICES, INC.
This Contribution Agreement (the "Agreement") is entered into as of July
15, 1999, by and between Doug McLeod ("Shareholder"), and J.B. FINANCIAL
SERVICES, INC., a Florida corporation ("Company").
A. Shareholder currently holds 8,600,000 shares of the Company's issued
and outstanding common shares (the "Common Shares").
B. The Common Shares were issued to Shareholder in consideration for
certain services to the Corporation (the "Consideration").
C. Shareholder and the Corporation have determined that it is in the best
interest of the Shareholder and the Corporation that the Shareholder
contribute to the Company 8,000,000 of the Common Shares to reduce the
number of issued and outstanding shares and to facilitate future
financing for the Company.
D. The Shareholder desires to contribute 8,000,000 Common Shares to the
Company and the Company desires to accept such contribution under the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Contribution. Shareholder hereby agrees to contribute Eight Million
(8,000,000) Common Shares to the Company and the Company hereby agrees
to accept such contribution by the Shareholder and to pay Shareholder
consideration in the sum of One Hundred Dollars ($100.00) as full
consideration for the Common Shares.
2. Governing Law. This Agreement shall be construed and enforced in
accordance with the federal laws of the United States and the internal
laws of the State of Washington, without regard to the conflicts of
law rules of such state.
3. Construction. Whenever the singular number is used in this Agreement
and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine
and neuter genders and vice versa.
4. Headings. The headings in this Agreement are inserted for convenience
<PAGE>
only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provisions
hereof.
5. Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement and the
application thereof shall not be affected and shall be enforceable to
the fullest extent permitted by law.
6. Heirs, Successors and Assigns. Each of the covenants, terms,
provisions and agreements contained in this Agreement shall be binding
upon and inure to the benefit of the parties hereto and, to the extent
permitted by this Agreement, their respective heirs, legal
representatives, successors and assigns.
7. Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
8. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute
one and the same instrument. Delivery of an executed counterpart of
this Agreement via facsimile shall be effective as delivery of a
manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
day first written above.
J.B. FINANCIAL SERVICES, INC.
By: --------------------------------
Its: ------------------------------
SHAREHOLDER
------------------------------------
Doug McLeod
EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of the 20th day of September, 1999.
AMONG:
ROSS AUCTIONEERS & APPRAISERS LTD., a company incorporated
under the laws of British Columbia and having its head office
at 4325 192nd Street, Surrey, British Columbia, V4P 1M5
(the "Vendor")
OF THE FIRST PART
AND:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office at 3112
Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Purchaser")
OF THE SECOND PART
AND:
ABLEAUCTIONS.COM, INC., a company incorporated under the laws
of Florida and having its head office at 3112 Boundary Road,
Burnaby, British Columbia, V5M 4A2
(the "Parent Company")
OF THE THIRD PART
WHEREAS:
A. The Vendor carries on the business of the auction of tools, vehicles,
industrial equipment, government surplus equipment, and police seized goods;
B. The Vendor has agreed to sell, and the Purchaser has agreed to purchase,
subject to certain exceptions, all of the property, assets, and undertaking of
the Vendor's business, as a going concern;
C. The Purchaser is a wholly owned subsidiary of the Parent Company;
<PAGE>
2
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises
and the covenants, agreements, representations, warranties, and payments set
forth in this Agreement, the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Where used in this Agreement, each of the following words will have
the following meanings:
(a) "Assets" means all properties and assets normally and necessarily used in
the Business, as a going concern, including without limitation:
(i) the Goodwill;
(ii) the Equipment;
(iii) the Material Contracts;
(iv) the Intangible Property; and
(v) all of the Vendor's right, title, and interest in and to all
other property and assets, real or personal, tangible or
intangible, used by the Vendor or to which the Vendor is entitled
in connection with the Business,
irrespective of whether these properties and assets are located on the
Premises, but does not include:
(vi) cash on hand or in banks before the Effective Date; and
(vii) the Receivables;
(b) "Business" means the business currently carried on by the Vendor for the
auction of tools, vehicles, industrial equipment, government surplus
equipment, and police seized goods;
(c) "Closing" means the completion of the sale and purchase of the Assets by
transfer and conveyance and the payment of or provision for the Purchase
Price, all as provided in this Agreement;
(d) "Closing Date" means on or before October 15, 1999;
(e) "Effective Date" means September 20, 1999;
(f) "Equipment" means all machinery, equipment, office inventory for resale,
automobiles, trucks, office equipment, furniture, furnishings, tools,
stores, and supplies of all kinds used in connection with the Business and
leased or owned by the Vendor, including without limitation the machinery,
equipment, and other property described in Schedule "A";
<PAGE>
3
(g) "Goodwill" means the goodwill of the Business, together with the
Purchaser's exclusive right to represent itself as carrying on the business
in continuation of and in succession to the Vendor and the right to use any
words indicating that the Business is so carried on, including the right to
use the Names as part of the name of or in connection with the Business or
any part thereof carried on or to be carried on by the Purchaser and all
lists of customers, documents, records, correspondence, and other
information related to the Business;
(h) "Indebtedness" means any and all of the Vendor's trade accounts, debts,
duties, endorsements, guarantees, liabilities, obligations,
responsibilities, and undertakings assumed, created, incurred, or made,
whether voluntary or involuntary, however incurred or made or arising,
whether due or not due (except accrued employees' salaries which are not
yet due and obligations of the Vendor under Material Contracts), absolute,
inchoate, or contingent, liquidated or unliquidated, determined or
undetermined, direct or indirect, express or implied, and whether the
Vendor may be liable individually or jointly with others;
(i) "Intangible Property" means all of the Vendor's right and interest to all
registered and unregistered trade marks, trade or brand names including the
Names, copyrights, designs, inventions, patents, licenses, authorities,
restrictive covenants, and other rights used in connection with the
Business;
(j) "Lease" means the lease between Ancor Enterprises Inc. and the Vendor dated
for reference January 28, 1998 regarding the Premises;
(k) "Material Contracts" means the benefit of all unfilled orders received by
the Vendor and forward commitments to purchase made by the Vendor in
connection with the Business, and all other contracts, engagements, or
commitments, whether written or oral, to which the Vendor is entitled in
connection with the Business including without limitation its right, title,
and interest in, to, and under the material agreements and contracts
described in Schedule "B";
(l) "Names" means the name "Ross Auctioneers" or any variation;
(m) "Person" means an individual, corporation, body corporate, partnership,
joint venture, society, association, trust, or unincorporated organization,
or any trustee, executor, administrator, or other legal representative;
(n) "Premises" means that portion of the leasehold lands and premises situated
at 16275 84th Avenue, Surrey, British Columbia, used by the Vendor for the
Business and more particularly described in the Lease;
(o) "Purchase Price" means the purchase price for the Assets set forth in
section 3.1;
<PAGE>
4
(p) "Receivables" means all accounts receivable, trade accounts, notes
receivable, and other debts owing to the Vendor as of the Closing Date in
connection with or arising out of the Business or otherwise, and the full
benefit of all securities for these accounts, notes, or debts; and
(q) "Regulatory Approval" means the approval of the transaction contemplated by
this Agreement by any securities regulatory authority having authority over
the affairs of the Parent Company and the Purchaser.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this Agreement, including the preamble and the Schedules,
as supplemented or amended from time to time;
(b) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent, or intent of this Agreement or any provision hereof;
(c) the singular of any term includes the plural and vice versa, the use of any
term is equally applicable to any gender and, where applicable, a body
corporate, the word "or" is not exclusive and the word "including" is not
limited (whether or not non-limited language, such as "without limitation"
or "but not limited" to words of similar import, is used with reference
thereto);
(d) any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principles applicable in
Canada;
(e) any reference to a statute includes and is a reference to that statute and
to the regulations made under that statute, with all amendments made to
that statute and in force from time to time, and to any statute or
regulations that may be passed which has the effect of supplementing or
superseding that statute or those regulations;
(f) except as otherwise provided, any dollar amount referred to in this
Agreement is in Canadian funds; and
(g) any other term defined within the text of this Agreement has the meaning so
ascribed.
1.3 The following are the Schedules to this Agreement:
Schedule Description
-------- -----------
A List of Equipment
B List of Material Contracts
C Terms of Employment
D Employment Agreements
<PAGE>
5
2. PURCHASE AND SALE
2.1 On the terms and subject to the conditions of and based on the
representations and warranties contained in this Agreement, the Vendor agrees to
sell and the Purchaser agrees to purchase the Assets belonging to or used in the
Business, as a going concern, as and from the Effective Date.
2.2 The parties acknowledge that the purchase and sale provided for in
section 2.1 is restricted to the Assets only and without limiting the generality
of the foregoing, the Purchaser is not acquiring any assets other than the
Assets nor is the Purchaser purchasing any business of the Vendor other than the
Business.
3. PURCHASE PRICE
3.1 The Purchase Price will be the sum of CDN$250,000 plus applicable
goods and services tax and provincial social services tax, to be allocated as
follows:
(a) Equipment: $25,000;
(b) Goodwill, Intangible Property,
and Material Contracts: $225,000.
3.2 In consideration of the sale of the Assets, the Purchaser also agrees
to reimburse to the Vendor, on a monthly basis, all rent payments under the
Lease.
3.3 The Purchaser will pay and satisfy the Purchase Price on the Closing
Date by issuing to the Vendor or its nominee 60,000 shares of common stock of
the Parent Company (the "Shares") at a deemed price of US$2.80 per Share.
3.4 The Vendor acknowledges that:
(a) the issuance of the Shares has not been approved or disapproved by the
United States Securities and Exchange Commission, any state securities
agency, or any foreign securities agency;
(b) the Purchaser is not registered under the Securities Exchange Act of 1934
(United States);
(c) the Shares will, when issued, be validly issued as fully paid and
non-assessable, will be issued pursuant to exemptions from registration and
prospectus requirements available under applicable securities laws, and
will be subject to resale restrictions imposed pursuant to applicable
securities laws;
<PAGE>
6
(d) the certificates representing the Shares will bear a legend stating that
they have not been registered under the Securities Act of 1933 (United
States) (the "1933 Act") or the securities laws of any state of the United
States and may not be offered for sale or sold in the United States unless
registered under the 1933 Act and the securities laws of all applicable
states of the United States or an exemption from such registration
requirements is available; and
(e) the Vendor has been cautioned to seek its own legal advice as to the resale
restrictions applicable to the Shares.
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as follows, with the intent
that the Purchaser will rely on these representations and warranties in entering
into this Agreement, and in concluding the purchase and sale contemplated by
this Agreement:
4.1 Status of Vendor. The Vendor is a corporation duly incorporated under
the Company Act (British Columbia), is validly existing and in good standing
regarding the filing of annual returns until 1998, and has the power and
capacity to own and dispose of the Assets, to carry on the Business now being
conducted by it, to enter into this Agreement, and carry out its terms to the
full extent.
4.2 Authority to Sell. All necessary corporate action on the Vendor's part
has duly and validly authorized the signing and delivery of this Agreement and
the completion of the transaction contemplated by this Agreement, and this
Agreement constitutes a legal, valid, and binding obligation of the Vendor
enforceable against the Vendor in accordance with its terms except as may be
limited by laws of general application affecting the rights of creditors.
4.3 Sale will Not Cause Default. Neither the signing nor delivery of this
Agreement, nor the completion of the purchase and sale contemplated in this
Agreement, will:
(a) violate any of the terms and provisions of the Vendor's Memorandum or
Articles, or any judgment, order, decree, statute, by-law, regulation,
covenant, restriction, or any Material Contract or agreement applicable to
the Vendor or any of the Assets (subject to the obligation to obtain
consents, if any, in the Material Contracts);
(b) give any person the right to terminate, cancel, or remove any of the
Assets, save to the extent that the consent of third parties is required to
assign the Material Contracts; or
(c) result in any fees, duties, taxes, assessments, or other amounts relating
to any of the Assets becoming due or payable other than provincial social
services tax and goods and services tax payable by the Purchaser in
connection with the purchase and sale.
4.4 Assets. The Vendor owns and possesses and has a good and marketable
title to the Assets and, on Closing, the Assets will be free and clear of all
liens, charges, mortgages, pledges, security interests, encumbrances, or other
claims whatsoever.
<PAGE>
7
4.5 Books and Records. The Vendor's books and records fairly and correctly
set out and disclose in all material respects, in accordance with generally
accepted accounting principles, the Vendor's financial position, and the Vendor
has accurately recorded all of its material financial transactions relating to
the Business in those books and records.
4.6 Material Change. Since August 31, 1999, there has not been:
(a) any material change in the financial condition of the Business, its
liabilities, or the Assets, other than changes in the ordinary course of
business, none of which has been materially adverse; or
(b) any damage, destruction, loss, or other event (whether or not covered by
insurance) materially and adversely affecting the Assets or the Business.
4.7 Litigation. To the Vendor's knowledge, there is no litigation or
administrative or government proceeding or inquiry pending or threatened against
or relating to the Vendor, the Business, or any of the Assets, and the Vendor
does not know of or have reasonable grounds for believing that there is any
basis for any action, proceeding, or inquiry.
4.8 Conformity with Laws. The Vendor has obtained all governmental
licenses and permits required for the conduct in the ordinary course of the
operations of the Business and the uses to which the Assets have been put and
the licenses and permits are in good standing and the conduct and uses are not
in breach of any statute, by-law, regulation, covenant, restriction, plan, or
permit, provided that the Vendor will not transfer the government licenses and
permits to the Purchaser and the Purchaser will be responsible for obtaining its
own permits and licenses.
4.9 No Collective Agreement. The Vendor is not a party to any collective
agreement relating to the Business with any labour union or other association of
employees and no part of the Business has been certified as a unit appropriate
for collective bargaining.
4.10 Terms of Employment. The name of each present employee of the Vendor,
the duration of the employment of each employee with the Vendor, and the
Vendor's remuneration and benefit obligations and accrued vacation pay of each
employee is accurately set out in Schedule "C", and the Vendor will have paid
the full amounts of salaries, pensions, bonuses, commissions, and other
remuneration of any nature, including severance pay and unpaid earned wages of
the Vendor's employees and salespersons, as at the Closing Date up to the most
recent pay day, and there is no employee who cannot be dismissed on less than
two months' notice without further liability.
4.11 No Defaults. Except as otherwise expressly disclosed in this
Agreement, there has been no material default in any term, condition, provision,
or obligation to be performed under the Lease or any Material Contract, each of
which is in good standing and in full force and effect, unamended.
<PAGE>
8
4.12 List of Material Contracts. The Schedule of Material Contracts,
Schedule "B", contains a true and correct listing of each written or oral
contract of the following types to be acquired or assumed by the Purchaser:
(a) contracts or commitments out of the ordinary course of business;
(b) contracts or commitments involving an obligation to pay in the aggregate
$10,000 or more or of a duration greater than one year;
(c) contracts or commitments affecting ownership of or title to or any interest
in the Assets;
(d) except as required by statute or regulation, contracts or commitments for
bonuses, incentive compensation, pensions, group insurance, or employee
welfare plans, all of which are fully funded as determined by an
independent and reputable firm of actuaries employed by the Vendor; and
(e) employment contracts or commitments other than unwritten employment
contracts of indefinite duration entered into in the ordinary course of the
Business.
4.13 Accuracy of Representations. No certificate furnished by or on behalf
of the Vendor to the Purchaser at the Closing Date regarding the Vendor's
representations, warranties, or covenants in this Agreement will contain any
untrue statement of a material fact or omit to state a material fact known to
the maker of the certificate necessary to make the statements contained in the
certificate not misleading.
4.14 Exclusions and Limitations. Despite anything to the contrary in this
Agreement, the Vendor makes no representations or warranties regarding the
Intangible Property or its right to the Names or use of the Names except that:
(f) the Vendor has not granted the right or license to any person to use the
Names;
(g) the Vendor has not received notice from any person that the Vendor's use of
the Names infringes the rights of any other person; and
(h) the Vendor has not assigned any rights to the Names or any other trademarks
to any other person.
4.15 Canadian Resident. The Vendor is a resident in Canada within the
meaning of the Income Tax Act (Canada).
4.16 Condition of Equipment. To the Vendor's best knowledge, all machinery
and equipment comprised in the Assets are in normal operating condition and in a
state of reasonable maintenance and repair and the Equipment represents all
machinery and equipment owned by the Vendor and used by the Vendor in the
operation of the Business.
<PAGE>
9
4.17 No Lien Indebtedness. The Vendor has no Indebtedness to any Person
which might, by operation of law or otherwise, now or hereafter, constitute a
lien, charge, or encumbrance on any of the Assets, except for encumbrances which
will be discharged on or following Closing on conditions satisfactory to the
Purchaser's lawyer acting reasonably.
4.18 No Infringement. To the best of the Vendor's knowledge, no copyright,
franchise or license, patent right, trade mark, trade name, or other of the
Vendor's Intangible Property used in or relating to the Business in any way
infringes on the right of any Person under or regarding any patent, trade mark,
trade name, copyright, or other industrial or intellectual property.
4.19 No Liability for Indebtedness. There is no Indebtedness of any kind
whatsoever, whether or not determined or determinable relating to the Business,
for which the Purchaser may become liable on or after the Closing Date.
4.20 No Other Agreement. There is no written or oral agreement, option,
understanding, or commitment, or any right or privilege capable of becoming an
agreement, for the purchase of the Business or any of the Assets from the
Vendor, other than purchase orders accepted by the Vendor in the ordinary course
of the operation of the Business.
4.21 Schedules Accurate. To the Vendor's best knowledge, all information
set out in the Schedules to this Agreement is complete and accurate in every
material respect.
5. VENDOR'S COVENANTS
5.1 Conduct of Business. Until the Closing Date, the Vendor will conduct
the Business diligently and only in the ordinary course and will use its best
efforts to preserve the Assets intact, to keep available to the Purchaser its
present employees, and to preserve for the Purchaser its relationship with its
suppliers, customers, and others having business relations with it.
5.2 Access by Purchaser. The Vendor will give to the Purchaser and its
officers, counsel, accountants, and other representatives full access, during
normal business hours throughout the period before the Closing Date, to all of
the Assets and of the Vendor's properties, books, contracts, commitments, and
records relating to the Business, and will furnish to the Purchaser during this
period all information that the Purchaser may reasonably request.
5.3 Insurance. From this date until the Closing Date, the Vendor will
obtain and maintain in full force and effect policies of insurance adequate to
insure the replacement value of the Assets.
5.4 Procure Consents. The Purchaser and the Vendor will cooperate
regarding obtaining any consents that may be required to validly assign the
Material Contracts to the Purchaser.
<PAGE>
10
5.5 Covenant of Indemnity. The Vendor will indemnify and hold harmless the
Purchaser from and against:
(a) any and all Indebtedness existing at or arising after the Closing Date;
(b) any and all damage or deficiencies resulting from any misrepresentation,
breach of warranty, or non-fulfillment of any covenant on the Vendor's part
under this Agreement or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished to the
Purchaser; and
(c) any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and legal and other expenses incident to any of the foregoing.
5.6 Termination of Employees. The Vendor will, as of the Closing Date,
terminate the employment of all employees to whom the Purchaser has made an
offer of employment under section 7.1 and will indemnify and save harmless the
Purchaser from and against all claims by any employee of the Vendor for wages,
salaries, bonuses, pension or other benefits, severance pay, notice or pay in
lieu of notice, and holiday pay for any period before the Closing Date.
5.7 Steps to Transfer Assets. The Vendor will, before the Closing Date,
take or cause to be taken all proper steps, actions, and corporate proceedings
on its part (including the approval of the sale by the Vendor's directors and
shareholders) to enable it to vest a good and marketable title in the Purchaser
to the Assets, free and clear of all liens, mortgages, encumbrances, equities,
or claims of every nature and kind.
5.8 Care of Assets. From the signing of this Agreement to the Closing
Date, the Vendor will take reasonable care to protect and safeguard the Assets
and do all necessary repairs and maintenance to the assets that the Vendor uses
in the operations of the Business, and will not sell or dispose of any of the
Assets except in the ordinary course of business.
5.9 Pay Employees. The Vendor will pay to all employees in the Business
all wages and salaries and all amounts due in lieu of vacation pay and will pay
all source deductions up to and including the Closing Date.
5.10 Tax Filings. The Vendor will, from the signing of this Agreement to
the Closing Date, make all necessary tax, government, and other filings in a
timely fashion.
5.11 Adverse Development. The Vendor will, from the signing of this
Agreement to the Closing Date, promptly advise the Purchaser regarding any
development which materially affects the Business or the Assets, in either case
taken as a whole.
<PAGE>
11
6. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor as follows, with the intent
that the Vendor will rely on these representations and warranties in entering
into this Agreement, and in concluding the purchase and sale contemplated in
this Agreement:
6.1 Status of Purchaser. The Purchaser is a corporation duly incorporated
and in good standing under the laws of British Columbia, is validly existing,
and has the power and capacity to enter into this Agreement and to carry out its
terms.
6.2 Status of Parent Company. The Parent Company is a corporation duly
incorporated and in good standing under the laws of Florida, is validly
existing, and has the power and capacity to enter into this Agreement and to
carry out its terms. The Parent Company's shares of common stock are quoted for
trading on the National Association of Securities Dealers Over-the-Counter
Bulletin Board.
6.3 Authority to Purchase. All necessary corporate action on the
Purchaser's part has duly and validly authorized the signing and delivery of
this Agreement and the completion of the transaction contemplated by this
Agreement, and this Agreement constitutes a legal, valid, and binding obligation
of the Purchaser enforceable against the Purchaser in accordance with its terms,
except as limited by laws of general application affecting the rights of
creditors.
7. PURCHASER'S COVENANTS
7.1 Offer Employment. The Purchaser covenants with the Vendor to offer
employment only to Ronald H. Smallwood, Ruth E. Smallwood, and Richie Smallwood
on the terms and conditions contained in the employment agreements attached as
Schedule "D". The Purchaser also agrees to reimburse the Vendor for all employee
wages paid by the Vendor from September 20, 1999 to and including December 31,
1999 in respect of the other employees listed in Schedule "C" who are not
offered employment directly by the Purchaser.
7.2 Social Services Tax and Goods and Services Tax. The Purchaser will be
liable for and will pay on Closing, with proof of payment satisfactory to the
Vendor, all provincial social services taxes, registration charges, and transfer
fees properly payable on and in connection with the Vendor's sale and transfer
of the Assets to the Purchaser. The Purchaser will pay to the Vendor for
remittance to the Excise Tax Branch, Revenue Canada, all goods and services tax
unless, by provisions of the Excise Tax Act, the Vendor is under no obligation
to collect and has no liability for failure to collect that tax. The Vendor will
provide the Purchaser with proof of payment, if required, of all goods and
services tax.
7.3 Consents. The Purchaser will, at the Vendor's request, sign and
deliver all applications for consent and all assumption agreements, provide all
information necessary to obtain the consents referred to in section 5.4, and
assist and co-operate with the Vendor in obtaining those consents.
<PAGE>
12
7.4 Assumption of Material Contracts. The Purchaser agrees to assume all
of the Vendor's obligations and liabilities under the Material Contracts as of
the Effective Date.
7.5 Indemnity. The Purchaser will jointly and severally indemnify and hold
harmless the Vendor from and against:
(a) any and all covenants, provisions, or obligations of or under the Material
Contracts arising after the Closing Date;
(b) any and all damage or deficiencies resulting from any misrepresentation,
breach of warranty, or non-fulfillment of any covenant on the Purchaser's
part under this Agreement or from any misrepresentation in or omission from
any certificate or other instrument furnished or to be furnished to the
Vendor; and
(c) any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and legal and other expenses incident to any of the foregoing.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS
8.1 Representations, Warranties, and Covenants of Vendor. All statements
contained in any certificate or other instrument delivered by or on behalf of
the Vendor under this Agreement will be deemed to be the Vendor's
representations and warranties. All of the Vendor's representations, warranties,
covenants, and agreements in this Agreement will, unless otherwise expressly
stated, survive the Closing Date and any investigation at any time made by or on
behalf of the Purchaser and, subject to section 8.2, will continue in full force
and effect for the Purchaser's benefit.
8.2 Limitation on Vendor's Indemnity. No claim by the Purchaser under the
covenant of indemnity contained in section 5.5 or for damages or other relief
regarding the Vendor's breach of warranty or breach of covenant under this
Agreement will be valid unless:
(a) the Purchaser gives to the Vendor written notice of the claim before the
expiration of 12 months after the Closing Date; and
(b) the aggregate amount of all claims exceeds $5,000.
8.3 Purchaser's Representations, Warranties, and Covenants. All of the
Purchaser's representations, warranties, covenants, and agreements in this
Agreement will, unless otherwise expressly stated, survive the Closing Date and
any investigation at any time made by or on behalf of the Purchaser and will
continue in full force and effect for the Vendor's benefit.
<PAGE>
13
8.4 Limitation on Purchaser's Indemnity. No claim by the Vendor under the
covenant of indemnity contained in section 7.5 or for damages or other relief
regarding the Purchaser's breach of warranty or breach of covenant under this
Agreement will be valid unless:
(a) the Vendor gives to the Purchaser written notice of the claim before the
expiration of 12 months after the Closing Date; and
(b) the aggregate amount of all claims exceeds $5,000.
9. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
All of the Purchaser's obligations under this Agreement are subject to the
fulfillment at or before the Closing Date of the following conditions:
9.1 Vendor's Representations and Warranties. The Vendor's representations
and warranties contained in this Agreement and in any certificate or document
delivered under this Agreement will be true at and as of the Closing Date if the
Vendor made the representations and warranties at and as of that time.
9.2 Vendor's Covenants. The Vendor will have performed and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it before or at the Closing Date.
9.3 Vendor's Certificate. The Vendor will have delivered to the Purchaser
a certificate of the Vendor's President, as an officer of the Vendor and not in
his personal capacity, dated the Closing Date and certifying in detail that the
Purchaser may specify to the fulfillment of the conditions set forth in sections
9.1 and 9.2.
9.4 Opinion of Counsel. The Purchaser will have received from the Vendor's
legal counsel an opinion dated the Closing Date that the Vendor has taken all
necessary steps and corporate proceedings to validly transfer the Assets to the
Purchaser, and that, to the knowledge of legal counsel but without
investigation, there are no claims, actions, or proceedings, pending or
threatened against or affecting the Assets or the transfer of the Assets to the
Purchaser.
9.5 Independent Valuation. The Purchaser will have obtained an independent
valuation of the Assets indicating a value of not less than CDN$250,000.
9.6 Smallwood Employment. Richie Smallwood will have signed a five year
employment agreement with the Purchaser in the form attached as Schedule "D".
9.7 Regulatory Approval. The Purchaser will have obtained all approvals
that may be required from all securities regulatory authorities having
jurisdiction over the affairs of the Purchaser.
<PAGE>
14
9.8 No Adverse Affect. Before the Closing Date, the Vendor will not have
experienced any event or condition or have taken any action of any kind
adversely affecting the Assets or the Business to materially reduce the value of
the Assets or the Business to the Purchaser.
The foregoing conditions are for the Purchaser's exclusive benefit and the
Purchaser may waive any condition in whole or in part before or at the Closing
Date by delivering to the Vendor a signed written waiver.
10. CONDITIONS PRECEDENT TO THE VENDOR'S OBLIGATIONS
All of the Vendor's obligations under this Agreement are subject to the
fulfillment, before or at the Closing Date, of the following conditions:
10.1 Purchaser's Representations and Warranties. The Purchaser's
representations and warranties contained in this Agreement will be true at and
as of the Closing Date as though the Purchaser made the representations and
warranties at and as of that time.
10.2 Purchaser's Covenants. The Purchaser will have performed and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it before or at the Closing Date.
10.3 Consents of Third Parties. The Vendor will have obtained all consents
or approvals required to be obtained to sell, assign, or transfer the Assets,
provided that the Vendor may only rely on this condition if the Vendor has
diligently used its best efforts to procure all consents or approvals and the
Purchaser has not waived the need for any consents or approvals.
The foregoing conditions are for the Vendor's exclusive benefit and the Vendor
may waive any condition in whole or in part before or at the Closing Date by
delivering to the Purchaser a signed written waiver.
11. CLOSING
11.1 Time of Closing. Subject to the terms and conditions of this
Agreement, the purchase and sale of the Assets will close on the Closing Date.
11.2 Place of Closing. The Closing will take place at the offices of the
Purchaser's solicitor, Claudia L. Losie, 1700 - 1185 West Georgia Street,
Vancouver, British Columbia, V6E 4E6.
11.3 Effective Date. Despite the Closing Date being after September 20,
1999, the Closing will take place effective on the Effective Date. From and
after the Effective Date, the Business will be operated for the benefit of the
Purchaser so that the Purchaser will receive all profits of the Business that
may arise or accrue from and after the Effective Date.
<PAGE>
15
11.4 Documents to be Delivered by the Vendor. At the Closing, the Vendor
will deliver or cause to be delivered to the Purchaser:
(a) all deeds of conveyance, bills of sale, transfer, and assignments in form
and content satisfactory to the Purchaser's counsel, appropriate to
effectively vest a good and marketable title to the Assets in the Purchaser
to the extent contemplated by this Agreement, and immediately registrable
in all places where registration of these instruments is required;
(b) possession of the Assets;
(c) the certificate of the Vendor's President under section 9.3;
(d) signed releases of or evidence to the Purchaser's reasonable satisfaction
for the discharge of any and all Indebtedness and encumbrances which may be
enforceable against any of the Assets being purchased or trust conditions
agreed on by lawyers for the Vendor and the Purchaser discharging the same;
(e) certified copies of resolutions of the Vendor's directors and shareholders
that are required to be passed to authorize the signing, delivery, and
implementation of this Agreement and of all documents to be delivered by
the Vendor under this Agreement; and
(f) all lists of customers, brochures, samples, price lists, files, records,
documents, and other information related to the Business, and all licenses,
authorities, and other rights used in connection with the Business included
in the Assets.
11.5 Documents to be Delivered by the Purchaser. At the Closing, the
Purchaser will deliver or cause to be delivered:
(a) a certificate registered in the name of the Vendor or its nominee
representing the Shares; and
(b) signed employment agreements between the Purchaser and each of Ronald H.
Smallwood, Ruth E. Smallwood, and Richie Smallwood in the forms attached as
Schedule "D".
12. RISK OF LOSS
From this date to the Closing Date, the Assets will be and remain at the
Vendor's risk. If any of the Assets are lost, damaged, or destroyed before the
Closing Date and are not replaced by the Vendor, the Purchaser may terminate
this Agreement on written notice to the Vendor or elect by notice in writing to
the Vendor to complete the purchase to the extent possible without reduction of
the Purchase Price, in which event all proceeds of any insurance or compensation
for any loss, damage, or destruction will be paid to the Purchaser and all of
the Vendor's right and claim to any amounts not paid by the Closing Date will be
assigned to the Purchaser by written assignment in form and substance
satisfactory to the Purchaser's counsel.
<PAGE>
16
13. RESTRICTIVE COVENANT
The Vendor and its shareholders, directors, and officers will not, for and
during the period of two years from the Closing Date, directly or indirectly
engage in or carry on, individually or in partnership or in conjunction with any
one or more persons, firms, associations, syndicates, or corporations, as
principal, agent, employee, director, officer, shareholder of any corporation,
guarantor, creditor, or in any manner whatsoever, within the Lower Mainland of
British Columbia, any business which is the same as or similar to, in whole or
in part, the Business. The Vendor acknowledges that it has considered this
provision and that this provision is, regarding their interests and those of the
Purchaser, reasonable as to all of the circumstances of the transactions
contemplated by this Agreement.
14. FURTHER ASSURANCES
The parties will sign all other documents and do all other things necessary to
carry out and give effect to the intent of this Agreement.
15. NOTICE
Any notices to be given by either party to the other will be sufficiently given
if delivered personally or transmitted by facsimile or if sent by registered
mail, postage prepaid, to the parties at their respective addresses shown on the
first page of this Agreement, or to any other addresses as the parties may
notify to the other from time to time in writing. This notice will be deemed to
have been given at the time of delivery, if delivered in person or transmitted
by facsimile, or within three business days from the date of posting if mailed
from Vancouver, British Columbia.
16. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and there
are no representations or warranties, express or implied, statutory or
otherwise, and no terms, conditions, or agreements collateral to this Agreement
other than as expressly set forth or referred to in this Agreement. This
Agreement supersedes all letters of intent or agreements made between the
parties before the date of this Agreement.
17. TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
18. APPLICABLE LAW
This Agreement will be governed by and interpreted in accordance with the laws
of British Columbia.
<PAGE>
17
19. SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit of and be binding on the parties and
their respective heirs, executors, administrators, successors, and assigns.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
THE CORPORATE SEAL OF )
ROSS AUCTIONEERS AND )
APPRAISERS LTD. )
was affixed in the presence of: )
)
)
/s/ Ron Smallwood ) c/s
- ------------------------------------- )
Authorized Signatory )
)
/s/ Mrs. Ruth Smallwood )
- ------------------------------------- )
Authorized Signatory )
THE CORPORATE SEAL OF )
ABLE AUCTIONS (1991) LTD. )
was affixed in the presence of: )
)
)
/s/ Abdul Ladha ) c/s
- ------------------------------------- )
Authorized Signatory )
)
- ------------------------------------- )
Authorized Signatory )
THE CORPORATE SEAL OF )
ABLEAUCTIONS.COM, INC. )
was affixed in the presence of: )
)
)
/s/ Abdul Ladha ) c/s
- ------------------------------------- )
Authorized Signatory )
)
- ------------------------------------- )
Authorized Signatory )
<PAGE>
SCHEDULE "A"
List of Equipment
WHITE MA 40 FORKLIFT SER. #26103602
NON WORKING WHITE FORKLIFTS
MISCELLANEOUS SHELVING & PALLET RACKING IN BUILDING
MINOLTA EP5320 PHOTOCOPIER
BACK PACK BLOWER
AUCTION PA SYSTEM
AUCTION TRUCK INDUSTRIAL AUCTION STAND
2 GLASS SHOWCASES
2 HAND TRUCKS
2 PALLET MOVERS
WALL MOUNT BATTERY CHARGER
1985 GMC 5 TON TRUCK
MISCELLANEOUS OFFICE SUPPLIES, ADDING MACHINES, PIGEONHOLES, ETC.
GREEN AIR COMPRESSOR
FLOOR STAGING
KEY ON SITE BUILDING
<PAGE>
SCHEDULE "B"
List of Material Contracts
1. Standing Office Agreement dated * with School District No. 43 (Coquitlam)
2. Agreement dated September 2, 1999 with the Vancouver Regional Cooperative
Purchasing Group.
3. Agreement dated May 9, 1997 with the Workers' Compensation Board.
4. List of various government clients (see attached).
<PAGE>
SCHEDULE "C"
Terms of Employment
Name of Employee Wage/Salary
---------------- -----------
Ronald H. Smallwood $2,500/month
Ruth E. Smallwood $2,500/month
Richie Smallwood $5,000/month
Bryan Wilkins $10.00/hour
Shawnna Ayers $9.00/hour
Miscellaneous Part-Time Help $9.00/hour
<PAGE>
SCHEDULE "D"
Employment Agreements
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective the 20th day of September, 1999.
BETWEEN:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office located
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Company")
OF THE FIRST PART
AND:
RONALD H. SMALLWOOD, of 4325 192nd Street, Surrey,
British Columbia, V4P 1M5
("Smallwood")
OF THE SECOND PART
WHEREAS:
A. The Company is an auctioneer and liquidator of a broad range of office
equipment, furniture, and industrial equipment;
B. Under an asset purchase agreement dated for reference September 20, 1999 (the
"Asset Purchase Agreement"), the Company purchased all of the property, assets,
and undertaking of the business of Ross Auctioneers & Appraisers Ltd. ("Ross"),
being the auction of tools, vehicles, industrial equipment, government surplus
equipment, and police seized goods (the "Business");
C. Pursuant to the Asset Purchase Agreement, the Business became a division of
the Company effective September 20, 1999; and
D. The Company has agreed to continue to employ Smallwood, being the director
and President of Ross, in the Business and Smallwood has agreed to accept that
employment, subject to the terms and conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that, for valuable consideration, the
parties mutually agree as follows:
<PAGE>
4
1. EMPLOYMENT
1.1 Subject to the terms and conditions of this Agreement, the Company
employs Smallwood to perform the duties set out in section 2.1 (the "Duties").
1.2 Smallwood's obligation to perform the Duties and the Company's
obligation to pay the remuneration to Smallwood will commence on September 20,
1999 (the "Effective Date") and will continue until December 31, 1999 unless
earlier terminated in accordance with Article 5 of this Agreement (the "Term").
2. DUTIES
2.1 Smallwood will use his best efforts to manage the set-up of an auction
site, including displays and advertising.
2.2 Smallwood will perform the Duties in a diligent, professional, and
efficient manner to preserve and enhance the Company's corporate image and will
faithfully devote the time, effort, and ability necessary to perform the Duties.
3. REMUNERATION
3.1 The Company will pay Smallwood $834 for the period September 20 to
September 30, 1999. Beginning October 1, 1999, the Company will pay Smallwood at
the monthly rate of $2,500, payable in two equal instalments (less applicable
source deductions) on the 15th day (or the business day immediately before the
15th day, if the latter is not a business day) and the last business day of each
month during the Term.
3.2 The Company will pay all reasonable expenses actually and properly
incurred by Smallwood in connection with his performance of the Duties to a
maximum of $600 per month against delivery to the Company of invoices evidencing
those expenses.
4. RELATIONSHIP OF THE PARTIES
4.1 The Duties are personal in character and Smallwood cannot assign
either this Agreement or any rights or benefits arising under this Agreement. In
performing the Duties, Smallwood will operate as and will have the status of an
employee and will not act or hold himself out as or be an agent or partner of
the Company.
5. TERMINATION AND RENEWAL
5.1 During the Term, the Company may terminate this Agreement and the
employment of Smallwood at any time for "just cause" by giving written notice to
Smallwood. For the purpose of this Agreement, "just cause" is defined as:
(a) the wilful and continued failure by Smallwood to substantially perform
the Duties 10 days after a written demand for substantial performance
is delivered to Smallwood,
<PAGE>
5
which demand specifically identifies the manner in which Smallwood has
not substantially performed his duties and responsibilities;
(b) any dishonesty on the part of Smallwood that materially affects the
Company;
(c) the conviction of Smallwood for any crime involving moral turpitude,
fraud, or misrepresentation; and
(d) any wilful and intentional act on Smallwood's part that demonstrably
and materially injures the reputation, business, or business
relationships of the Company.
5.2 Smallwood may terminate this Agreement if, without his express written
consent, the Company breaches any material terms of this Agreement and fails to
remedy that breach within 10 days of Smallwood's written notice to the Company.
5.3 On termination of this Agreement for any reason, Smallwood will
deliver to the Company all documents pertaining to the Company or its business,
including without limitation all correspondence, reports, contracts, data bases
related to the Company, and anything included in the definition of "Work
Product" set out in section 6.1.
6. CONFIDENTIALITY
6.1 All reports, documents, customer lists, concepts, and products,
together with any business contracts or any business opportunities prepared,
produced, developed, or acquired by Smallwood, directly or indirectly, in
connection with Smallwood's performance of the Duties (collectively, the "Work
Product") will belong exclusively to the Company or any of its affiliates, as
appropriate (collectively, the "Ableauctions Companies"), which will be entitled
to all rights, interest, profits, or benefits in respect of the Work Product.
6.2 Smallwood will not make any copies, summaries, or other reproductions
of any Work Product without the Company's express written permission, provided
that the Company permits Smallwood to maintain one copy of the Work Product for
his own use.
6.3 Smallwood will not disclose any information, documents, or Work
Product which Smallwood develops or to which Smallwood may have access by virtue
of his performance of the Duties to any person not expressly authorized in
writing by the Company for that purpose. Smallwood will comply with any
directions that the Company may make to ensure the safeguarding or
confidentiality of all information, documents, and Work Product.
6.4 Smallwood will not disseminate or distribute any of the Work Product
or any other written or printed information about the Ableauctions Companies or
their business to the media, members of the public, shareholders of the
Ableauctions Companies, prospective investors, members of the investment or
brokerage community, securities regulators, or any other third party, without
the Company first reviewing and approving the Work Product or other information
before dissemination or distribution.
<PAGE>
6
6.5. Smallwood will not, either directly or indirectly as a member or
associate of any person, make any use of any confidential information for the
purpose of soliciting the business of any customer or former customer of the
Ableauctions Companies, or for the purpose of appropriating any business
opportunity whatsoever available to or which might be available to the
Ableauctions Companies.
6.6 Smallwood acknowledges and agrees that the confidential information is
and will be of a special and unique character, the loss of which cannot be
reasonably, readily, or accurately calculated in monetary terms. Accordingly,
the Ableauctions Companies will be entitled to injunctive or other equitable
relief to prevent or cure any breach or threatened breach of this Agreement by
Smallwood. Resort to equitable relief, however, will not be construed to be a
waiver of any other right or remedy which the Ableauctions Companies may have
for damages or otherwise.
6.7 Smallwood agrees that for a period of two years following the date of
this Agreement, he will not:
(a) encourage or entice any persons who are employees, contractors, or
suppliers of the Ableauctions Companies during the Term of this
Agreement, or who were employees, contractors, or suppliers of the
Ableauctions Companies at any time within the 30 days preceding the
date of this Agreement, to seek employment or service or contracts for
supply with persons other than the Ableauctions Companies; or
(b) offer employment or service or contracts, directly or indirectly, to
any persons who are employees, contractors, or suppliers of the
Ableauctions Companies during the Term of this Agreement, or who were
employees, contractors, or suppliers of the Ableauctions Companies at
any time within the 30 days preceding the date of this Agreement.
6.8 On termination of this Agreement, Smallwood will furnish to the
Company a certificate in a form approved by the Company's solicitors which
declares that Smallwood has not:
(a) divulged, disclosed, distributed, or otherwise made available to any
person any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information;
or
(c) acted contrary to the provision of the above; except with the
Company's prior written consent.
The remedies afforded to the Ableauctions Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to the participants at
law or in equity, including the remedy of injunctive relief.
<PAGE>
7
7. NON-COMPETITION CLAUSE
7.1 Smallwood agrees with the Company that he will not, except as an
employee of the Company or any of its affiliates:
(a) at any time during the Term or any other association with an
affiliated company and during any notice period while Smallwood is
receiving remuneration from the Company or an affiliated company, or
(b) for a period of two years, where the Term or the association of
Smallwood with an affiliated company is terminated for whatever
reason,
either individually or in a partnership or jointly or in conjunction with any
person, firm, corporation, government, association, or syndicate (a "Business
Entity") as principal, agent, employee, director, officer, consultant, or in any
other manner, carry on or be engaged in any Business Entity engaged in or
concerned with or interested in the Business or any other business of the
Ableauctions Companies within the Lower Mainland of British Columbia.
8. NOTICES
8.1 Any notices to be given by either party to the other will be
sufficiently given if delivered personally or transmitted by facsimile or if
sent by registered mail, postage prepaid, to the parties at their respective
addresses shown on the first page of this Agreement, or to any other addresses
as the parties may notify to the other from time to time in writing. This notice
will be deemed to have been given at the time of delivery, if delivered in
person or transmitted by facsimile, or within three business days from the date
of posting if mailed from Vancouver, British Columbia.
9. FURTHER ASSURANCES
9.1 Each party will at any time and from time to time, at the other's
request, sign and deliver other documents and do other things that the other
party may reasonably request to carry out and give full effect to the terms,
conditions, and intent of this Agreement.
10. ENUREMENT
10.1 This Agreement will enure to the benefit of and be binding on the
parties to this Agreement and their respective personal representatives,
successors, and permitted assigns.
<PAGE>
8
11. LAW
11.1 This Agreement will be governed by and construed in accordance with
the laws of British Columbia and the parties irrevocably attorn to the courts of
British Columbia.
IN WITNESS WHEREOF the parties have signed this Agreement as of the
date written on the first page of this Agreement.
ABLE AUCTIONS (1991) LTD.
Per:
- ---------------------------------
Authorized Signatory
- ---------------------------------
RONALD H. SMALLWOOD
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective the 20th day of September, 1999.
BETWEEN:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office located
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Company")
OF THE FIRST PART
AND:
RUTH E. SMALLWOOD, of 4325 192nd Street, Surrey,
British Columbia, V4P 1M5
("Smallwood")
OF THE SECOND PART
WHEREAS:
A. The Company is an auctioneer and liquidator of a broad range of office
equipment, furniture, and industrial equipment;
B. Under an asset purchase agreement dated for reference September 20, 1999 (the
"Asset Purchase Agreement"), the Company purchased all of the property, assets,
and undertaking of the business of Ross Auctioneers & Appraisers Ltd. ("Ross"),
being the auction of tools, vehicles, industrial equipment, government surplus
equipment, and police seized goods (the "Business");
D. Pursuant to the Asset Purchase Agreement, the Business became a division of
the Company effective September 20, 1999; and
D. The Company has agreed to continue to employ Smallwood, being the Secretary
of Ross, in the Business and Smallwood has agreed to accept that employment,
subject to the terms and conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that, for valuable consideration, the
parties mutually agree as follows:
<PAGE>
10
1. EMPLOYMENT
1.1 Subject to the terms and conditions of this Agreement, the Company
employs Smallwood to perform the duties set out in section 2.1 (the "Duties").
1.2 Smallwood's obligation to perform the Duties and the Company's
obligation to pay the remuneration to Smallwood will commence on September 20,
1999 (the "Effective Date") and will continue until December 31, 1999 unless
earlier terminated in accordance with Article 5 of this Agreement (the "Term").
2. DUTIES
2.2 Smallwood will use her best efforts to act as an auction cashier,
responsible for the collection and deposit of all monies received from the
auction sales and the accounting of the items sold with payments to the proper
auction consigners.
2.2 Smallwood will perform the Duties in a diligent, professional, and
efficient manner to preserve and enhance the Company's corporate image and will
faithfully devote the time, effort, and ability necessary to perform the Duties.
3. REMUNERATION
3.1 The Company will pay Smallwood $834 for the period September 20 to
September 30, 1999. Beginning October 1, 1999, the Company will pay Smallwood at
the monthly rate of $2,500, payable in two equal instalments (less applicable
source deductions) on the 15th day (or the business day immediately before the
15th day, if the latter is not a business day) and the last business day of each
month during the Term.
4. RELATIONSHIP OF THE PARTIES
4.1 The Duties are personal in character and Smallwood cannot assign
either this Agreement or any rights or benefits arising under this Agreement. In
performing the Duties, Smallwood will operate as and will have the status of an
employee and will not act or hold herself out as or be an agent or partner of
the Company.
5. TERMINATION AND RENEWAL
5.2 During the Term, the Company may terminate this Agreement and the
employment of Smallwood at any time for "just cause" by giving written notice to
Smallwood. For the purpose of this Agreement, "just cause" is defined as:
(a) the wilful and continued failure by Smallwood to substantially perform
the Duties 10 days after a written demand for substantial performance
is delivered to Smallwood, which demand specifically identifies the
manner in which Smallwood has not substantially performed her duties
and responsibilities;
<PAGE>
11
(b) any dishonesty on the part of Smallwood that materially affects the
Company;
(c) the conviction of Smallwood for any crime involving moral turpitude,
fraud, or misrepresentation; and
(d) any wilful and intentional act on Smallwood's part that demonstrably
and materially injures the reputation, business, or business
relationships of the Company.
5.2 Smallwood may terminate this Agreement if, without her express written
consent, the Company breaches any material terms of this Agreement and fails to
remedy that breach within 10 days of Smallwood's written notice to the Company.
5.3 On termination of this Agreement for any reason, Smallwood will
deliver to the Company all documents pertaining to the Company or its business,
including without limitation all correspondence, reports, contracts, data bases
related to the Company, and anything included in the definition of "Work
Product" set out in section 6.1.
6. CONFIDENTIALITY
6.1 All reports, documents, customer lists, concepts, and products,
together with any business contracts or any business opportunities prepared,
produced, developed, or acquired by Smallwood, directly or indirectly, in
connection with Smallwood's performance of the Duties (collectively, the "Work
Product") will belong exclusively to the Company or any of its affiliates, as
appropriate (collectively, the "Ableauctions Companies"), which will be entitled
to all rights, interest, profits, or benefits in respect of the Work Product.
6.2 Smallwood will not make any copies, summaries, or other reproductions
of any Work Product without the Company's express written permission, provided
that the Company permits Smallwood to maintain one copy of the Work Product for
her own use.
6.3 Smallwood will not disclose any information, documents, or Work
Product which Smallwood develops or to which Smallwood may have access by virtue
of her performance of the Duties to any person not expressly authorized in
writing by the Company for that purpose. Smallwood will comply with any
directions that the Company may make to ensure the safeguarding or
confidentiality of all information, documents, and Work Product.
6.4 Smallwood will not disseminate or distribute any of the Work Product
or any other written or printed information about the Ableauctions Companies or
their business to the media, members of the public, shareholders of the
Ableauctions Companies, prospective investors, members of the investment or
brokerage community, securities regulators, or any other third party, without
the Company first reviewing and approving the Work Product or other information
before dissemination or distribution.
<PAGE>
12
6.5 Smallwood will not, either directly or indirectly as a member or
associate of any person, make any use of any confidential information for the
purpose of soliciting the business of any customer or former customer of the
Ableauctions Companies, or for the purpose of appropriating any business
opportunity whatsoever available to or which might be available to the
Ableauctions Companies.
6.6 Smallwood acknowledges and agrees that the confidential information is
and will be of a special and unique character, the loss of which cannot be
reasonably, readily, or accurately calculated in monetary terms. Accordingly,
the Ableauctions Companies will be entitled to injunctive or other equitable
relief to prevent or cure any breach or threatened breach of this Agreement by
Smallwood. Resort to equitable relief, however, will not be construed to be a
waiver of any other right or remedy which the Ableauctions Companies may have
for damages or otherwise.
6.7 Smallwood agrees that for a period of two years following the date of
this Agreement, she will not:
(a) encourage or entice any persons who are employees, contractors, or
suppliers of the Ableauctions Companies during the Term of this
Agreement, or who were employees, contractors, or suppliers of the
Ableauctions Companies at any time within the 30 days preceding the
date of this Agreement, to seek employment or service or contracts for
supply with persons other than the Ableauctions Companies; or
(b) offer employment or service or contracts, directly or indirectly, to
any persons who are employees, contractors, or suppliers of the
Ableauctions Companies during the Term of this Agreement, or who were
employees, contractors, or suppliers of the Ableauctions Companies at
any time within the 30 days preceding the date of this Agreement.
6.8 On termination of this Agreement, Smallwood will furnish to the
Company a certificate in a form approved by the Company's solicitors which
declares that Smallwood has not:
(a) divulged, disclosed, distributed, or otherwise made available to any
person any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information;
or
(c) acted contrary to the provision of the above; except with the
Company's prior written consent.
The remedies afforded to the Ableauctions Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to the participants at
law or in equity, including the remedy of injunctive relief.
<PAGE>
13
7. NON-COMPETITION CLAUSE
7.1 Smallwood agrees with the Company that she will not, except as an
employee of the Company or any of its affiliates:
(a) at any time during the Term or any other association with an
affiliated company and during any notice period while Smallwood is
receiving remuneration from the Company or an affiliated company, or
(b) for a period of two years, where the Term or the association of
Smallwood with an affiliated company is terminated for whatever
reason,
either individually or in a partnership or jointly or in conjunction with any
person, firm, corporation, government, association, or syndicate (a "Business
Entity") as principal, agent, employee, director, officer, consultant, or in any
other manner, carry on or be engaged in any Business Entity engaged in or
concerned with or interested in the Business or any other business of the
Ableauctions Companies within the Lower Mainland of British Columbia.
8. NOTICES
8.1 Any notices to be given by either party to the other will be
sufficiently given if delivered personally or transmitted by facsimile or if
sent by registered mail, postage prepaid, to the parties at their respective
addresses shown on the first page of this Agreement, or to any other addresses
as the parties may notify to the other from time to time in writing. This notice
will be deemed to have been given at the time of delivery, if delivered in
person or transmitted by facsimile, or within three business days from the date
of posting if mailed from Vancouver, British Columbia.
9. FURTHER ASSURANCES
9.1 Each party will at any time and from time to time, at the other's
request, sign and deliver other documents and do other things that the other
party may reasonably request to carry out and give full effect to the terms,
conditions, and intent of this Agreement.
10. ENUREMENT
10.1 This Agreement will enure to the benefit of and be binding on the
parties to this Agreement and their respective personal representatives,
successors, and permitted assigns.
<PAGE>
14
11. LAW
11.1 This Agreement will be governed by and construed in accordance with
the laws of British Columbia and the parties irrevocably attorn to the courts of
British Columbia.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
ABLE AUCTIONS (1991) LTD.
Per:
- ---------------------------------
Authorized Signatory
- ---------------------------------
RUTH E. SMALLWOOD
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective the 20th day of September, 1999.
BETWEEN:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office located
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Company")
OF THE FIRST PART
AND:
RICHIE SMALLWOOD, of 23038 Fraser Highway, Langley,
British Columbia, V2Z 2V1
("Smallwood")
OF THE SECOND PART
WHEREAS:
A. The Company is an auctioneer and liquidator of a broad range of office
equipment, furniture, and industrial equipment;
B. Under an asset purchase agreement dated for reference September 20, 1999 (the
"Asset Purchase Agreement"), the Company purchased all of the property, assets,
and undertaking of the business of Ross Auctioneers & Appraisers Ltd. ("Ross"),
being the auction of tools, vehicles, industrial equipment, government surplus
equipment, and police seized goods (the "Business");
E. Pursuant to the Asset Purchase Agreement, the Business became a division of
the Company effective September 20, 1999; and
D. The Company has agreed to continue to employ Smallwood in the Business and
Smallwood has agreed to accept that employment, subject to the terms and
conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that, for valuable consideration, the
parties mutually agree as follows:
<PAGE>
16
1. EMPLOYMENT
1.1 Subject to the terms and conditions of this Agreement, the Company
employs Smallwood to perform the duties set out in section 2.1 (the "Duties").
1.2 Smallwood's obligation to perform the Duties and the Company's
obligation to pay the remuneration to Smallwood will commence on September 20,
1999 (the "Effective Date") and will continue until September 30, 2004 unless
earlier terminated in accordance with Article 5 of this Agreement (the "Term").
1.3 The Company may, at its option, renew this Agreement at the end of the
Term for an additional term or as negotiated by the parties. If the Company
elects not to renew this Agreement at the end of the Term, the Company will pay
the sum of $20,000 to Smallwood on the last business day of the Term.
2. DUTIES
2.3 Smallwood will use his best efforts to serve the Company as manager of
industry operations and, in that capacity, will perform any duties and exercise
any powers that may from time to time be directed by the Company's Board of
Directors, subject always to the control and direction of the Board.
2.2 Smallwood will perform the Duties in a diligent, professional, and
efficient manner to preserve and enhance the Company's corporate image and will
faithfully devote the time, effort, and ability necessary to perform the Duties.
3. REMUNERATION
3.1 The Company will pay Smallwood $1,668 for the period September 20 to
September 30, 1999. Beginning October 1, 1999, the Company will pay Smallwood at
the monthly rate of $5,000, payable in two equal instalments (less applicable
source deductions) on the 15th day (or the business day immediately before the
15th day, if the latter is not a business day) and the last business day of each
month during the Term.
3.2 The Company will pay all reasonable expenses actually and properly
incurred by Smallwood in connection with his performance of the Duties against
delivery to the Company of invoices evidencing those expenses.
3.3 The Company will pay Smallwood a cash bonus as follows:
(a) $10,000 if gross revenues from the Business in any fiscal year of the
Company are at least CDN$1,500,000; or
(b) $25,000 if gross revenues from the Business in any fiscal year of the
Company are at least CDN$2,500,000,
<PAGE>
17
payable within 14 days of the date of completion of the audit and Board approval
of the Company's financial statements for that fiscal year.
4. RELATIONSHIP OF THE PARTIES
4.1 The Duties are personal in character and Smallwood cannot assign
either this Agreement or any rights or benefits arising under this Agreement. In
performing the Duties, Smallwood will operate as and will have the status of an
employee and will not act or hold himself out as or be an agent or partner of
the Company.
5. TERMINATION AND RENEWAL
5.3 During the Term, the Company may terminate this Agreement and the
employment of Smallwood at any time for "just cause" by giving written notice to
Smallwood. For the purpose of this Agreement, "just cause" is defined as:
(a) the wilful and continued failure by Smallwood to substantially perform
the Duties 10 days after a written demand for substantial performance
is delivered to Smallwood, which demand specifically identifies the
manner in which Smallwood has not substantially performed his duties
and responsibilities;
(b) any dishonesty on the part of Smallwood that materially affects the
Company;
(c) the conviction of Smallwood for any crime involving moral turpitude,
fraud, or misrepresentation; and
(d) any wilful and intentional act on Smallwood's part that demonstrably
and materially injures the reputation, business, or business
relationships of the Company.
5.2 Smallwood may terminate this Agreement if, without his express written
consent, the Company breaches any material terms of this Agreement and fails to
remedy that breach within 10 days of Smallwood's written notice to the Company.
5.3 On termination of this Agreement for any reason, Smallwood will
deliver to the Company all documents pertaining to the Company or its business,
including without limitation all correspondence, reports, contracts, data bases
related to the Company, and anything included in the definition of "Work
Product" set out in section 6.1.
6. CONFIDENTIALITY
6.1 All reports, documents, customer lists, concepts, and products,
together with any business contracts or any business opportunities prepared,
produced, developed, or acquired by Smallwood, directly or indirectly, in
connection with Smallwood's performance of the Duties (collectively, the "Work
Product") will belong exclusively to the Company or any of its affiliates, as
appropriate (collectively, the "Ableauctions Companies"), which will be entitled
to all rights,
<PAGE>
18
interest, profits, or benefits in respect of the Work Product.
6.2 Smallwood will not make any copies, summaries, or other reproductions
of any Work Product without the Company's express written permission, provided
that the Company permits Smallwood to maintain one copy of the Work Product for
his own use.
6.3 Smallwood will not disclose any information, documents, or Work
Product which Smallwood develops or to which Smallwood may have access by virtue
of his performance of the Duties to any person not expressly authorized in
writing by the Company for that purpose. Smallwood will comply with any
directions that the Company may make to ensure the safeguarding or
confidentiality of all information, documents, and Work Product.
6.4 Smallwood will not disseminate or distribute any of the Work Product
or any other written or printed information about the Ableauctions Companies or
their business to the media, members of the public, shareholders of the
Ableauctions Companies, prospective investors, members of the investment or
brokerage community, securities regulators, or any other third party, without
the Company first reviewing and approving the Work Product or other information
before dissemination or distribution.
6.5. Smallwood and his agents, employees, consultants, or associates
(collectively, the "Smallwood Associates") will not, during the Term and for one
year following termination of the Term, either directly or indirectly as a
member or associate of any person, make any use of any confidential information
for the purpose of soliciting the business of any customer or former customer of
the Ableauctions Companies, or for the purpose of appropriating any business
opportunity whatsoever available to or which might be available to the
Ableauctions Companies. The term "associates" as used above will have the
meaning ascribed to it in the Company Act (British Columbia).
6.6 Smallwood acknowledges and agrees that the confidential information is
and will be of a special and unique character, the loss of which cannot be
reasonably, readily, or accurately calculated in monetary terms. Accordingly,
the Ableauctions Companies will be entitled to injunctive or other equitable
relief to prevent or cure any breach or threatened breach of this Agreement by
Smallwood. Resort to equitable relief, however, will not be construed to be a
waiver of any other right or remedy which the Ableauctions Companies may have
for damages or otherwise.
6.7 Smallwood agrees that during the Term and for one year following the
termination of the Term, neither he nor any of the Smallwood Associates will:
(a) encourage or entice any persons who are employees, contractors, or
suppliers of the Ableauctions Companies during the Term of this
Agreement, or who were employees, contractors, or suppliers of the
Ableauctions Companies at any time within the 30 days preceding the
date of this Agreement, to seek employment or service or contracts for
supply with persons other than the Ableauctions Companies; or
<PAGE>
19
(b) offer employment or service or contracts, directly or indirectly, to
any persons who are employees, contractors, or suppliers of the
Ableauctions Companies during the Term of this Agreement, or who were
employees, contractors, or suppliers of the Ableauctions Companies at
any time within the 30 days preceding the date of this Agreement.
6.8 On termination of this Agreement, Smallwood will furnish to the
Company a certificate in a form approved by the Company's solicitors which
declares that Smallwood has not:
(a) divulged, disclosed, distributed, or otherwise made available to any
person any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information;
or
(c) acted contrary to the provision of the above; except with the
Company's prior written consent.
The remedies afforded to the Ableauctions Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to the participants at
law or in equity, including the remedy of injunctive relief.
7. NON-COMPETITION CLAUSE
7.1 Smallwood, on his own behalf and on behalf of the Smallwood Associates
except for Bryan Wilkins and Shawnna Ayers, agrees with the Company that he will
not, except as an employee of the Company or any of its affiliates:
(a) at any time during the Term or any other association with an
affiliated company and during any notice period while Smallwood is
receiving remuneration from the Company or an affiliated company, or
(b) for a period of one year, where the Term or the association of
Smallwood with an affiliated company is terminated for whatever
reason,
either individually or in a partnership or jointly or in conjunction with any
person, firm, corporation, government, association, or syndicate (a "Business
Entity") as principal, agent, employee, director, officer, consultant, or in any
other manner, carry on or be engaged in any Business Entity engaged in or
concerned with or interested in the Business or any other business of the
Ableauctions Companies within the Lower Mainland of British Columbia.
<PAGE>
20
8. NOTICES
8.1 Any notices to be given by either party to the other will be
sufficiently given if delivered personally or transmitted by facsimile or if
sent by registered mail, postage prepaid, to the parties at their respective
addresses shown on the first page of this Agreement, or to any other addresses
as the parties may notify to the other from time to time in writing. This notice
will be deemed to have been given at the time of delivery, if delivered in
person or transmitted by facsimile, or within three business days from the date
of posting if mailed from Vancouver, British Columbia.
9. FURTHER ASSURANCES
9.1 Each party will at any time and from time to time, at the other's
request, sign and deliver other documents and do other things that the other
party may reasonably request to carry out and give full effect to the terms,
conditions, and intent of this Agreement.
10. ENUREMENT
10.1 This Agreement will enure to the benefit of and be binding on the
parties to this Agreement and their respective personal representatives,
successors, and permitted assigns.
11. LAW
11.1 This Agreement will be governed by and construed in accordance with
the laws of British Columbia and the parties irrevocably attorn to the courts of
British Columbia.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
ABLE AUCTIONS (1991) LTD.
Per:
- ---------------------------------
Authorized Signatory
- ---------------------------------
RICHIE SMALLWOOD
EXHIBIT 10.7
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of the 20th day of September, 1999.
BETWEEN:
JOHN CARRIER dba LJM COMPUTER RESOURCES, of 21434 122nd Avenue,
Maple Ridge, British Columbia, V2X 3W6
(the "Vendor")
OF THE FIRST PART
AND:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office at 3112
Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Vendor has developed and owns the website located at www.bcbids.com (the
"Website"), including all intellectual property rights and the software
technology associated with the Website;
B. The Vendor has agreed to sell, and the Purchaser has agreed to purchase,
subject to certain exceptions, the Website and all rights and assets associated
therewith, as a going concern;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises
and the covenants, agreements, representations, warranties, and payments set
forth in this Agreement, the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Where used in this Agreement, each of the following words will have the
following meanings:
(a) "Assets" means all properties and assets normally and necessarily
associated with the Website, as a going concern, including without
limitation:
(i) the Goodwill;
(ii) the Intangible Property; and
<PAGE>
-2-
(iii) all of the Vendor's right, title, and interest in and to all
other property and assets, real or personal, tangible or
intangible, used by the Vendor or to which the Vendor is entitled
in connection with the operation of the Website;
(b) "Closing" means the completion of the sale and purchase of the Assets by
transfer and conveyance and the payment of or provision for the Purchase
Price, all as provided in this Agreement;
(c) "Closing Date" means on or before October 15, 1999;
(d) "Goodwill" means the goodwill associated with the Website, together with
the Purchaser's exclusive right to represent itself as operating the
Website in continuation of and in succession to the Vendor and the right to
use any words indicating that the Website is so operated, including the
right to use "bcbids.com" in connection with the Website and all lists of
customers, documents, records, correspondence, and other information
related to the Website;
(e) "Indebtedness" means any and all of the Vendor's trade accounts, debts,
duties, endorsements, guarantees, liabilities, obligations,
responsibilities, and undertakings assumed, created, incurred, or made,
whether voluntary or involuntary, however incurred or made or arising,
whether due or not due (except accrued employees' salaries which are not
yet due and obligations of the Vendor), absolute, inchoate, or contingent,
liquidated or unliquidated, determined or undetermined, direct or indirect,
express or implied, and whether the Vendor may be liable individually or
jointly with others;
(f) "Intangible Property" means all of the Vendor's right and interest to all
rights, copyrights, patents, trademarks, tradenames, licenses, and other
intellectual property rights, whether registered or unregistered, in
relation to and including any software, source codes, designs, know-how,
concepts, drawings, graphics, reports, literature, manuals, or other
technology or materials of any nature whatsoever, including any
modifications, improvements, and upgrades, which the Vendor has developed,
designed, created, written, or acquired in connection with or arising from
the Website;
(g) "Person" means an individual, corporation, body corporate, partnership,
joint venture, society, association, trust, or unincorporated organization,
or any trustee, executor, administrator, or other legal representative; and
(h) "Purchase Price" means the purchase price for the Assets set out in section
2.3.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this Agreement, including the preamble and the Schedules,
as supplemented or amended from time to time;
<PAGE>
-3-
(b) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent, or intent of this Agreement or any provision hereof;
(c) the singular of any term includes the plural and vice versa, the use of any
term is equally applicable to any gender and, where applicable, a body
corporate, the word "or" is not exclusive and the word "including" is not
limited (whether or not non-limited language, such as "without limitation"
or "but not limited" to words of similar import, is used with reference
thereto);
(d) any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principles applicable in
Canada;
(e) any reference to a statute includes and is a reference to that statute and
to the regulations made under that statute, with all amendments made to
that statute and in force from time to time, and to any statute or
regulations that may be passed which has the effect of supplementing or
superseding that statute or those regulations;
(f) except as otherwise provided, any dollar amount referred to in this
Agreement is in Canadian funds; and
(g) any other term defined within the text of this Agreement has the meaning so
ascribed.
2. PURCHASE AND SALE
2.1 On the terms and subject to the conditions of and based on the
representations and warranties contained in this Agreement, the Vendor agrees to
sell and the Purchaser agrees to purchase the Assets belonging to or used in the
Business, as a going concern, as and from the Closing Date.
2.2 The parties acknowledge that the purchase and sale provided for in section
2.1 is restricted to the Assets only and without limiting the generality of the
foregoing, the Purchaser is not acquiring any assets other than the Assets nor
is the Purchaser purchasing any business of the Vendor other than the Business.
2.3 The Purchase Price for the Assets will be the sum of $38,000 plus
applicable goods and services tax and provincial social services tax. On the
Closing Date, the Purchaser will pay the Purchase Price to the Vendor as
directed by him.
<PAGE>
-4-
3. VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as follows, with the intent
that the Purchaser will rely on these representations and warranties in entering
into this Agreement and in concluding the purchase and sale contemplated by this
Agreement:
3.1 Authority to Sell. All necessary action on the Vendor's part has duly and
validly authorized the signing and delivery of this Agreement and the completion
of the transaction contemplated by this Agreement, and this Agreement
constitutes a legal, valid, and binding obligation of the Vendor enforceable
against him in accordance with its terms except as may be limited by laws of
general application affecting the rights of creditors.
3.2 Sale will Not Cause Default. Neither the signing nor delivery of this
Agreement, nor the completion of the purchase and sale contemplated in this
Agreement, will:
(a) violate any of the terms and provisions of any agreement applicable to the
Vendor or any of the Assets;
(b) give any person the right to terminate, cancel, or remove any of the
Assets, save to the extent that the consent of third parties is required to
assign the Assets; or
(c) result in any fees, duties, taxes, assessments, or other amounts relating
to any of the Assets becoming due or payable other than provincial social
services tax and goods and services tax payable by the Purchaser in
connection with the purchase and sale.
3.3 Assets. The Vendor owns and possesses and has a good and marketable title
to the Assets and, on Closing, the Assets will be free and clear of all liens,
charges, mortgages, pledges, security interests, encumbrances, or other claims
whatsoever.
3.4 Exclusions and Limitations. Despite anything to the contrary in this
Agreement, the Vendor makes no representations or warranties regarding the
Intangible Property except that:
(a) the Vendor has not granted the right or license to any person to use the
Intangible Property;
(b) the Vendor has not received notice from any person that the Vendor's use of
the Intangible Property infringes the rights of any other person; and
(c) the Vendor has not assigned any rights to the Intangible Property to any
other person.
3.5 No Infringement. To the best of the Vendor's knowledge, no copyright,
franchise or license, patent right, trade mark, trade name, or other of the
Vendor's Intangible Property used in or relating to the Website in any way
infringes on the right of any Person under or regarding any patent, trademark,
tradename, domain name, copyright, or other industrial or intellectual property.
<PAGE>
-5-
3.6 Books and Records. The Vendor's books and records fairly and correctly set
out and disclose in all material respects, in accordance with generally accepted
accounting principles, the Vendor's financial position, and the Vendor has
accurately recorded all of his material financial transactions relating to the
Website in those books and records.
3.7 Material Change. Since August 31, 1999, there has not been:
(a) any material change in the financial condition or operation of the Website,
its liabilities, or the Assets, other than changes in the ordinary course
of business, none of which has been materially adverse; or
(b) any damage, destruction, loss, or other event (whether or not covered by
insurance) materially and adversely affecting the Assets or the Website.
3.8 Litigation. To the Vendor's knowledge, there is no litigation or
administrative or government proceeding or inquiry pending or threatened against
or relating to the Vendor, the Website, or any of the Assets, and the Vendor
does not know of or have reasonable grounds for believing that there is any
basis for any action, proceeding, or inquiry.
3.9 Conformity with Laws. The Vendor has obtained all governmental licenses and
permits required for the conduct in the ordinary course of the operations of the
Website and the uses to which the Assets have been put and the licenses and
permits are in good standing and the conduct and uses are not in breach of any
statute, by-law, regulation, covenant, restriction, plan, or permit, provided
that the Vendor will not transfer the government licenses and permits to the
Purchaser and the Purchaser will be responsible for obtaining its own permits
and licenses.
3.10 Accuracy of Representations. No certificate furnished by or on behalf of
the Vendor to the Purchaser at the Closing Date regarding the Vendor's
representations, warranties, or covenants in this Agreement will contain any
untrue statement of a material fact or omit to state a material fact known to
the maker of the certificate necessary to make the statements contained in the
certificate not misleading.
3.11 Canadian Resident. The Vendor is a resident in Canada within the meaning of
the Income Tax Act (Canada).
3.12 No Lien Indebtedness. The Vendor has no Indebtedness to any Person which
might, by operation of law or otherwise, now or hereafter, constitute a lien,
charge, or encumbrance on any of the Assets.
3.13 No Liability for Indebtedness. There is no Indebtedness of any kind
whatsoever, whether or not determined or determinable relating to the Website or
the Assets, for which the Purchaser may become liable on or after the Closing
Date.
<PAGE>
-6-
3.14 No Other Agreement. There is no written or oral agreement, option,
understanding, or commitment, or any right or privilege capable of becoming an
agreement, for the purchase of the Website or any of the Assets from the Vendor.
4. VENDOR'S COVENANTS
4.1 Operation of Website. Until the Closing Date, the Vendor will operate and
maintain the Website diligently and only in the ordinary course and will use his
best efforts to preserve the Assets intact and to preserve for the Purchaser its
relationship with its customers and others having business relations with it.
4.2 Access by Purchaser. The Vendor will give to the Purchaser and its
officers, counsel, accountants, and other representatives full access, during
normal business hours throughout the period before the Closing Date, to all of
the Assets and of the Vendor's properties, books, contracts, commitments, and
records relating to the Website, and will furnish to the Purchaser during this
period all information that the Purchaser may reasonably request.
4.3 Insurance. From this date until the Closing Date, the Vendor will obtain
and maintain in full force and effect policies of insurance adequate to insure
the replacement value of the Assets.
4.4 Procure Consents. The Purchaser and the Vendor will cooperate regarding
obtaining any consents that may be required to validly transfer the Assets to
the Purchaser.
4.5 Covenant of Indemnity. The Vendor will indemnify and hold harmless the
Purchaser from and against:
(a) any and all Indebtedness existing at or arising after the Closing Date;
(b) any and all damage or deficiencies resulting from any misrepresentation,
breach of warranty, or non-fulfillment of any covenant on the Vendor's part
under this Agreement or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished to the
Purchaser; and
(c) any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and legal and other expenses incident to any of the foregoing.
4.6 Steps to Transfer Assets. The Vendor will, before the Closing Date, take or
cause to be taken all proper steps, actions, and proceedings on his part to
enable him to vest a good and marketable title in the Purchaser to the Assets,
free and clear of all liens, mortgages, encumbrances, equities, or claims of
every nature and kind.
4.7 Care of Assets. From the signing of this Agreement to the Closing Date, the
Vendor will take reasonable care to protect and safeguard the Assets and will
not sell or dispose of any of the Assets except in the ordinary course of
business.
<PAGE>
-7-
4.8 Tax Filings. The Vendor will, from the signing of this Agreement to the
Closing Date, make all necessary tax, government, and other filings in a timely
fashion.
4.9 Adverse Development. The Vendor will, from the signing of this Agreement to
the Closing Date, promptly advise the Purchaser regarding any development which
materially affects the Website or the Assets, in either case taken as a whole.
4.10 Training. Within the first month after the Closing Date, the Vendor will
provide the Purchaser, free of charge, an aggregate 80 hours of training and
consultation services with respect to the operation and maintenance of the
Website. If the Purchaser requires more than 80 hours of services, it will pay
the Vendor for any additional hours at a rate agreed on by the parties.
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor as follows, with the intent
that the Vendor will rely on these representations and warranties in entering
into this Agreement, and in concluding the purchase and sale contemplated in
this Agreement:
5.1 Status of Purchaser. The Purchaser is a corporation duly incorporated and
in good standing under the laws of British Columbia, is validly existing, and
has the power and capacity to enter into this Agreement and to carry out its
terms.
5.2 Authority to Purchase. All necessary corporate action on the Purchaser's
part has duly and validly authorized the signing and delivery of this Agreement
and the completion of the transaction contemplated by this Agreement, and this
Agreement constitutes a legal, valid, and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as
limited by laws of general application affecting the rights of creditors.
6. PURCHASER'S COVENANTS
6.1 Social Services Tax and Goods and Services Tax. The Purchaser will be
liable for and will pay on Closing, with proof of payment satisfactory to the
Vendor, all provincial social services taxes, registration charges, and transfer
fees properly payable on and in connection with the Vendor's sale and transfer
of the Assets to the Purchaser. The Purchaser will pay to the Vendor for
remittance to the Excise Tax Branch, Revenue Canada, all goods and services tax
unless, by provisions of the Excise Tax Act, the Vendor is under no obligation
to collect and have no liability for failure to collect that tax. The Vendor
will provide the Purchaser with proof of payment, if required, of all goods and
services tax.
6.2 Consents. The Purchaser will, at the Vendor's request, sign and deliver all
applications for consent, provide all information necessary to obtain the
consents referred to in section 4.4, and assist and co-operate with the Vendor
in obtaining those consents.
<PAGE>
-8-
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS
7.1 Representations, Warranties, and Covenants of Vendor. All statements
contained in any certificate or other instrument delivered by or on behalf of
the Vendor under this Agreement will be deemed to be the Vendor's
representations and warranties. All of the Vendor's representations, warranties,
covenants, and agreements in this Agreement will, unless otherwise expressly
stated, survive the Closing Date and any investigation at any time made by or on
behalf of the Purchaser and, subject to section 7.2, will continue in full force
and effect for the Purchaser's benefit.
7.2 Limitation on Vendor's Indemnity. No claim by the Purchaser under any
relief regarding the Vendor's breach of warranty or breach of covenant under
this Agreement will be valid unless:
(a) the Purchaser gives to the Vendor written notice of the claim before the
expiration of 12 months after the Closing Date; and
(b) the aggregate amount of all claims exceeds $5,000.
7.3 Purchaser's Representations, Warranties, and Covenants. All of the
Purchaser's representations, warranties, covenants, and agreements in this
Agreement will, unless otherwise expressly stated, survive the Closing Date and
any investigation at any time made by or on behalf of the Purchaser and will
continue in full force and effect for the Vendor's benefit.
8. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
All of the Purchaser's obligations under this Agreement are subject to the
fulfillment at or before the Closing Date of the following conditions:
8.1 Vendor's Representations and Warranties. The Vendor's representations and
warranties contained in this Agreement and in any certificate or document
delivered under this Agreement will be true at and as of the Closing Date as if
the Vendor made the representations and warranties at and as of that time.
8.2 Vendor's Covenants. The Vendor will have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it before or at the Closing Date.
8.3 Vendor's Certificate. The Vendor will have signed and delivered to the
Purchaser a certificate dated the Closing Date and certifying in detail that the
Purchaser may specify to the fulfillment of the conditions set forth in sections
8.1 and 8.2.
8.4 No Adverse Affect. Before the Closing Date, the Vendor will not have
experienced any event or condition or have taken any action of any kind
adversely affecting the Assets or the Website to materially reduce the value of
the Assets or the Website to the Purchaser.
<PAGE>
-9-
The foregoing conditions are for the Purchaser's exclusive benefit and the
Purchaser may waive any condition in whole or in part before or at the Closing
Date by delivering to the Vendor a signed written waiver.
9. CONDITIONS PRECEDENT TO THE VENDOR'S OBLIGATIONS
All of the Vendor's obligations under this Agreement are subject to the
fulfillment, before or at the Closing Date, of the following conditions:
9.1 Purchaser's Representations and Warranties. The Purchaser's representations
and warranties contained in this Agreement will be true at and as of the Closing
Date as though the Purchaser made the representations and warranties at and as
of that time.
9.2 Purchaser's Covenants. The Purchaser will have performed and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it before or at the Closing Date.
9.3 Consents of Third Parties. The Vendor will have obtained all consents or
approvals required to be obtained to sell, assign, or transfer the Assets,
provided that the Vendor may only rely on this condition if the Vendor has
diligently used his best efforts to procure all consents or approvals and the
Purchaser has not waived the need for any consents or approvals.
The foregoing conditions are for the Vendor's exclusive benefit and the Vendor
may waive any condition in whole or in part before or at the Closing Date by
delivering to the Purchaser a signed written waiver.
10. CLOSING
10.1 Time of Closing. Subject to the terms and conditions of this Agreement, the
purchase and sale of the Assets will close on the Closing Date.
10.2 Place of Closing. The Closing will take place at the offices of the
Purchaser's solicitor, Claudia L. Losie, 1700 - 1185 West Georgia Street,
Vancouver, British Columbia, V6E 4E6.
10.3 Documents to be Delivered by the Vendor. At the Closing, the Vendor will
deliver or cause to be delivered to the Purchaser:
(a) all deeds of conveyance, bills of sale, transfer, and assignments in form
and content satisfactory to the Purchaser's counsel, appropriate to
effectively vest a good and marketable title to the Assets in the Purchaser
to the extent contemplated by this Agreement, and immediately registrable
in all places where registration of these instruments is required;
(b) possession of the Assets;
<PAGE>
-10-
(c) the certificate of the Vendor under section 8.3; and
(d) all lists of customers, manuals, brochures, price lists, source codes,
files, records, documents, and other information related to the Website,
and all licenses, authorities, and other rights used in connection with the
Website included in the Assets.
10.4 Documents to be Delivered by the Purchaser. At the Closing, the Purchaser
will deliver or cause to be delivered one or more certified cheques or bank
drafts made payable to or to the order of the Vendor or as directed by him
representing payment in full of the Purchase Price.
11. RISK OF LOSS
From this date to the Closing Date, the Assets will be and remain at the
Vendor's risk. If any of the Assets are lost, damaged, or destroyed before the
Closing Date and are not replaced by the Vendor, the Purchaser may terminate
this Agreement on written notice to the Vendor or elect by notice in writing to
the Vendor to complete the purchase to the extent possible without reduction of
the Purchase Price, in which event all proceeds of any insurance or compensation
for any loss, damage, or destruction will be paid to the Purchaser and all of
the Vendor's right and claim to any amounts not paid by the Closing Date will be
assigned to the Purchaser by written assignment in form and substance
satisfactory to the Purchaser's counsel.
12. RESTRICTIVE COVENANT
The Vendor and his agents, employees, consultants, or associates (collectively,
the "Vendor's Associates") will not, for and during the period of two years from
the Closing Date, directly or indirectly engage in or carry on, individually or
in partnership or in conjunction with any one or more persons, firms,
associations, syndicates, or corporations, as principal, agent, employee,
director, officer, shareholder of any corporation, guarantor, creditor, or in
any manner whatsoever, within Canada, any business which is the same as or
similar to, in whole or in part, the Website. The Vendor acknowledges that he
has considered this provision and that this provision is, regarding his
interests and those of the Purchaser, reasonable as to all of the circumstances
of the transactions contemplated by this Agreement.
13. NON-DISCLOSURE
13.1 All reports, documents, customer lists, concepts, and products, together
with any business contracts or any business opportunities prepared, produced,
developed, or acquired by the Vendor, directly or indirectly, in connection with
the Website (collectively, the "Work Product") will belong exclusively to the
Purchaser and its affiliates, which will be entitled to all rights, interest,
profits, or benefits in respect thereof.
13.2 The Vendor will not make any copies, summaries, or other reproductions of
any Work Product without the express written permission of the Purchaser and its
affiliates.
<PAGE>
-11-
13.3 The Vendor and the Vendor's Associates will not disclose any information,
documents, or Work Product which is developed by the Vendor or to which the
Vendor may have access by virtue of his development and ownership of the Website
to any person not expressly authorized in writing by the Purchaser for that
purpose. The Vendor will comply with any directions that the Purchaser may make
to ensure the safeguarding or confidentiality of all such information,
documents, and Work Product.
13.4 The Vendor may not disseminate nor distribute to the media, members of the
public, shareholders of Ableauctions.com, Inc. (the parent company of the
Purchaser), prospective investors, members of the investment or brokerage
community, securities regulators, or any other third party any of the Work
Product or any other written or printed information about the Purchaser and its
affiliates or their business, without the Purchaser first reviewing and
approving the Work Product or other information before dissemination or
distribution.
13.5 The Vendor and the Vendor's Associates will not, either directly or
indirectly as a shareholder, director, officer, employee, agent, consultant, or
associate of any person, make any use of any confidential information for the
purpose of soliciting the business of any customer or former customer of the
Purchaser and its affiliates, or for the purpose of appropriating any business
opportunity whatsoever available to, or which might be available to the
Purchaser and its affiliates.
13.6 The Vendor acknowledges and agrees that the confidential information is and
will be of a special and unique character, the loss of which cannot be
reasonably, readily, or accurately calculated in monetary terms. Accordingly,
the Purchaser and its affiliates will be entitled to injunctive or other
equitable relief to prevent or cure any breach or threatened breach of this
Agreement by the Vendor or any of the Vendor's Associates. Resort to such
equitable relief, however, will not be construed to be a waiver of any other
right or remedy which the Purchaser and its affiliates may have for damages or
otherwise.
13.7 The Vendor agrees that for a period of two years following the Closing
Date, neither he nor any of the Vendor's Associates will:
(a) encourage or entice any persons who are employees or consultants of the
Purchaser and its affiliates or who were employees or consultants of the
Purchaser and its affiliates at any time within the 30 days preceding the
date of this Agreement to seek employment or service with persons other
than the Purchaser and its affiliates; or
(b) offer employment or service contracts directly or indirectly to any persons
who are employees or consultants of the Purchaser and its affiliates or who
were employees or consultants of the Purchaser and its affiliates at any
time within the 30 days preceding the date of this Agreement.
13.8 If the Vendor or any of the Vendor's Associates or any other person who is
not at arm's length from the Vendor at any time contravenes the provisions of
this Article 13, and on every occasion that such contravention occurs, the
Vendor will indemnify the Purchaser and its
<PAGE>
-12-
affiliates and will forthwith pay to the Purchaser and its affiliates as
liquidated damages the sum of $10,000 together with costs on the highest scale
of costs permitted by the Rules of Court for all proceedings undertaken by the
Purchaser and its affiliates or any of them to obtain or to attempt to obtain an
injunction to prohibit the divulgence, disclosure, reproduction, or use of the
confidential information by any of the persons herein before described, this sum
being, so nearly as the participants can determine, a reasonable pre-estimate of
the Purchaser and its affiliates minimum damages and not a penalty. If one of
the events described in this paragraph occurs and if any of the Purchaser and
its affiliates makes written demand for the payment of such liquidated damages,
simple interest on this sum calculated at the rate of 18% per annum will accrue
from the date of demand to the actual date of payment.
13.9 On termination of the Vendor's association with the Purchaser (including
the training period under subsection 4.10), the Vendor will furnish to the
Purchaser a certificate in a form approved by the Purchaser's solicitors which
declares that neither the Vendor nor any of the Vendor's Associates has:
(a) divulged, disclosed, distributed, or otherwise made available to any person
any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information; or
(c) acted contrary to the provision of the above; except with the prior written
consent of the Purchaser.
The remedies afforded to the Purchaser and its affiliates by this Agreement will
be cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to them at law or in
equity, including the remedy of injunctive relief.
14. FURTHER ASSURANCES
The parties will sign all other documents and do all other things necessary to
carry out and give effect to the intent of this Agreement.
15. SET-OFF
If after the Closing, under this Agreement or any document delivered under this
Agreement, the Vendor becomes obligated to pay any sum of money to the
Purchaser, then this sum may, at the Purchaser's election and without limiting
or waiving any right or remedy of the Purchaser under this Agreement, be set-off
against and will apply to any sum of money or security owed by the Purchaser to
the Vendor until this amount has been completely set-off.
<PAGE>
-13-
16. NOTICE
Any notices to be given by either party to the other will be sufficiently given
if delivered personally or transmitted by facsimile or if sent by registered
mail, postage prepaid, to the parties at their respective addresses shown on the
first page of this Agreement, or to any other addresses as the parties may
notify to the other from time to time in writing. This notice will be deemed to
have been given at the time of delivery, if delivered in person or transmitted
by facsimile, or within three business days from the date of posting if mailed
from Vancouver, British Columbia.
17. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and there
are no representations or warranties, express or implied, statutory or
otherwise, and no terms, conditions, or agreements collateral to this Agreement
other than as expressly set forth or referred to in this Agreement. This
Agreement supersedes all letters of intent or agreements made between the
parties before the date of this Agreement.
18. TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
19. APPLICABLE LAW
This Agreement will be governed by and interpreted in accordance with the laws
of British Columbia.
20. SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit of and be binding on the parties and
their respective heirs, executors, administrators, successors, and assigns.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
SIGNED, SEALED, AND DELIVERED )
by JOHN CARRIER )
in the presence of: )
)
)
illegible ) /s/ John Carrier
- ---------------------------------- ) ---------------------------------
Authorized Signatory ) JOHN CARRIER
)
illegible )
- ---------------------------------- )
Authorized Signatory )
)
<PAGE>
-14-
THE CORPORATE SEAL OF )
able auctions (1991) ltd. )
was affixed in the presence of: )
)
)
/s/ Abdul Ladha ) c/s
- ---------------------------------- )
Authorized Signatory )
)
)
- ---------------------------------- )
Authorized Signatory )
EXHIBIT 10.8
BILL OF SALE
THIS INDENTURE made the 20th day of September, 1999.
BETWEEN:
RONALD H. SMALLWOOD, of 4325 192nd Street, Surrey,
British Columbia, V4P 1M5
(the "Vendor")
OF THE FIRST PART
AND:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office at 3112
Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Purchaser")
OF THE SECOND PART
WHEREAS the Vendor has agreed to sell and the Purchaser has agreed to
purchase the domain name "bcbids.com" (the "Name") in consideration of the
purchase price of $200.00;
NOW THEREFORE THIS INDENTURE WITNESSES that the Vendor grants, sells,
assigns, transfers, and conveys the Name to the Purchaser;
TO HOLD the Name and all right, title, and interest of the Vendor thereto
and therein unto and to the use of the Purchaser;
AND the Purchaser agrees to pay to the Vendor the purchase price of $200.00
for the Name;
AND the Purchaser agrees that it will be responsible for the payment of any
and all applicable social services taxes or other sales taxes in respect of the
purchase and sale of the Name;
AND the Vendor represents and warrants to the Purchaser as follows:
(a) Marketable Title. The Vendor owns and possesses and has a good and
marketable title to the Name and, on the sale of the Name hereunder, the
Name will be free and clear of all liens, charges, mortgages, pledges,
security interests, encumbrances, or other claims whatsoever;
<PAGE>
2
(b) Domain Name. The Vendor:
(i) is the sole and exclusive registered and beneficial owner of the
Name, free and clear of all encumbrances whatsoever;
(ii) is not a party to or bound by any contract or any other
obligation whatsoever that limits or impairs his ability to sell,
transfer, assign or convey, or that otherwise affects, the Name;
and
(iii) has paid all fees or other costs associated with maintaining the
registration of the Name for the 1999 calendar year, and the
registration of the Name is in good standing with Network
Solutions, Inc.; and
(c) Exclusions and Limitations. The Vendor makes no representations or
warranties regarding its right to the Name or use of the Name except as set
forth in (b) above and except that:
(i) the Vendor has not granted the right or license to any person to
use the Name;
(ii) the Vendor has not received notice from any person that the
Vendor's use of the Name infringes the rights of any other
person; and
(iii) the Vendor has not assigned any rights to the Name or any other
trademarks to any other person;
THIS INDENTURE will be governed by and construed in accordance with the
laws of British Columbia.
IN WITNESS WHEREOF the parties have signed this Indenture as of the date
written above.
/s/ Ronald Smallwood
- ------------------------------------
RONALD H. SMALLWOOD
ABLE AUCTIONS (1991) LTD.
Per:
/s/ Abdul Ladha
- ------------------------------------
Authorized Signatory
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective the 20th day of September, 1999.
BETWEEN:
ABLE AUCTIONS (1991) LTD., a company incorporated under the
laws of British Columbia and having its head office located
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2
(the "Company")
OF THE FIRST PART
AND:
RICHIE SMALLWOOD, of 23038 Fraser Highway, Langley, British
Columbia, V2Z 2V1
("Smallwood")
OF THE SECOND PART
WHEREAS:
A. The Company is an auctioneer and liquidator of a broad range of office
equipment, furniture, and industrial equipment;
B. Under an asset purchase agreement dated for reference September 20, 1999 (the
"Asset Purchase Agreement"), the Company purchased all of the property, assets,
and undertaking of the business of Ross Auctioneers & Appraisers Ltd. ("Ross"),
being the auction of tools, vehicles, industrial equipment, government surplus
equipment, and police seized goods (the "Business");
C. Pursuant to the Asset Purchase Agreement, the Business became a division of
the Company effective September 20, 1999; and
D. The Company has agreed to continue to employ Smallwood in the Business and
Smallwood has agreed to accept that employment, subject to the terms and
conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that, for valuable consideration, the
parties mutually agree as follows:
<PAGE>
2
1. EMPLOYMENT
1.1 Subject to the terms and conditions of this Agreement, the Company employs
Smallwood to perform the duties set out in section 2.1 (the "Duties").
1.2 Smallwood's obligation to perform the Duties and the Company's obligation
to pay the remuneration to Smallwood will commence on September 20, 1999 (the
"Effective Date") and will continue until September 30, 2004 unless earlier
terminated in accordance with Article 5 of this Agreement (the "Term").
1.3 The Company may, at its option, renew this Agreement at the end of the Term
for an additional term or as negotiated by the parties. If the Company elects
not to renew this Agreement at the end of the Term, the Company will pay the sum
of $20,000 to Smallwood on the last business day of the Term.
2. DUTIES
2.1 Smallwood will use his best efforts to serve the Company as manager of
industry operations and, in that capacity, will perform any duties and exercise
any powers that may from time to time be directed by the Company's Board of
Directors, subject always to the control and direction of the Board.
2.2 Smallwood will perform the Duties in a diligent, professional, and
efficient manner to preserve and enhance the Company's corporate image and will
faithfully devote the time, effort, and ability necessary to perform the Duties.
3. REMUNERATION
3.1 The Company will pay Smallwood $1,668 for the period September 20 to
September 30, 1999. Beginning October 1, 1999, the Company will pay Smallwood at
the monthly rate of $5,000, payable in two equal instalments (less applicable
source deductions) on the 15th day (or the business day immediately before the
15th day, if the latter is not a business day) and the last business day of each
month during the Term.
3.2 The Company will pay all reasonable expenses actually and properly incurred
by Smallwood in connection with his performance of the Duties against delivery
to the Company of invoices evidencing those expenses.
3.3 The Company will pay Smallwood a cash bonus as follows:
(a) $10,000 if gross revenues from the Business in any fiscal year of the
Company are at least CDN$1,500,000; or
(b) $25,000 if gross revenues from the Business in any fiscal year of the
Company are at least CDN$2,500,000,
<PAGE>
3
payable within 14 days of the date of completion of the audit and Board approval
of the Company's financial statements for that fiscal year.
4. RELATIONSHIP OF THE PARTIES
4.1 The Duties are personal in character and Smallwood cannot assign either
this Agreement or any rights or benefits arising under this Agreement. In
performing the Duties, Smallwood will operate as and will have the status of an
employee and will not act or hold himself out as or be an agent or partner of
the Company.
5. TERMINATION AND RENEWAL
5.1 During the Term, the Company may terminate this Agreement and the
employment of Smallwood at any time for "just cause" by giving written notice to
Smallwood. For the purpose of this Agreement, "just cause" is defined as:
(a) the wilful and continued failure by Smallwood to substantially perform
the Duties 10 days after a written demand for substantial performance
is delivered to Smallwood, which demand specifically identifies the
manner in which Smallwood has not substantially performed his duties
and responsibilities;
(b) any dishonesty on the part of Smallwood that materially affects the
Company;
(c) the conviction of Smallwood for any crime involving moral turpitude,
fraud, or misrepresentation; and
(d) any wilful and intentional act on Smallwood's part that demonstrably
and materially injures the reputation, business, or business
relationships of the Company.
5.2 Smallwood may terminate this Agreement if, without his express written
consent, the Company breaches any material terms of this Agreement and fails to
remedy that breach within 10 days of Smallwood's written notice to the Company.
5.3 On termination of this Agreement for any reason, Smallwood will deliver to
the Company all documents pertaining to the Company or its business, including
without limitation all correspondence, reports, contracts, data bases related to
the Company, and anything included in the definition of "Work Product" set out
in section 6.1.
6. CONFIDENTIALITY
6.1 All reports, documents, customer lists, concepts, and products, together
with any business contracts or any business opportunities prepared, produced,
developed, or acquired by Smallwood, directly or indirectly, in connection with
Smallwood's performance of the Duties (collectively, the "Work Product") will
belong exclusively to the Company or any of its
<PAGE>
4
affiliates, as appropriate (collectively, the "Ableauctions Companies"), which
will be entitled to all rights, interest, profits, or benefits in respect of the
Work Product.
6.2 Smallwood will not make any copies, summaries, or other reproductions of
any Work Product without the Company's express written permission, provided that
the Company permits Smallwood to maintain one copy of the Work Product for his
own use.
6.3 Smallwood will not disclose any information, documents, or Work Product
which Smallwood develops or to which Smallwood may have access by virtue of his
performance of the Duties to any person not expressly authorized in writing by
the Company for that purpose. Smallwood will comply with any directions that the
Company may make to ensure the safeguarding or confidentiality of all
information, documents, and Work Product.
6.4 Smallwood will not disseminate or distribute any of the Work Product or any
other written or printed information about the Ableauctions Companies or their
business to the media, members of the public, shareholders of the Ableauctions
Companies, prospective investors, members of the investment or brokerage
community, securities regulators, or any other third party, without the Company
first reviewing and approving the Work Product or other information before
dissemination or distribution.
6.5. Smallwood and his agents, employees, consultants, or associates
(collectively, the "Smallwood Associates") will not, during the Term and for one
year following termination of the Term, either directly or indirectly as a
member or associate of any person, make any use of any confidential information
for the purpose of soliciting the business of any customer or former customer of
the Ableauctions Companies, or for the purpose of appropriating any business
opportunity whatsoever available to or which might be available to the
Ableauctions Companies. The term "associates" as used above will have the
meaning ascribed to it in the Company Act (British Columbia).
6.6 Smallwood acknowledges and agrees that the confidential information is and
will be of a special and unique character, the loss of which cannot be
reasonably, readily, or accurately calculated in monetary terms. Accordingly,
the Ableauctions Companies will be entitled to injunctive or other equitable
relief to prevent or cure any breach or threatened breach of this Agreement by
Smallwood. Resort to equitable relief, however, will not be construed to be a
waiver of any other right or remedy which the Ableauctions Companies may have
for damages or otherwise.
6.7 Smallwood agrees that during the Term and for one year following the
termination of the Term, neither he nor any of the Smallwood Associates will:
(a) encourage or entice any persons who are employees, contractors, or
suppliers of the Ableauctions Companies during the Term of this
Agreement, or who were employees, contractors, or suppliers of the
Ableauctions Companies at any time within the 30 days preceding the
date of this Agreement, to seek employment or service or contracts for
supply with persons other than the Ableauctions Companies; or
<PAGE>
5
(b) offer employment or service or contracts, directly or indirectly, to
any persons who are employees, contractors, or suppliers of the
Ableauctions Companies during the Term of this Agreement, or who were
employees, contractors, or suppliers of the Ableauctions Companies at
any time within the 30 days preceding the date of this Agreement.
6.8 On termination of this Agreement, Smallwood will furnish to the Company a
certificate in a form approved by the Company's solicitors which declares that
Smallwood has not:
(a) divulged, disclosed, distributed, or otherwise made available to any
person any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information;
or
(c) acted contrary to the provision of the above; except with the
Company's prior written consent.
The remedies afforded to the Ableauctions Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to the participants at
law or in equity, including the remedy of injunctive relief.
7. NON-COMPETITION CLAUSE
7.1 Smallwood, on his own behalf and on behalf of the Smallwood Associates
except for Bryan Wilkins and Shawnna Ayers, agrees with the Company that he will
not, except as an employee of the Company or any of its affiliates:
(a) at any time during the Term or any other association with an
affiliated company and during any notice period while Smallwood is
receiving remuneration from the Company or an affiliated company, or
(b) for a period of one year, where the Term or the association of
Smallwood with an affiliated company is terminated for whatever
reason,
either individually or in a partnership or jointly or in conjunction with any
person, firm, corporation, government, association, or syndicate (a "Business
Entity") as principal, agent, employee, director, officer, consultant, or in any
other manner, carry on or be engaged in any Business Entity engaged in or
concerned with or interested in the Business or any other business of the
Ableauctions Companies within the Lower Mainland of British Columbia.
<PAGE>
6
8. NOTICES
8.1 Any notices to be given by either party to the other will be sufficiently
given if delivered personally or transmitted by facsimile or if sent by
registered mail, postage prepaid, to the parties at their respective addresses
shown on the first page of this Agreement, or to any other addresses as the
parties may notify to the other from time to time in writing. This notice will
be deemed to have been given at the time of delivery, if delivered in person or
transmitted by facsimile, or within three business days from the date of posting
if mailed from Vancouver, British Columbia.
9. FURTHER ASSURANCES
9.1 Each party will at any time and from time to time, at the other's request,
sign and deliver other documents and do other things that the other party may
reasonably request to carry out and give full effect to the terms, conditions,
and intent of this Agreement.
10. ENUREMENT
10.1 This Agreement will enure to the benefit of and be binding on the parties
to this Agreement and their respective personal representatives, successors, and
permitted assigns.
11. LAW
11.1 This Agreement will be governed by and construed in accordance with the
laws of British Columbia and the parties irrevocably attorn to the courts of
British Columbia.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
ABLE AUCTIONS (1991) LTD.
Per:
/s/ Abdul Ladha
- ----------------------------------
Authorized Signatory
/s/ Richie Smallwood
- ----------------------------------
richie Smallwood
EXHIBIT 10.10
SUBSCRIPTION AGREEMENT
THIS AGREEMENT MADE EFFECTIVE AS OF THE 16th DAY OF AUGUST, 1999 (the "Effective
Date").
BETWEEN:
ABLEAUCTIONS.COM, INC.
(formerly J. B. FINANCIAL SERVICES, INC.)
688 - 6 Ishikawa
Kanagawa
Japan 252 0815
(the "Company")
AND:
THE PARTY NAMED AS PURCHASER BELOW
(the "Purchaser")
WHEREAS:
A. The Purchaser wishes to subscribe for 4,376,225 units, where each unit
consists of one common share and one-half of one non-transferable share purchase
warrant of the Company (the "Securities");
B. It is the intention of the parties to this Agreement that this subscription
will be made pursuant to appropriate exemptions (the "Exemptions") from the
registration and prospectus or equivalent requirements of all rules, policies,
notices, orders and legislation of any kind whatsoever (collectively the
"Securities Rules") of all jurisdictions applicable to this subscription;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the receipt of which is hereby
acknowledged, the parties covenant and agree with each other (the "Agreement")
as follows:
1. Representations and Warranties of the Purchaser
1.1 The Purchaser represents and warrants to the Company, and acknowledges that
the Company is relying on these representations and warranties to, among other
things, ensure that it is complying with all of the applicable Securities Rules,
that:
(a) the Purchaser is purchasing a sufficient number of Securities such
that the aggregate acquisition cost to the Purchaser of such
Securities is not less than $97,000, if the Purchaser is a resident of
British Columbia, Alberta, Manitoba, New Brunswick, Prince Edward
Island, Newfoundland or an International Jurisdiction, or $150,000 if
the Purchaser is a resident of Saskatchewan, Ontario, Quebec or Nova
Scotia, and the Purchaser is:
<PAGE>
(i) purchasing such Securities as principal for its own account
and not for the benefit of any other person; or
(ii) deemed to be acting as principal by virtue of it being:
A. a trust company or insurer which is authorized to carry
on business in B.C. under the Financial Institutions
Act (British Columbia) and which is acting as agent or
trustee for accounts that are fully managed by it
within the meaning of ss. 74(1)(a) of the Securities
Act (British Columbia (the "Act") and NIN #97/11 issued
by the B.C. Securities Commission (the "Commission");
or
B. a portfolio manager within the meaning of ss. 1(1) of
the Act which is carrying on business in B.C. and which
is registered or exempt from registration under the Act
and which is acting as agent for accounts that are
fully managed by it within the meaning of ss. 74(1)(b)
of the Act and NIN #97/11; or
C. a trust company, insurer or portfolio manager within
the meaning of BOR #97/4 issued by the Commission which
is acting, in the case of a trust company or insurer,
as agent or trustee or, in the case of a portfolio
manager, as agent, for accounts that are fully managed
by it within the meaning of BOR #97/4and NIN #97/11;
and the Purchaser is also deemed to be acting as principal
under the analogous provisions of any other Securities Rules
having application;
(b) the Purchaser has not been formed, created, established or
incorporated for the purpose of permitting the purchase of the
Securities without a prospectus by groups of individuals whose
individual share of the aggregate acquisition cost for such Securities
is less than $97,000, if the beneficial purchaser is a resident of
British Columbia, Alberta, Manitoba, New Brunswick, Prince Edward
Island, Newfoundland or an International Jurisdiction, or $150,000 if
the beneficial purchaser is a resident of Saskatchewan, Ontario,
Quebec or Nova Scotia;
(c) the Purchaser is resident of an "International Jurisdiction" (which
means a country other than Canada or the United States) and the
Purchaser further represents and warrants that:
(i) the Purchaser is knowledgeable of, or has been independently
advised as to, the applicable Securities Rules of the
International Jurisdiction which would apply to this
subscription, if there are any;
(ii) the Purchaser is purchasing the Securities pursuant to
Exemptions under the Securities Rules of that International
Jurisdiction or, if such is not applicable, the Purchaser is
permitted to purchase the Securities under the applicable
Securities Rules of the International Jurisdiction without
the need to rely on Exemptions; and
-2-
<PAGE>
(iii) the applicable Securities Rules do not require the Company
to make any filings or seek any approvals of any kind
whatsoever from any regulatory authority of any kind
whatsoever in the International Jurisdiction; and
the Purchaser will, if requested by the Company, deliver to the
Company a certificate or opinion of local counsel from the
International Jurisdiction which will confirm the matters referred to
in subparagraphs (ii) and (iii) above to the satisfaction of the
Company, acting reasonably;
(d) [intentionally left blank]
(e) the Purchaser acknowledges that the Company is relying on the
Exemptions in order to complete the trade and distribution of the
Securities and the Purchaser is aware of the criteria of the
Exemptions to be met by the Purchaser, and if applicable, the
Purchaser meets those criteria;
(f) the Purchaser acknowledges that because this subscription is being
made pursuant to the Exemptions:
(i) the Purchaser is restricted from using certain of the civil
remedies available under the applicable Securities Rules;
(ii) the Purchaser may not receive information that might
otherwise be required to be provided to the Purchaser under
the applicable Securities Rules if the Exemptions were not
being used; and
(iii) the Company is relieved from certain obligations that would
otherwise apply under the applicable Securities Rules if the
Exemptions were not being used;
(iv) no securities commission, stock exchange or similar
regulatory authority has reviewed or passed on the merits of
the Securities;
(v) there is no government or other insurance covering the
Securities;
(vi) there are risks associated with the purchase of the
Securities;
(vii) there are restrictions on the Purchaser's ability to resell
the Securities and it is the responsibility of the Purchaser
to find out what those restrictions are and to comply with
them before selling the Securities.
(g) the Securities are not being subscribed for by the Purchaser as a
result of any material information about the Company's affairs that
has not been publicly disclosed;
(h) the offer and sale of these Securities was not accompanied by an
advertisement and the Purchaser was not induced to purchase these
Securities as a result of any advertisement made by the Company;
(i) if the Purchaser is a corporation, the Purchaser is a valid and
subsisting corporation, has the necessary corporate capacity and
authority to execute and deliver this Agreement and to observe and
perform its covenants and obligations hereunder and has taken all
necessary corporate action in respect thereof, or, if the Purchaser is
a partnership,
-3-
<PAGE>
syndicate, trust or other form of unincorporated organization, the
Purchaser has the necessary legal capacity and authority to execute
and deliver this Agreement and to observe and perform its covenants
and obligations hereunder and has obtained all necessary approvals in
respect thereof, and, in either case, upon the Company executing and
delivering this Agreement, this Agreement will constitute a legal,
valid and binding contract of the Purchaser enforceable against the
Purchaser in accordance with its terms and neither the agreement
resulting from such acceptance nor the completion of the transactions
contemplated hereby conflicts with, or will conflict with, or results,
or will result, in a breach or violation of any law applicable to the
Purchaser, any constating documents of the Purchaser or any agreement
to which the Purchaser is a party or by which the Purchaser is bound;
(j) the Purchaser is not, and was not at any time that it purchased the
Securities or received an offer to purchase the Securities pursuant to
this subscription, a "U.S. Person" as defined in Regulation S under
the United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), which definition includes, but is not limited to, an
individual resident in the United States, an estate or trust of which
any executor or administrator or trustee, respectively, is a U.S.
person, and any partnership or corporation organized or incorporated
under the laws of the United States;
(k) the Purchaser did not receive any term sheet, subscription form or
other offering materials in connection with this subscription in the
United States, and did not execute or deliver any such subscription
form or other materials in the United States;
(l) no offers of Securities were made by any person to the Purchaser while
the Purchaser was in the United States; and
(m) the Purchaser is not acquiring Securities, directly or indirectly, for
the account or benefit of a U.S. Person or a person in the United
States.
1.2 The Company represents and warrants to the Purchaser, and acknowledges that
the Purchaser is relying on these representations and warranties in entering
into this Agreement, that:
(a) the Company is a valid and subsisting corporation duly incorporated
and in good standing under the laws of Florida;
(b) the Company is not a reporting issuer in British Columbia and any
Securities issued to the Purchaser that are or become subject to the
laws of British Columbia (if any) will be subject to an indefinite
hold period in British Columbia unless an exemption from the
registration and prospectus requirements of the Securities Act is
available. Such an exemption may not be available;
(c) the Company's subsidiaries (the "Subsidiaries"), if any, are valid and
subsisting corporations and in good standing under the laws of the
jurisdictions in which they were incorporated;
(d) the common shares of the Company are eligible for quotation on the
N.A.S.D. OTC Bulletin Board ("OTC");
-4-
<PAGE>
(e) upon their issuance, the Shares (as defined below) will be validly
issued and outstanding fully paid and non-assessable common shares of
the Company registered as directed by the Purchaser, free and clear of
all trade restrictions (except as may be imposed by operation of the
applicable Securities Rules) and, except as may be created by the
Purchaser, liens, charges or encumbrances of any kind whatsoever;
(f) upon their issuance, the Warrants (as defined below) will be validly
created, issued and outstanding, registered as directed by the
Purchaser, and, upon their issuance, the shares issued on the exercise
of the Warrants will be validly issued and outstanding fully paid and
non-assessable common shares of the Company registered as directed by
the Purchaser, and both will be free and clear of all trade
restrictions (except as may be imposed by operation of the applicable
Securities Rules) and, except as may be created by the Purchaser,
liens, charges or encumbrances of any kind whatsoever;
(g) the Company and its Subsidiaries, if any, hold all licences and
permits that are required for carrying on their business in the manner
in which such business has been carried on and the Company and its
Subsidiaries, if any, have the corporate power and capacity to own the
assets owned by them and to carry on the business carried on by them
and they are duly qualified to carry on business in all jurisdictions
in which they carry on business;
(h) all prospectuses, exchange offering prospectuses, offering
memorandums, filing statements, information circulars, material change
reports, shareholder communications, press releases and other
disclosure documents of the Company including, but not limited to,
financial statements, contain no untrue statement of a material fact
as at the date thereof nor do they omit to state a material fact
which, at the date thereof, was required to have been stated or was
necessary to prevent a statement that was made from being false or
misleading in the circumstances in which it was made;
(i) to the best of its knowledge, and except as publicly disclosed, there
are no material actions, suits, judgments, investigations or
proceedings of any kind whatsoever outstanding, pending or threatened
against or affecting the Company or its Subsidiaries, if any, at law
or in equity or before or by any Federal, Provincial, State, Municipal
or other governmental department, commission, board, bureau or agency
of any kind whatsoever and, to the best of the Company's knowledge,
there is no basis therefor;
(j) the Company has good and sufficient right and authority to enter into
this Agreement and complete its transactions contemplated under this
Agreement on the terms and conditions set forth herein; and
(k) to the best of its knowledge, the execution and delivery of this
Agreement, the performance of its obligations under this Agreement and
the completion of its transactions contemplated under this Agreement
will not conflict with, or result in the breach of or the acceleration
of any indebtedness under, or constitute default under, the constating
documents of the Company or any indenture, mortgage, agreement, lease,
licence or other instrument of any kind whatsoever to which the
Company is a party or by which it is bound, or any judgment or order
of any kind whatsoever of any Court or administrative body of any kind
whatsoever by which it is bound.
-5-
<PAGE>
2. Subscription
2.1 The Purchaser hereby subscribes the subscription funds (the "Subscription
Funds") referred to below for and agrees to take up the units (a "Unit" or the
"Units") referred to below, where each Unit consists of one common share with a
par value of U.S. $0.001 in the capital stock of the Company (a "Share" or the
"Shares") and one-half of one non-transferable share purchase warrant (a
"Warrant" or the "Warrants"), at a price of U.S. $0.80 per Unit. Each whole
Warrant will entitle the Purchaser to subscribe for one additional common share
of the Company at a price of U.S. $0.80 per share at any time up to 5:00 p.m.
local time in Seattle, Washington on the first anniversary of the Closing Date,
and thereafter at a price of U.S. $1.00 per share at any time up to 5:00 p.m.
local time on the second anniversary of the Closing Date.
2.2 The Purchaser has delivered the Subscription Funds for the Securities
subscribed for in the form of solicitor's trust cheque, certified cheque, bank
draft, money order or wire transfer payable to "Campney & Murphy In Trust" as
the solicitors for and on behalf of the Company. Campney & Murphy will be
entitled to release the Subscription Funds from trust and the Company will be
entitled to use the Subscription Funds on the terms set forth in Article 5 of
this Subscription Agreement.
3. Covenants, Agreements and Acknowledgments
3.1 The Purchaser covenants and agrees with the Company to hold and not sell,
transfer or in any manner dispose of the Shares comprising the Units or any
shares acquired on the exercise of the Warrants comprising the Units unless the
sale, transfer or disposition is made in accordance with all applicable
Securities Rules.
3.2 The Purchaser acknowledges and agrees that the Shares comprising the Units
and any shares acquired on the exercise of the Warrants comprising the Units
will be subject to such trade restrictions as may be imposed by operation of the
applicable Securities Rules, and the share certificate or certificates
representing the Shares comprising the Units and any shares acquired on the
exercise of the Warrants comprising the Units will bear such legends as may be
required by the applicable Securities Rules. The Purchaser further acknowledges
and agrees that it is the Purchaser's obligation to comply with the trade
restrictions in all of the applicable jurisdictions and the Company offers no
advice as to those trade restrictions.
3.3 The Purchaser acknowledges that:
(a) the Securities have not been registered under the U.S. Securities Act
and are "restricted securities" within the meaning of Rule 144 under
the U.S. Securities Act and may only be resold in accordance with the
provisions of Regulation S under the U.S. Securities Act, pursuant to
registration under the U.S. Securities Act, or pursuant to an
available exemption from such registration. The Purchaser understands
that the Company has no obligation or present intention of filing a
registration statement under the U.S. Securities Act in respect of the
Securities;
(b) hedging transactions involving the Securities may not be conducted
unless in compliance with the U.S. Securities Act;
(c) there may be material tax consequences to the Purchaser of an
acquisition or disposition of Securities. The Company gives no opinion
and makes no representation with respect
-6-
<PAGE>
to the tax consequences to the Purchaser under United States, state,
local or foreign tax law of the Purchaser's acquisition or disposition
of such securities;
(d) the certificates evidencing the Securities issued in this subscription
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED ONLY (i)
TO THE COMPANY; (ii) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT; (iii) IN ACCORDANCE WITH RULE 144
UNDER THE 1933 ACT; OR (iv) IN A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS, PROVIDED, PRIOR TO ANY SUCH SALE, TRANSFER OR ASSIGNMENT, THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL, IN FORM ACCEPTABLE
TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS
WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.";
(e) the Company is required to refuse to register any transfer of the
Securities not made in accordance with the provisions of Regulation S
under the U.S. Securities Act, pursuant to registration under the U.S.
Securities Act, or pursuant to an available exemption from such
registration; and
(f) any person who exercises a Warrant will be required to provide to the
Company either:
(i) written certification that it is not a U.S. Person and that
such Warrant is not being exercised within the United States
or on behalf of, or for the account or benefit of, a U.S.
Person; or
(ii) a written opinion of counsel or other evidence satisfactory
to the Company to the effect that the Warrants and the
common shares issuable on the exercise of the Warrants have
been registered under the 1933 Act and applicable state
securities laws or are exempt from registration thereunder.
3.4 The Company covenants and agrees with the Purchaser to file any documents
necessary to be filed under the applicable Securities Rules with respect to this
subscription within the required time.
4. [Intentionally left blank]
5. Closing
5.1 The completion of the subscription contemplated under this Agreement shall
occur:
-7-
<PAGE>
(a) on or before September 7, 1999 or such later date agreed to in
writing by the parties hereto (the "Closing Date"); and
(b) immediately following the acquisition by the Company of the
issued shares (the "Able Shares") of Able Auctions (1991) Ltd. (a
British Columbia corporation), subject only to the payment of any
cash portion (the "Able Cash Payment") of the purchase price for
the Able Shares. The Purchaser acknowledges and agrees that the
Company is entitled to use the Subscription Proceeds to pay the
Able Cash Payment.
No later than the Closing Date, the Company shall deliver a treasury order (the
"Treasury Order") to its transfer agent sufficient to cause the transfer agent
to issue to the Purchaser a share certificate or certificates representing the
Shares and the Company shall issue a warrant certificate or certificates
representing the Warrants comprising the Units as provided for below by the
Purchaser.
5.2 The Purchaser and the Company hereby mutually agree that upon the Company
advising Campney & Murphy that the Company is in a position to satisfy the
closing conditions set forth in paragraph 5.1 and upon:
(a) the Company's transfer agent giving written confirmation to Campney &
Murphy that has received the Treasury Order, will prepare the share
certificates representing the Shares and will deliver such
certificates to Campney & Murphy for delivery to the Purchaser, or to
the direction of the Purchaser; and
(b) the Company advising Campney & Murphy that it is holding the warrant
certificate for immediate delivery to, or to the direction of, the
Purchaser;
Campney & Murphy is irrevocably authorized and directed by the parties hereto to
release and deliver the Subscription Funds, together with any accrued interest
thereon, to the Company or for use as directed by the Company without prior
notice to, consent of or action by the Purchaser or the Company and that Campney
& Murphy can rely and act on this irrevocable direction as if it was a party to
this Agreement.
6. General
6.1 For the purposes of this Agreement, time is of the essence.
6.2 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as may, either before or after the
execution of this Agreement, be reasonably required to carry out the full intent
and meaning of this Agreement.
6.3 This Agreement shall be subject to, governed by and construed in accordance
with the laws of Florida.
6.4 This Agreement may not be assigned by either party hereto.
-8-
<PAGE>
6.5 This Agreement may be signed by the parties in as many counterparts as may
be deemed necessary, each of which so signed shall be deemed to be an original,
and all such counterparts together shall constitute one and the same instrument.
A copy of this Agreement transmitted by facsimile shall be treated and relied
upon for all purposes by any person as an originally signed copy.
IN WITNESS WHEREOF the parties have executed this written Agreement effective as
of the Effective Date.
ABLEAUCTIONS.COM, INC.
Per: /s/ Douglas McLeod
------------------------------------
Authorized Signatory
-9-
<PAGE>
TO BE COMPLETED BY THE PURCHASER:
- ---------------------------------
A. Name and Address (Note: Cannot be a U.S. Address) The name and address (to
establish the Purchaser's jurisdiction of residence for the purpose of
determining the applicable Securities Rules) of the purchaser (the "Purchaser")
is as follows:
SILICON CAPITAL CORP.
------------------------------------
Name
Temple Building, Tropicana Plaza
------------------------------------
Street Address
Leeward Highway, Providenciales
------------------------------------
Turks & Caicos Islands, B.W.I.
------------------------------------
Country
B. Registration Instructions (Note: Cannot be a U.S. Address) The name and
address of the person in whose name the Purchaser's Securities are to be
registered is as follows (if the name and address is the same as was inserted in
paragraph A above, then insert "N/A"):
SILICON CAPITAL CORP.
------------------------------------
Name
TEMPLE BUILDING, TROPICANA PLAZA
------------------------------------
Street Address
LEEWARD HIGHWAY
------------------------------------
PROVIDENCIALES
------------------------------------
City and Province
TURKS & CAICOS ISLANDS, B.W.I.
------------------------------------
Country
------------------------------------
Postal Code
<PAGE>
C. Delivery Instructions (Note: Cannot be a U.S. Address) The name and address
of the person to whom the certificates representing the Purchaser's Securities
referred to in paragraph A above are to be delivered is as follows (if the name
and address is the same as was inserted in paragraph A above, then insert
"N/A"):
SILICON CAPITAL CORP.
------------------------------------
Name
Temple Building, Tropicana Plaza
------------------------------------
Street Address
Leeward Highway,
------------------------------------
Providenciales
------------------------------------
City and Province
Turks & Caicos Islands, B.W.I.
------------------------------------
------------------------------------
Postal Code
D. Subscription Amount The minimum is Cdn. $97,000 if the Purchaser is a
resident (as per the address inserted in paragraph A above) of British Columbia,
Alberta, Manitoba. New Brunswick, Prince Edward Island, Newfoundland or an
International Jurisdiction, or Cdn. $150,000 if the Purchaser is a resident of
Saskatchewan, Ontario, Quebec or Nova Scotia.:
Subscription Funds: U.S. $3,500,980
Number of Units: 4,376,225 Units (where each Unit consists
of one share and one-half of one share
purchase warrant. Each whole share
purchase warrant will entitle the
Purchaser to subscribe for one additional
common share of the Company on the terms
set forth in paragraph 2.1 of this
Subscription Agreement).
Note: The number of Units must equal the Subscription Funds divided
by price of U.S. $0.80 per Unit.
TO BE COMPLETED AND SIGNED BY THE PURCHASER:
SILICON CAPITAL CORP.
- ---------------------------------
Name of the "Purchaser" - use the name inserted in
paragraph A above.
Per:
/s/ illegible
---------------------------------
Signature of Purchaser
AGENT / AUTHORIZED SIGNATORY
--------------------------------
Title (if applicable)
-11-
EXHIBIT 10.11
CONSULTING AGREEMENT
THIS AGREEMENT made with effect from the 24th day of August, 1999 (the
"Effective Date")
BETWEEN: Able Auctions (1991) Ltd., of
1963 Lougheed Highway, Coquitlam, British Columbia, V3K 3T8;
(the "Company")
AND: Dexton Technologies Corporation, of
3112 Boundary Road, Burnaby, British Columbia, V5M 4A2;
(the "Consultant")
WHEREAS:
A. The Consultant was formerly the sole shareholder of the Company, and is now
a shareholder of the sole corporate shareholder of the Company;
B. The Consultant has experience in the auction business and in electronic
commerce and has expressed a desire to continue to be involved in the
affairs of the Company;
C. The Company wishes to utilize the Consultant's experience to facilitate the
Company's business; and
D. The Company has agreed to retain the services of the Consultant to provide
the consulting services described in Schedule "A" attached hereto (the
"Services") and the Consultant has agreed to provide the Services to the
Company, in accordance with the terms and conditions contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
of the covenants and agreements herein contained the parties hereto covenant and
agree (the "Agreement") as follows:
1. DEFINITIONS AND INTERPRETATION
1.01 Definitions
In this Agreement, including the recitals and the schedule, the following words
and expressions have the following meanings unless the context otherwise
requires:
(a) "Confidential Information" means all information or data which may,
before or after the date of this Agreement, be delivered or made
available to the Consultant by the Company or by any affiliate of the
Company, all information or data regarding programs, products,
services, costs, equipment, operations, suppliers, employees,
contractors, distribution, marketing or customers relating to the
<PAGE>
products, all technical information, procedures, processes, diagrams,
specifications, improvements, formulations, plans and data relating to
the business of the Company or any affiliate of the Company.
(b) "Services" means all services which the Consultant may provide from
time to time for the Company, including, without limitation, those
provided in Schedule "A" hereto.
1.02 Entire Agreement
This Agreement and any documents and agreements to be delivered pursuant to this
Agreement supersede all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Agreement, other than as expressed in
writing in this Agreement. No trade terms or trade usages are to be incorporated
by reference implicitly or otherwise into this Agreement, unless expressly
referred to in this Agreement.
1.03 Amendments
No change or modification of this Agreement will be valid unless it is in
writing and signed by each party to this Agreement.
1.04 Invalidity of Particular Provision
It is intended that all of the provisions of this Agreement will be fully
binding and effective between the parties. If any particular provision or
provisions or a part of one or more is found to be void, voidable or
unenforceable for any reason whatsoever, then the particular provision or
provisions or part of the provision will be deemed severed from the remainder of
this Agreement. The other provisions of this Agreement will not be affected by
the severance and will remain in full force and effect.
1.05 Governing Law
This Agreement will be governed by and construed in accordance with the laws of
the Province of British Columbia and the laws of Canada applicable in such
Province.
2. APPOINTMENT AND AUTHORITY
2.01 Appointment of Consultant
The Company appoints the Consultant as a consultant to the Company to provide
the Services for the benefit of the Company and the Company authorizes the
Consultant to exercise the powers provided under this Agreement. The Consultant
accepts this appointment on the terms and conditions herein set forth.
<PAGE>
2.02 Consultant's Employees Not Employees of the Company
The parties agree that none of the employees of the Consultant shall be
considered an employee of the Company.
2.03 No Partnership
This Agreement will not be construed as creating a partnership, joint venture or
agency relationship between the parties or any other form of legal association
which would impose liability upon one party for any act or failure to act by the
other party.
3. GENERAL OBLIGATIONS OF THE CONSULTANT
3.01 Limitations
The Consultant shall not be entitled to enter into any commitment, contractual
or otherwise binding upon, or pledge the credit of, the Company without the
express prior written consent of the directors of the Company.
3.02 The Company's Ownership Rights
The Consultant acknowledges and agrees that nothing contained in this Agreement
shall be construed as an assignment to the Consultant of any right, title or
interest in the Confidential Information or in any other tangible or intangible
property of the Company, in respect of which all right, title and interest is
expressly reserved by the Company.
4. COMPENSATION
4.01 Compensation
In full and complete consideration for the performance of the Services by the
Consultant, the Company shall pay the Consultant consulting fees totalling
US$240,000, payable as to US$120,000 on the Effective Date and the balance of
US$120,000 on April 1, 2000, subject to such approvals and conditions as may be
required by any regulatory authority having jurisdiction.
5. TERM
5.01 Term
This Agreement will take effect on the Effective Date and will continue in full
force and effect for one year unless earlier terminated by one of the parties in
accordance with this Agreement.
5.02 Termination With Notice
Notwithstanding any other provision of this Agreement, the Company may, in its
absolute discretion, at any time upon 48 hour's advance written notice by the
Company to the Consultant, terminate this Agreement without cause and on the
expiration of the 48 hour notice period this
<PAGE>
Agreement and the Option granted hereunder shall be terminated. Such notice may
expire on any day of the month, but shall not affect the Consultant's
entitlement to payment of all consulting fees payable under section 4.01 hereof,
and any consulting fees which have not yet been paid or which have not yet
become due will be paid on the date of termination.
5.03 Termination Without Notice
The Company may terminate this Agreement immediately and without advance written
notice to the Consultant if:
(a) the Consultant has materially breached its duties under this Agreement
and such breach has not been cured within 7 days after receipt of
notice thereof; or
(b) the Consultant has committed a crime or wrongful act which relates
directly to the performance of this Agreement.
6. GENERAL
6.01 Notices
Any notice, direction, request or other communication required or contemplated
by any provision of this agreement shall be given in writing and shall be given
by delivering or faxing same to the Company or the Consultant, as the case may
be, at the address for that party first set out above. Any such notice,
direction, request or other communication shall be deemed to have been given or
made on the date on which it was delivered or, in the case of fax, on the next
business day after receipt of transmission. Either party may change its fax
number or address for service from time to time by notice in accordance with the
foregoing.
6.02 Assignment
This Agreement is not assignable in whole or in part by the Consultant. Any
attempt to assign any of the rights, or to delegate any of the duties or
obligations of this Agreement is void. Any assignment occurring by operation of
law such as on a bankruptcy or amalgamation will be deemed an event of default
under this Agreement.
6.03 Waiver
No failure or delay of any party in exercising any power or right under this
Agreement will operate as a waiver of such power or right, nor will any single
or partial exercise of any such right or power preclude any further or other
exercise of such right or power under this Agreement. No modification or waiver
of any provision of this Agreement and no consent to any departure by any party
from any provision of this Agreement will be effective unless it is in writing.
Any such waiver or consent will be effective only in the specific instance and
for the specific purpose for which it was given. No notice to or demand on any
party in any circumstances will entitle such party to any other or further
notice or demand in similar or other circumstances.
<PAGE>
6.04 Enurement
Subject to the restrictions on transfer contained in this Agreement, this
Agreement will enure to the benefit of and be binding on the parties and their
respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
above written.
THE CORPORATE SEAL of )
Able Auctions (1991) Ltd. was hereunto )
affixed in the ))
presence of: )
) c/s
/s/ Abdul Ladha )
- ----------------------------------------- )
Name: )
Title: )
THE CORPORATE SEAL of )
Dexton Technologies Corporation was )
hereunto affixed in the presence of: )
) c/s
/s/ Abdul Ladha )
- ----------------------------------------- )
Name: )
Title: )
<PAGE>
SCHEDULE "A"
THE SERVICES
------------
The Consultant covenants and agrees with the Company to provide advisory
services to the Company with respect to:
1. the operation of an auction business;
2. the operation of an electronic commerce business;
3. marketing;
4. negotiation of banner advertising, URL link arrangements and other
value-added relationships;
5. identifying potential strategic partnerships and other arrangements; and
6. other related corporate advisory services.
EXHIBIT 10.12
INVESTOR RELATIONS AGREEMENT
This Agreement made as of the 15th day of September, 1999 (the "Effective
Date").
BETWEEN:
ABLEAUCTIONS.COM, INC., a company incorporated under the laws
of Florida having a business office at 1963 Lougheed Highway,
Coquitlam, British Columbia, V3K 3T8
(the "Company")
AND:
NORTH STAR COMMUNICATIONS INC., a company incorporated under
the laws of British Columbia, having its registered and records
office at 2500 - 1177 W. Hastings Street, Vancouver,
British Columbia, V6E 2K3
(the "Contractor")
WHEREAS:
A. The common stock of the Company is currently quoted on the National
Association of Securities Dealers' Over-the-Counter Bulletin Board in the United
States;
B. The Company wishes to retain the Contractor to assist with its investor
relations and the Contractor has agreed to assist with the investor relations of
the Company in accordance with the terms of this agreement (the "Agreement");
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Appointment and Authority of the Contractor
1.1 Appointment of the Contractor
The Company appoints the Contractor to perform the services for the benefit of
the Company hereinafter set forth, and the Company authorizes the Contractor to
exercise the powers provided under this Agreement. The Contractor accepts this
appointment on the terms and conditions herein set forth.
1.2 Independent Contractor
In performing the services hereunder, the Contractor shall be:
(a) an independent contractor and not an employee or agent of the Company,
except that the Contractor shall be the agent of the Company solely in
circumstances where the Contractor must be the agent to carry out its
obligations as set forth in this Agreement; and
<PAGE>
(b) responsible for the management of its employees and without limiting
the generality of the foregoing, shall be responsible for payment to
the proper authorities of all unemployment insurance premiums, Canada
Pension Plan contributions, Worker's Compensation premiums, and all
other employment expenses for all of the Contractor's employees, and
the Contractor shall be responsible for deduction and remittance of
all income tax due from itself and its employees.
Nothing in this Agreement shall be deemed to require the Contractor to provide
its services exclusively to the Company and the Contractor hereby acknowledges
that the Company is not required and shall not be required to make any
remittances and payments required of employers by statute on the Contractor's
behalf and the Contractor shall not be entitled to the fringe benefits provided
by the Company to its employees
2. Duties of the Contractor
2.1 General
The Contractor shall:
(a) assist with the investor relations of the Company pursuant to the
terms and conditions of this Agreement;
(b) implement or cause to be implemented decisions of the Company at the
instruction of the Company;
(c) at all times, be subject to the direction of the Company and shall
keep the Company informed as to all matters concerning the activities
of the Contractor;
(d) meet the performance standards that may be reasonably prescribed by
the Company from time to time; and
(e) subject always to the general or specific instructions and directions
of the President or the board of directors (the "Directors") of the
Company, have full power and authority to provide investor relations
services on behalf of the Company except in respect of such matters
and duties as by law must be transacted or performed by the Directors
or senior officers of the Company.
2.2 The Contractor's Activities
The Contractor shall:
(a) conform to all lawful instructions and directions from time to time
given to it by the officers and Directors of the Company;
(b) devote sufficient time and attention to the business and affairs of
the Company to fully and properly carry out the services contemplated
by this Agreement;
(c) assist with co-ordinating and disseminating news and information of
the Company to the public and to the shareholders of the Company;
-2-
<PAGE>
(d) initiate and maintain contact with brokers and brokerage houses to
provide them with the news of the Company;
(e) arrange for the attendance or representation of the Company at
conferences of analysts;
(f) subject to the control and direction of the Company, prepare corporate
and product related materials for distribution to brokers, analysts,
and investment advisers, and distribute same to brokers, analysts, and
investment advisors;
(g) do all such acts and things as may be required to foster a positive
reputation of the Company and its securities in the market place;
(h) notify the Company of any major inquiry, complaint, or request made by
the general public or any regulatory authority and deliver to the
Company copies of any supporting papers received in connection with
such inquiry, complaint, and request;
(i) perform any other services or functions reasonably required by the
Company and within the general scope of the Contractor's duties as set
forth in this Agreement and otherwise operate and manage the
promotional activities of the Company in accordance with and as
limited by this Agreement;
(j) perform all other functions relating to promotional activities of the
Company as may be customary and usual for the exclusive expert
promotion of a company of the size and nature of the Company, in
accordance and as limited by this Agreement;
(k) well and faithfully serve the Company and use its best efforts to
promote the interests of the Company; and
(l) refrain from acting in any manner contrary to the best interests of
the Company or contrary to its duties.
2.3 Dissemination of Information
The Contractor:
(a) shall not disseminate or spread false or misleading information
relating to the Company to any person;
(b) shall disseminate any news and information which is specifically
authorized in writing by the Company; and
(c) will be relying upon information received from the Company, and will
so disclose this fact in all communications.
No act or omission by the Company shall act to waive the requirements of this
Section 2.3.
-3-
<PAGE>
2.4 Approval of President Required
The Contractor may not disseminate or distribute to the media, members of the
public, shareholders of the Company, prospective investors, members of the
investment or brokerage community, securities regulators, or any other third
party any of the Work Product (as defined in Section 5.1) or any other written
or printed information about the Company or its business, without the Company's
President first reviewing and approving the Work Product or other information
prior to dissemination or distribution.
2.5 Authority of the Contractor
The Company hereby authorizes the Contractor, subject to the other provisions of
this Agreement, to do all acts and things as the Contractor may in its
discretion deem necessary or desirable to enable the Contractor to carry out its
duties.
2.6 Limitations and Restrictions
The Contractor shall not be entitled to enter into any commitment, contractual
or other, binding upon, or pledge the credit of, the Company without the express
prior written consent of the President or the Directors.
2.7 Impossibility of Performance
If the performance of any duty of the Contractor set forth in this Agreement is
beyond the reasonable control of the Contractor, the Contractor shall
nonetheless be obliged to use its best efforts to perform such duty and to
notify the Company that the performance of such duty is beyond its reasonable
control.
2.8 Compliance with Laws
The Contractor agrees that it will perform the services under this Agreement in
accordance with all applicable laws including, but not limited to, the
Securities Act of 1933 and the Securities and Exchange Act of 1934, the rules
and regulations thereunder and the rules and policies of the Securities and
Exchange Commission, and the rules and policies of the NASD Stock Quotation
Service, as applicable.
2.9 Indemnity
The Contractor agrees to indemnify and save the Company harmless with respect to
any claim, suit, proceeding, or judgment, whether regulatory in nature or
brought in a court of competent jurisdiction arising from any breach of this
Agreement by the Contractor.
2.10 Other Activities
During the term of this Agreement, the Contractor shall not provide services to
any person, firm, or corporation or become involved in any activity, directly or
indirectly, with any person, firm, or corporation which does or could prevent or
hinder the Contractor from fulfilling its duties and obligations hereunder.
The Contractor shall not be precluded from acting in a function similar to that
contemplated under this Agreement or in any function similar to that
contemplated under this Agreement or in any other capacity for any other person,
firm, or company; provided such action shall not conflict with the Contractor's
duty to the Company and shall not prevent the Contractor from fulfilling its
obligations under this Agreement.
-4-
<PAGE>
2.11 Fiduciary Obligations
Without limiting the generality of the foregoing, during the term of this
Agreement, the Contractor shall not act in any manner contrary to the terms of
this Agreement, or contrary to the best interests of the Company.
3. Company's Agreements
3.1 Compensation of the Contractor
As compensation for the services rendered by the Contractor pursuant to this
Agreement, the Company agrees to pay to the Contractor a fee of Forty Thousand
(US$40,000) United States Dollars per month payable for each calendar month with
the first month's fee due and payable upon execution of this Agreement.
Thereafter, the monthly fee of US$40,000 is payable in advance of the month in
which services are to be rendered.
3.2 The Contractor's Expenses
The Company further agrees to pay the Contractor the sum of One Hundred and
Sixty Thousand (US$160,000) United States Dollars upon execution of this
Agreement. It is agreed that this payment represents an advance towards expenses
to be incurred pursuant to the investor relations program including reasonable
disbursements and GST thereon, which will include travel and accommodation
expenses, printing and mailing costs, long-distance charges, outside services,
and all other out of pocket expenses reasonably incurred by the Contractor in
the performance of its obligations pursuant to this Agreement; provided that the
Contractor will not incur any single expenditure in excess of US$10,000 without
obtaining the prior written consent of the Company. The Contractor agrees to
provide the Company with support documentation for the disbursements and
expenses incurred where procurable. A monthly accounting will be provided of the
expenses incurred and paid from the advance. Any amount of the advance not
utilized is fully refundable net of any un-reimbursed costs at the termination
of this Agreement.
3.3 Access to Company Information
The Company shall make available to the Contractor such information and data and
shall permit the Contractor to have access to such documents or premises as are
reasonably necessary to enable it to perform the services provided for under
this Agreement.
3.4 Indemnity
The Company will indemnify and save harmless the Contractor against any
liability to the Contractor resulting from any material misstatements,
misrepresentations, or omissions in information provided by the Company to the
Contractor and utilized by the Contractor in the performance of its services
hereunder.
-5-
<PAGE>
4. Duration of Service
4.1 Effective Date
This Agreement shall become effective as of the 15th day of September, 1999, and
shall remain in force, subject to earlier termination as provided herein, for a
term of six months ending March 15, 2000.
4.2 Termination
This Agreement may be terminated by:
(a) the Company, at any time, by giving the Contractor written notice of
such termination at least 30 days prior to the termination date set
forth in that notice;
(b) the Contractor, at any time, by giving the Company written notice of
such termination at least 30 days prior to the termination date set
forth in that notice;
(c) the Company without prior notice upon the occurrence of any default by
the Contractor, by the Company giving written notice to the Contractor
specifying the nature of such default. For the purposes of this
Agreement, a default by the Contractor shall be defined as the
occurrence of any one or more of the following:
(i) the Contractor fails to perform any of its services in the
manner or within the time required herein or commits or
permits a breach of or default of any of its duties,
liabilities, or obligations hereunder and fails to fully
cure or remedy such failure, breach, or default 10 days
after the Company delivers written demand for substantial
performance to the Contractor, which specifically identifies
the manner in which the Contractor has not performed the
services hereunder or the nature of the breach or default;
or
(ii) the Company, acting reasonably, determines that the
Contractor or any of its shareholders, directors, officers,
employees, or consultants (collectively, the "Contractor's
Associates") is acting or is likely to act in a manner
detrimental to the Company or has violated or is likely to
violate the confidentiality of any information relating to
the Company;
(iii) the Contractor or any of the Contractor's Associates commits
fraud or dishonesty or misconduct while in the performance
of the services hereunder; or
(iv) the Contractor becomes bankrupt or makes an arrangement or
composition with its creditors; or
(d) the Contractor, acting reasonably, immediately upon the failure of the
Company to pay the fee as provided for in Section 3.1 above.
On termination of the Contractor's services for any reason, the Contractor will
deliver to the Company all documents pertaining to the Company or its business,
including without limitation all correspondence, reports, contracts, data bases
related to the Company, and anything included in the definition of "Work
Product" set out in Section 5.1 below.
-6-
<PAGE>
4.3 Automatic Termination
If during the term of this Agreement the shares of the Company cease to be
quoted, are cease traded, or halted by regulatory authorities for a period of
more than 30 days, this Agreement will automatically terminate without liability
to either party, subject to the option of the Company to continue this
Agreement. Notwithstanding the foregoing, if the Contractor or any of the
Contractor's Associates directly or indirectly commits an act or omission,
voluntarily or involuntarily, that causes, directly or indirectly, the Company's
shares to be cease quoted, cease traded, or halted, then the Contractor will be
liable, under Section 2.9 hereof, for any damages, liabilities, costs, or
expenses suffered by the Company by reason of that act or omission.
4.4 Compensation of the Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled to receive,
as its full and sole compensation in discharge of the Company's obligations to
the Contractor under this Agreement, all sums due and payable under this
Agreement to the date of termination and the Contractor shall have no right to
receive any further payments. The Company may offset against any payment owing
to the Contractor under this Agreement any damages, liabilities, costs, or
expenses suffered by the Company by reason of the fraud, negligence, or wilful
act of the Contractor.
4.5 Renewal of Agreement
The Company may renew this Agreement for a further six month term by providing
the Contractor with written notice of its intention to do so at least 30 days
prior to the expiration of the current term, but the Company shall be under no
obligation to renew this Agreement.
5. Confidentiality
5.1 Ownership of Work Product
All reports, documents, concepts, products, and processes, together with any
marketing schemes, business and sales contracts, and any business opportunities
prepared, produced, developed, or acquired, by or at the direction of the
Contractor, directly or indirectly, in connection with or otherwise developed or
first reduced to practice by the Contractor in the performance of its
obligations hereunder (collectively, the "Work Product") shall belong
exclusively to the Company, which shall be entitled, exclusively, to all right,
interest, profits, or benefits in respect thereof. No copies, summaries, or
other reproductions of any Work Product shall be made by the Contractor without
the express permission in writing of the Company.
5.2 Confidentiality
Except as authorized or required by its duties, the Contractor shall not reveal
to any person any of the trade secrets, secret or confidential operations,
processes or dealings, or any information concerning the organization, business,
finances, transactions, or other affairs of the Company of which it becomes
aware during the term of this Agreement. The Contractor shall keep secret all
confidential information entrusted to it and shall not use or attempt to use
this information in any manner which might injure or cause loss, either directly
or indirectly, to the Company's business. This restriction shall continue to
apply after the termination of this Agreement but shall cease to apply to
information which may come into the public domain, other than as a result of
disclosure by the Contractor.
-7-
<PAGE>
The Contractor shall comply with such directions as the Company shall make to
ensure the safeguarding or confidentiality of all such information.
6. Miscellaneous
6.1 Severability
Each provision of this Agreement is intended to be severable. If any term or
provision hereof shall be determined by a court or competent jurisdiction to be
illegal or invalid for any reason whatsoever, that provision shall be severed
from this Agreement and shall not affect the validity of the remainder of this
Agreement.
6.2 Waiver and Consents
No consent, approval, or waiver, express or implied, by either party hereto, to
or of any breach or default by the other party in the performance by the other
party of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such other
party of the same or any other obligations of such other party. The failure of a
party to declare the other party in default, irrespective of how long such
failure continues, shall not constitute a general waiver by such party of the
breach or default of the other and shall not be construed to waive or limit the
need for such consent or approval in any other instance.
6.3 Governing Law
This Agreement and all matters arising thereunder shall be governed by the laws
of the Province of British Columbia and, to the extent that the laws of Florida
govern the Company, by the laws of Florida.
6.4 Successors, Etc.
This Agreement shall enure to the benefit of and be binding upon each of the
parties and their respective heirs and successors.
6.5 Assignment
This Agreement may not be assigned by any other party.
6.6 Entire Agreement and Modifications
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and undertakings, whether oral or written,
relative to the subject matter hereof. To be effective any modification of this
Agreement must be in writing and signed by the parties.
6.7 Notices
All notices, requests, and communications required or permitted hereunder shall
be in writing and shall be sufficiently given and deemed to have been received
upon personal delivery or, if mailed, upon the first to occur of actual receipt
or 48 hours after being placed in the mail, postage prepaid, registered or
certified mail, return receipt requested, respectively addressed to the Company
or the Contractor as follows:
-8-
<PAGE>
To the Company:
Ableauctions.com, Inc.
1963 Lougheed Highway
Coquitlam, B.C. V3K 3T8
Attention: Abdul Ladha
-----------------------
To the Contractor:
North Star Communications Inc.
2500 - 1177 W. Hastings Street
Vancouver, B.C. V6E 2K3
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence.
6.9 Further Assurances
From time to time after the execution of this Agreement, the parties will make,
do, execute, or cause or permit to be made, done, or executed all additional
lawful acts, deeds, things, devices, and assurances in law whatsoever as may be
required to carry out the true intention and to give full force and effect to
this Agreement.
6.10 Counterparts
This Agreement may be executed in several counterparts, each of which will be
deemed to be an original and all of which will together constitute one
instrument.
6.11 Survival of Indemnities
The indemnities given under this Agreement will survive the termination of this
Agreement.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties hereto
effective as of the day and year first above written.
ABLEAUCTIONS.COM, INC.
Per:
/s/ Abdul Ladha
- ----------------------------
Authorized Signatory
-9-
<PAGE>
NORTH STAR COMMUNICATIONS INC.
Per:
/s/ Mitch Adam
- ----------------------------
Authorized Signatory
EXHIBIT 10.13
INVESTOR RELATIONS AGREEMENT
THIS AGREEMENT dated for reference the 1st day of October, 1999.
BETWEEN:
ABLEAUCTIONS.COM, INC., a company incorporated under the laws
of Florida and having its head office located at 3112 Boundary
Road, Burnaby, British Columbia, V5M 4A2
(the "Company")
OF THE FIRST PART
AND:
EUROPEAN INVESTOR SERVICES LTD., a company incorporated under
the laws of the United Kingdom whose registered office is
located at 17 - 18 Dover Street, London, WIX 4DQ, England
("EIS")
OF THE SECOND PART
WHEREAS:
A. The Company, through its subsidiary, is an auctioneer and liquidator of a
broad range of office equipment, furniture, and industrial equipment (the
"Business");
B. The Company wishes to engage EIS to provide investor relations and financial
media relations services to the Company on the terms and subject to the
conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT witnesses that the parties mutually agree as
follows:
1. ENGAGEMENT
1.1 Subject to the terms and conditions below, the Company engages EIS to
provide the investor relations and financial media relations services set out in
section 2.1 (the "Services").
1.2 EIS' obligation to perform the Services and the Company's obligation to pay
the remuneration to EIS will commence on October 1, 1999 (the "Effective Date")
and will continue for a term of six months from the Effective Date unless
earlier terminated in accordance with Article 5 (the "Term").
<PAGE>
2
1.3 The parties may renew this Agreement at the end of the Term by agreement in
writing for any further term to which the parties may agree.
2. SERVICES
2.1 Subject to the direction of the Company, EIS will use its best efforts to
promote the Business and the Company in Europe and, without limitation, will
provide investor relations and financial media relations services to the Company
with the general objective of expanding the interest and awareness of existing
and potential investors and the brokerage and financial community in Europe
(collectively, the "Target Audience") regarding the Business and the Company's
activities by:
(a) identifying and maintaining a database of the Target Audience and
fostering an interest in the Company by direct liaison with
institutional investment professionals, including fund managers,
retail and private client stockbrokers, investment bankers, analysts,
and high net worth individuals. The opportunity exists for EIS to
produce a report identifying current shareholders of the Company in
the Company's sectoral peer group, using EIS's online CDA database at
a reduced cost;
(b) identifying current major shareholders of the Company, analysing their
current attitudes to the Company, and reporting to the Company on
those matters;
(c) ensuring on-going contact with the Target Audience; updating them with
regular information by telephone, fax, and mail, including timely
distribution of quarterly financial statements, annual reports, press
releases, brokers' reports, and other relevant corporate information.
Before any such distribution, EIS will obtain the Company's written
approval of all written material to be distributed;
(d) providing information to and raising the Company's profile with the
financial media, broadsheets, and news agencies; co-ordinating
coverage, including participation in regional/sectoral survey
features; ensuring distribution of press releases and relevant
information to news agencies such as Press Association News, Dow
Jones, Reuters, Bloomberg, where appropriate; assessing possibilities
for stories in the broadcast media, i.e., business radio and
television;
(e) encouraging industry and financial analysts to follow the Company and
encouraging the production of brokers' reports;
(f) advising on corporate matters including presentation of corporate
strategy, possibilities for share buy-backs, acquisitions, joint
ventures, etc.;
(g) advising on the opportunities and methods of available financing and
the possibilities and benefits of listing on other exchanges; and
<PAGE>
3
(h) providinga representative office in London, including use of boardroom
facilities and general administrative support where necessary.
2.2 EIS will perform the Services in a diligent, professional, and efficient
manner to preserve and enhance the Company's corporate image and will faithfully
devote the time, effort and ability necessary to perform the Services.
2.3 EIS will perform the Services to comply with all applicable securities
legislation, regulation, rules, and policies in Canada, the United States, and
Europe.
3. CONSIDERATION
3.1 The Company will pay to EIS a fee of US$5,000 per month, payable on the
first business day of each month during the Term, which fee is intended to cover
day-to-day time and administrative costs incurred by EIS in the performance of
the Services.
3.2 The Company will also pay separately or reimburse EIS in respect of the
following extraordinary out-of-pocket expenses:
(a) European roadshows will be charged at the discounted retainer rate of
US$4,000 per city per business day (not including Saturdays, Sundays,
and statutory holidays) (this rate is guaranteed until December 31,
1999) and in accordance with the sample form of agreement attached as
Schedule "A";
(b) providing promotional literature, arranging mailshots, entertaining
clients on the Company's behalf, and other travel/subsistence
expenses, with the Company's prior consent being required for all
expenses over (pound)200;
(c) all other investigatory costs and expenses, including the engagement
of third-party consultants, undertaken only with the Company's prior
consent and carried out in good faith in the performance of this
Agreement; and
(d) all bought-in items will be charged to the Company at cost plus a 15%
handling charge, subject to the Company's prior consent.
In the case of the expense described in subsection (a) above, the Company and
EIS will sign an agreement in the form attached as Schedule "A" not less than
five business days before EIS is to embark on a European roadshow. The first
European roadshow will commence on October 25, 1999. In the case of the expenses
described in subsections (b) to (d) above, the Company will approve those
expenses in advance and will pay those expenses against invoices and receipts
delivered to the Company.
<PAGE>
4
4. RELATIONSHIP OF THE PARTIES
4.1 The services to be performed by EIS are personal in character and EIS cannot
assign either this Agreement or any rights or benefits arising under it. In
performing the Services, EIS will operate as and will have the status of
independent contractor and will not act or hold itself out as or be an agent of
the Company.
5. TERMINATION
5.1 Either party may terminate the Services at any time on 30 days' prior
written notice to the other party.
5.2 On termination of the Services for any reason, EIS will deliver to the
Company all documents pertaining to the Company or its Business, including
without limitation all correspondence, reports, contracts, data bases related to
the Company, and anything included in the definition of "Work Product" set out
in section 6.1.
6. CONFIDENTIALITY
6.1 All reports, documents, customer lists, databases, concepts, and products,
together with any business contracts or any business opportunities prepared,
produced, developed, or acquired by or delivered to EIS, directly or indirectly,
in connection with EIS performing the Services (collectively, the "Work
Product") will belong exclusively to the Company or any of their affiliates, as
appropriate (collectively, the "Ableauctions Companies"), which will be entitled
to all rights, interest, profits, or benefits in respect thereof.
6.2 No copies, summaries, or other reproductions of any Work Product will be
made by EIS without the express written permission of the Company, provided that
EIS is permitted to maintain one copy of the Work Product for its own use during
the Term.
6.3 EIS and any of its shareholders, directors, officers, agents, employees, or
consultants (collectively, the "EIS Associates") will not disclose any
information, documents, or Work Product which is developed by EIS or to which
EIS may have access by virtue of its performance of the Services to any person
not expressly authorized in writing by the Company for that purpose. EIS will
comply with any directions that the Company may make to ensure the safeguarding
or confidentiality of all such information, documents, and Work Product.
6.4 EIS may not disseminate nor distribute to the media, members of the public,
shareholders of the Company, prospective investors, members of the investment or
brokerage community, securities regulators, or any other third party any of the
Work Product or any other written or printed information about the Ableauctions
Companies or their business, without the Company first reviewing and approving
the Work Product or other information before dissemination or distribution.
<PAGE>
5
6.5. EIS and the EIS Associates will not, either directly or indirectly as a
shareholder, director, officer, employee, agent, consultant, or associate of any
person, make any use of any confidential information for the purpose of
soliciting the business of any customer or former customer of the Ableauctions
Companies, or for the purpose of appropriating any business opportunity
whatsoever available to, or which might be available to the Ableauctions
Companies.
6.6 EIS acknowledges and agrees that the confidential information is and will be
of a special and unique character, the loss of which cannot be reasonably,
readily, or accurately calculated in monetary terms. Accordingly, the
Ableauctions Companies will be entitled to injunctive or other equitable relief
to prevent or cure any breach or threatened breach of this Agreement by EIS or
any of the EIS Associates. Resort to such equitable relief, however, will not be
construed to be a waiver of any other right or remedy which the Ableauctions
Companies may have for damages or otherwise.
6.7 EIS agrees that during the Term and for a period of two years following the
termination of this Agreement, neither it nor any of the EIS Associates will:
(a) encourage or entice any persons who are employees or consultants of
the Ableauctions Companies at any time during the Term or who were
employees or consultants of the Company at any time within the 30 days
preceding the date of this Agreement to seek employment or service
with persons other than the Ableauctions Companies; or
(b) offer employment or service contracts directly or indirectly to any
persons who are employees or consultants of the Ableauctions Companies
at any time during the Term or who were employees or consultants of
the Ableauctions Companies at any time within the 30 days preceding
the date of this Agreement.
6.8 If EIS or any of the EIS Associates or any other person who is not at arm's
length from EIS at any time contravenes the provisions of this Article 6, and on
every occasion that such contravention occurs, EIS will indemnify the
Ableauctions Companies and will forthwith pay to the Ableauctions Companies as
liquidated damages the sum of $10,000 together with costs on the highest scale
of costs permitted by the Rules of Court for all proceedings undertaken by the
Ableauctions Companies or any of them to obtain or to attempt to obtain an
injunction to prohibit the divulgence, disclosure, reproduction, or use of the
confidential information by any of the persons herein before described, this sum
being, so nearly as the participants can determine, a reasonable pre-estimate of
the Ableauctions Companies' minimum damages and not a penalty. If one of the
events described in this paragraph occurs and if any of the Ableauctions
Companies makes written demand for the payment of such liquidated damages,
simple interest on this sum calculated at the rate of 18% per annum will accrue
from the date of demand to the actual date of payment.
<PAGE>
6
6.9 On termination of this Agreement, EIS will furnish to the Company a
certificate in a form approved by the Company's solicitors which declares that
neither EIS nor any of the EIS Associates has:
(a) divulged, disclosed, distributed, or otherwise made available to any
person any confidential information; or
(b) reproduced or made any use whatsoever of any confidential information;
or
(c) acted contrary to the provision of the above, except with the prior
written consent of the Company.
The remedies afforded to the Ableauctions Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to them at law or in
equity, including the remedy of injunctive relief.
7. NOTICES
7.1 Any notices to be given by either party to the other will be sufficiently
given if transmitted by facsimile or electronic mail or delivered by courier to
the parties at their respective addresses shown on the first page of this
Agreement, or to any other addresses as the parties may notify to the other from
time to time in writing. This notice will be deemed to have been given the next
business day, if transmitted by facsimile or electronic mail, or within two
business days from the date of pick-up, if delivered by courier.
8. GENERAL PROVISIONS
8.1 Each party will sign and deliver all other documents and do all other things
that the other party may reasonably request to carry out the terms, conditions,
and intent of this Agreement.
8.2 Time is of the essence of this Agreement.
8.3 The invalidity or unenforceability of any particular provision of this
Agreement will not affect the other provisions and this Agreement will be
construed as if the invalid or unenforceable provision were omitted.
8.4 The parties may sign this Agreement in counterparts, which parts will be
read together and construed as if all the signing parties had signed one copy of
this Agreement.
8.5 This Agreement will enure to the benefit of and be binding on the parties to
this Agreement and their respective successors and permitted assigns.
<PAGE>
7
8.6 This Agreement will be governed by and construed in accordance with the laws
of the United Kingdom or Florida as applicable.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
ableauctions.com, inc.
/s/ Abdul Ladha
- --------------------------------
Authorized Signatory
EUROPEAN INVESTOR SERVICES LTD.
/s/ Miles Lewis
- --------------------------------
Authorized Signatory
<PAGE>
SCHEDULE "A"
CLIENT ROADSHOW AGREEMENT
This Agreement is made on the 11th day of October, 1999 between EUROPEAN
INVESTOR SERVICES LTD. (hereinafter known as 'EIS'), and ABLEAUCTIONS.COM, INC.
situated at 3112 Boundary Road, Burnaby, BC, V5M 4A2 (hereinafter known as the
'Company').
The Company has requested EIS to organise a European Roadshow comprised of
presentations over five days in London, Amsterdam, Brussels, Paris, Frankfurt,
Zurich, Geneva, and Vienna commencing 25th October 1999, and provide the
following:
o Writing and distributing roadshow invitations to the target audience of
institutional investment professionals and private investors within the
chosen European cities.
o Booking and arranging facilities at each of the venues, including logistics
of flights, accommodation, etc., where appropriate.
o Following up with the target audience by telephone/fax and providing the
Company with a list of attendees prior to each roadshow day.
o Advising upon the appropriate presentation material and briefing the
Company on the type and expectations of the audience.
o Providing one member of EIS staff to co-ordinate details on the day to
ensure the smooth running of each presentation.
o Supplying attendee details for each of the presentations the week following
completion of the roadshow.
EIS will be remunerated as follows:-
(i) A Fee of $4,000 (four thousand dollars) per day for all cities, except
Vienna which will be charged at $2,000 (two thousand dollars) to cover day to
day time and administrative costs incurred in the performance of the services.
Extraordinary items such out of pocket expenses incurred on the Company's behalf
will be charged at cost plus a 15% handling charge. As agreed the total fee
applicable will be paid on receipt of the booking confirmation, subject to
refund for any presentation cancelled for reasons beyond the Company's control.
On completion of the roadshow the remaining costs incurred will be settled in
full within a two week period.
Signed this 11th day of October 1999 by the parties to this Agreement as,
ABLEAUCTIONS.COM, INC. /s/ Abdul Ladha, Director
EUROPEAN INVESTOR SERVICES LTD. /s/ Miler Lewis, Director
EXHIBIT 10.14
-2-
THIS INDENTURE made effective as of the first day of September, 1999.
BETWEEN:
Derango Resources Inc.
(herein called the "Landlord")
OF THE FIRST PART
AND:
Ableauctions.com Inc.
(herein called the "Tenant")
OF THE SECOND PART
ARTICLE 1 - DEFINITIONS
The Landlord and the Tenant hereby agree that in this Lease the following
words or phrases shall, unless there is something in the context inconsistent
therewith, have the meanings hereinafter set out:
1.1 "Actual Costs" shall have the meaning set out in paragraph 5.2;
1.2 "Additional Rent" shall mean the Actual Costs, the Estimated Costs, the
Building Proportionate Share of the Building Operating Expenses, the Project
Proportionate Share of the Project Operating Expenses, the Project Proportionate
Share of the Taxes and together with all other sums which may be payable to the
Landlord hereunder or reimbursable to the Landlord hereunder, including, without
limitation, all interest and penalties payable hereunder, whether or not such
sums are referred to as Rent or Additional Rent or otherwise, but excluding the
Annual Basic Rent;
1.3 "Annual Basic Rent" shall mean the amount specified as such in paragraph
4.1(a) hereof;
1.4 "Building" shall mean the building and improvements erected on the Land and
shown outlined in red on the plan attached hereto as Schedule "A" together with
any additions, alterations and replacements thereto;
1.5 "Building Operating Expenses" shall mean and include all expenses
ordinarily chargeable against income in connection with the operation and
maintenance of all or any portion of the Building and without restricting the
generality of the foregoing shall include:
(a) all charges for water, gas, electric light and power and all other
utilities and services used on or in respect of the Building or any
part thereof and all fittings, machines, apparatus, meters and any
other thing leased in respect thereof, and all work and
<PAGE>
-3-
services performed by any corporation, authority or commission in
connection with such utilities, less any Utility Costs recovered from
the Tenant and other tenants of the Building pursuant to paragraphs
5.1 or 5.2 hereof;
(b) all salaries and wages (including employee benefits and worker's
compensation assessments) and the costs of independent service
contracts incurred in the maintenance and operation of all or any
portion of the Building;
(c) all consultant's fees as required from time to time in respect of all
or any portion of the Building;
(d) all costs of building and cleaning supplies, employee uniforms and dry
cleaning in connection with the Building;
(e) all costs of repairs and replacement to and maintenance of the
operation of all or any portion of the Building, and including without
limiting the generality of the foregoing the repair and replacement of
the Roof;
(f) all costs of capital improvements required pursuant to any
governmental law or regulation which were not required at the time of
construction of the Building and capital improvements which
substantially reduce projected Building Operating Expenses amortized
over their useful life as determined by the Landlord in accordance
with generally accepted accounting principles, and the cost of
purchasing extended warranties on capital equipment and machinery;
(g) management and administration charges of the Landlord in the sum of
five (5%) percent of the total cost under this paragraph 1.5 before
such charges;
(h) depreciation, computed by the Landlord in accordance with generally
accepted accounting principles, of fixtures and equipment comprising
or located on the Building which by their nature require periodic
replacement or substantial replacement; and
(i) all payments whatsoever to railway companies or other authorities
operating any railway spur lines servicing the Building which are
required to be made whether in respect to the initial construction of
the said railway spur line or in respect of any and all payments and
compensation including, without limitation, any prepayments for the
use of the railway facilities and other materials or otherwise and the
costs of repairs and replacements of the rail lines, track bed, ties
and any other apparatus;
but shall not include interest on the Landlord's debt, capital retirement of the
Landlord's debt, income or capital tax of the Landlord or costs incurred in
leasing or procuring new tenants;
1.6 "Building Proportionate Share" shall mean 100% of the total;
1.7 "Commencement Date" shall mean the first day of September, 1999
<PAGE>
-4-
1.8 "Common Areas and Facilities" shall mean those parts of the Land and the
Building including, without limitation, the Roof, exterior walls, exterior and
interior structural elements and bearing walls in the Building, electrical,
plumbing, drainage, mechanical and other installations or services as well as
the structures housing the same, fire prevention and communication systems,
entrances to and exits from the Building and the Land, truck ways, loading docks
or areas, storage rooms, delivery passages, railway spur lines servicing the
Building, if any, freight elevators, if any, pedestrian sidewalks, parking
areas, driveways, ramps, landscaped and planted areas, retaining walls,
stairways, washrooms (other than washrooms within the Premises or other premises
leased to tenants), and all fixtures, general signs, lighting facilities,
improvements, facilities, equipment and installations thereupon or therein which
the Landlord provides or designates from time to time for the general use by or
for the benefit of the Tenant, its officers, agents, employees, customers and
other invitees in common with other tenants of the Landlord and other persons
permitted by the Landlord, excluding all of the Rentable Area of the Building
whether or not leased to tenants;
1.9 "Estimated Costs" shall have the meaning set out in paragraph 5.2;
1.10 "Expiry Date" shall mean twelve o'clock noon on the 31st day of August,
2004;
1.11 "Landlord" shall mean only the owner or the mortgagee in possession for the
time being of the Premises;
1.12 "Landlord's Mortgagees" shall mean the mortgagees, debenture holders and
trustees on behalf of a mortgagee holding Mortgages;
1.13 "Land" shall mean all and singular that certain parcel or tract of land in
the city of Burnaby, Province of British Columbia more particularly described
as:
3112 Boundary Road, Burnaby, B.C.
1.14 "Lease" shall mean this Indenture together with all schedules attached
hereto;
1.15 "Lease Year" shall mean a twelve (12) month period commencing on the first
day of September in any calendar year and ending on the last day of August in
that calendar year, provided that the first Lease Year shall commence on the
Commencement Date and end on the last day of August next following and the last
Lease Year shall commence on the first day of September of the calendar year
during which the Term expires and end upon the Expiry Date;
1.16 "Mortgages" shall have the meaning set out in paragraph 5.30;
1.17 "Premises" shall mean the portion of the Building shown outlined in red
colour on the plan attached hereto as Schedule "B";
1.18 "Project Operating Expenses" shall mean and include all expenses ordinarily
chargeable against income in connection with the operation and maintenance of
all or any portion of the Land (excluding the Building Operating Expenses) and
without restricting the generality of
<PAGE>
-5-
the foregoing shall include:
(a) the total cost and expense to the Landlord of insuring the Land, the
Building and all other buildings and improvements on the Land;
(b) all costs of landscape repair, maintenance and replacement, snow
removal, traffic control, security and pest control;
(c) all costs of the maintenance and repair of the Land including, repair,
maintenance and replacement of paving;
(d) all costs and expenses of operating and maintaining a management
office on the Land; and
(e) management and administration charges of the Landlord in the sum of
five (5%) percent of the total cost under this paragraph 1.18 before
such charges;
but shall not include interest on the Landlord's debt, capital retirement of the
Landlord's debt, income or capital tax of the Landlord or costs incurred in
leasing or procuring new tenants;
1.19 "Project Proportionate Share" shall mean 100% of the total;
1.20 "Relative Portion" shall mean, with respect to any amount payable under
this Lease, that fraction which has as its denominator the period of time
expressed in days in respect of which an amount payable hereunder is calculated
and which has as its numerator the number of days within the same calculation
period, but which fall within the Term or any renewal period;
1.21 "Rent" shall mean the Annual Basic Rent and the Additional Rent;
1.22 "Rentable Area" shall mean the area expressed in square feet or its metric
equivalent of space set aside by the Landlord for leasing to tenants of the
Building, measured from the centre line of all walls separating the premises
from adjacent premises and from the outer surface of other outer building walls,
adjoining corridors and other permanent partitions; provided that if any part of
the walls of the premises is recessed from the lines of the Building or lines of
the wall, as the case may be, in which the premises are situate, the last
mentioned lines shall be deemed to be the lines of the outside walls of the
premises;
1.23 "Roof" shall mean the roof of the Building including the roof membrane,
insulation and deck and all structural components of the roof;
1.24 "Signs" shall have the meaning set out in paragraph 5.12;
1.25 "Taxes" shall mean the aggregate of all taxes, local improvements or
similar rates, duties, assessments and/or charges, municipal realty taxes, water
taxes, school taxes, or any other taxes, rates, duties, assessments both general
or special or any rate, duty, assessment, charge or tax levied, charged or
assessed in lieu thereof now or at any time hereafter levied or imposed upon or
<PAGE>
-6-
in respect of the Land, the Building and all other buildings and improvements on
the Land, and any parts thereof, by any governmental authority whether federal,
provincial, municipal or otherwise, together with all costs and expenses
(including legal and other professional fees and interest and penalties on
deferred payments) incurred by the Landlord in good faith contesting or
appealing any such taxes, levies, rates, assessments or charges levied in lieu
thereof, but excluding the Tenant's Taxes;
1.26 "Tenant's Taxes" shall mean all taxes, license and permit fees, rates,
duties and assessments imposed or levied by any lawful authority covering any
period during the Term and any renewal thereof and relating to or in respect of
the business of the Tenant or relating to or in respect of personal property and
all business and trade fixtures, machinery and equipment, cabinet work,
furniture and movable partitions owned or installed by the Tenant at the expense
of the Tenant or being the property of the Tenant, or relating to or in respect
of improvements to the Premises built, made or installed by the Tenant, on
behalf of the Tenant or at the Tenant's request whether any such taxes are
payable by law by the Tenant or by the Landlord and whether such taxes are
included by the taxing authority in the taxes, licenses, rates, duties and
assessments imposed or levied on or with respect to the Premises;
1.27 "Term" shall mean the period from September 1, 1999 to twelve o'clock noon
on August 31st, 2004;
1.28 "Utility Costs" shall have the meaning set out in paragraph 5.1; and
1.29 "Utility Services" shall have the meaning set out in paragraph 2.1.
ARTICLE 2 - THE DEMISE
WITNESSES that in consideration of the rents, covenants, conditions and
agreements hereinafter respectively reserved and contained, the Landlord hereby
demises and leases to the Tenant the Premises, subject to the easements and
rights-of-way, if any, now or hereafter registered against the title to the Land
and excepting and reserving to the Landlord, its officers, servants, agents and
nominees, the following:
2.1 all the sewer mains, water mains, pipes and hydrants, street lighting
systems, gas mains, culverts, drains, telephone and telegraph poles and wires,
electrical distribution lines, and all other utility systems and works, together
with all the appurtenances thereto belonging whether installed prior to the date
of this Lease or thereafter and whether installed by the Landlord or any other
person, except the Tenant, (herein collectively called the "Utility Services");
and
2.2 the right at all reasonable times to enter upon the Premises for the
purpose of examining, constructing, repairing, replacing with the same or
different size and quality of materials, enlarging or altering the Utility
Services, provided however that in carrying out any such operations the Landlord
shall not unreasonably disturb the Tenant's business and shall make good all
damage to the Premises or any improvements thereon caused by such operations.
<PAGE>
-7-
ARTICLE 3 - TERM
To have and to hold the Premises, subject to the exceptions and
reservations aforesaid, unto the Tenant for the Term from and including the
Commencement Date until the Expiry Date.
ARTICLE 4 - RENT
4.1 Annual Basic Rent and Additional Rent
Yielding and paying therefor during the Term the following Rent payable to
the Landlord in care of Derango Resourses Inc. at 3112 Boundary Road, Burnaby,
B.C. or at such other place as the Landlord may from time to time designate in
writing, in the following instalments:
(a) rent of Twenty Seven Thousand Nine Hundred and Ninety One dollars
($27,991.12) per annum (herein called the "Annual Basic Rent") payable
in advance in equal consecutive monthly instalments of two thousand
three hundred and thirty two Dollars ($2332.60) each on the first day
of each and every month in each and every year of the Term commencing
on the first day of September, 1999 and continuing until and including
the first day of the month immediately preceding the Expiry Date; and
(b) the Additional Rent payable in accordance with the provisions of this
Lease.
4.2 No Abatement
The Tenant covenants and agrees with the Landlord that all of the Rent
payable under this Lease shall be paid by the Tenant to the Landlord without
demand, deduction, set-off or abatement whatsoever, except as specifically
provided in subparagraph 7.4(a). The Tenant covenants and agrees that the
Landlord may at its option apply all sums received from or due to the Tenant
against any amounts due and payable hereunder in such manner as the Landlord may
see fit, regardless of any designation or instructions by the Tenant to the
contrary.
4.3 Post-Dated Cheques or Pre-Authorized Withdrawal
The Tenant covenants and agrees to provide the Landlord with a series of
twelve (12) post-dated cheques payable at par on the Commencement Date and upon
each yearly anniversary thereafter during the Term and any renewal thereof. Each
cheque shall be in the amount of the monthly instalment of the Annual Basic Rent
provided for herein and, if required by the Landlord, shall also include a
monthly amount estimated by the Landlord from time to time in respect of the
whole or any portion of the Additional Rent as the Landlord may require.
Provided however, if the Commencement Date is not the first day of a month then
the first and last cheques shall be in the amount of the Relative Portion of the
monthly instalment of the Annual Basic Rent and the Additional Rent required by
the Landlord. In the alternative, at the Tenant's option, it shall duly execute
and deliver to the Landlord, the Landlord's standard pre-authorized withdrawal
form directed to a Canadian chartered bank or other financial institution
acceptable to the Landlord and requiring such bank or other financial
institution to deduct from the Tenant's account with such bank or
<PAGE>
-8-
financial institution and to pay to the Landlord each month during the Term and
any renewal thereof an amount equal to the monthly instalments of the Annual
Basic Rent provided for herein, and, if required by the Landlord, such payment
shall also include a monthly amount estimated by the Landlord from time to time
in respect of the whole or any portion of the Additional Rent as the Landlord
may require. Provided however, if the Commencement Date is not the first day of
a month then the first and last payments shall be in the amount of the Relative
Portion of the monthly instalment of the Annual Basic Rent and the Additional
Rent required by the Landlord. The Tenant shall forthwith upon request by the
Landlord execute and deliver to the Landlord such authorizations and documents
as may be required by the Landlord from time to time in order to enable the
Landlord to obtain all such payments. The failure of the Tenant to comply in any
way with the provisions of this paragraph 4.3 shall be deemed to be a default
under this Lease and shall entitle the Landlord to exercise any and all remedies
available to the Landlord under this Lease.
4.4 Adjustment
If the Term shall commence or cease on a day other than the commencement of
or the end of any period of time in respect of which any amount payable
hereunder is calculated, then the Tenant shall pay to the Landlord its Relative
Portion of such amount for such period of time.
ARTICLE 5 - TENANT'S COVENANTS
The Tenant hereby covenants and agrees with the Landlord as follows:
5.1 To Pay
The Tenant shall pay the Rent, and shall pay when due all charges for
water, gas, telephone, electric light and power and all other utilities and
services used on or in respect of the Premises or any part thereof and shall pay
for all fittings, machines, apparatus, meters and any other thing leased in
respect thereof, and for all work and services performed by any corporation,
authority or commission in connection with such utilities in respect of the
Premises (herein collectively called the "Utility Costs"). The Tenant shall
promptly pay the Tenant's Taxes as they become due and the Tenant shall pay to
the Landlord the Project Proportionate Share of the Project Operating Expenses
and the Building Proportionate Shares of the Building Operating Expenses,
forthwith upon demand therefor during the Term and any renewal thereof. The
Tenant shall provide to the Landlord, when and if requested by the Landlord, the
receipt for each payment made by the Tenant in respect of the Tenant's Taxes and
all other payments required to be made by the Tenant hereunder. The Tenant shall
install or cause to be installed, at the expense of the Tenant, separate meters
for measuring the consumption of all utilities in respect of the Premises within
a reasonable time after request by the Landlord.
5.2 Landlord May Estimate Costs
The Tenant covenants and agrees that the Landlord shall have the right to
make reasonable forward estimates for each Lease Year of the amount of any or
all of the Utility Costs for which a separate billing in respect of the Premises
is not made by the corporation, authority or commission supplying any of the
Utility Services, but which the Landlord, acting reasonably,
<PAGE>
-9-
allocates to the Premises (herein collectively called the "Estimated Costs").
The Tenant covenants and agrees to pay to the Landlord, within fifteen (15) days
after receipt by the Tenant of a written request from the Landlord, the whole or
any portion of the Estimated Costs as determined by the Landlord in order to
enable the Landlord to pay to the appropriate person or authority all or any
portion of the actual amount of the Utility Costs which are not separately
metered to the Premises but which the Landlord, acting reasonably, allocates to
the Premises (herein collectively called the "Actual Costs") before the date on
which such Actual Costs are due, without the Landlord incurring any interest or
penalty. Notwithstanding the foregoing, the Landlord shall have the right to
require the Tenant to pay to the Landlord an amount equal to one-third (1/3) of
the Estimated Costs for each Lease Year in each month during each Lease Year on
the first day of each month. In the event that the Landlord determines, after
the end of a Lease Year, that the Actual Costs for the preceding Lease Year
exceed the Estimated Costs paid by the Tenant for that Lease Year, then the
Tenant shall within fifteen (15) days after receipt by the Tenant of a written
request from the Landlord, pay to the Landlord the amount by which the Actual
Costs for such Lease Year exceed the Estimated Costs paid by the Tenant for such
Lease Year. In the event that the Landlord determines, after the end of a Lease
Year, that the Actual Costs for the preceding Lease Year are less than the
Estimated Costs paid by the Tenant for that Lease Year, then the Landlord shall
credit to the Tenant towards the Estimated Costs for the next following Lease
Year, the amount by which the Estimated Costs for such Lease Year exceed the
Actual Costs for such Lease Year. A certificate of an officer of the Landlord of
the amount of the Actual Costs for any Lease Year shall be final and binding
upon the Tenant and the Landlord.
5.3 Taxes
(a) The Tenant will, as additional rent, in each and every year during the
Term, pay to the Landlord the Project Proportionate Share of the
Taxes.
(b) The Landlord agrees to provide the Tenant upon request with copies of
all assessment notices within a reasonable time after receipt and the
Landlord further agrees to provide the Tenant upon request with proof
of payment of the Taxes, provided that the Tenant has paid to the
Landlord the Project Proportionate Share of the Taxes.
(c) Prior the commencement of each calendar year during the Term or as
soon after the Commencement Date as is reasonably possible, the
Landlord shall furnish to the Tenant an estimate of the amount of the
Taxes payable by the Tenant under paragraph 5.3(a), and the Tenant
shall pay to the Landlord on the first day of each of the first six
(6) months of such calendar year during the Term the amount calculated
by the Landlord to be one-third (1/3) of such estimated amount,
provided that if on the first day of any such month the Landlord has
not furnished to the Tenant the estimate hereinbefore provided for,
the Tenant shall pay to the Landlord the amount due as aforesaid in
respect to such month as soon as such estimate is furnished by the
Landlord to the Tenant.
(d) After all bills for the Taxes for each calendar year have been
received, the Tenant agrees to pay to the Landlord within fourteen
(14) days after written request by the Landlord, the Project
Proportionate Share of the amount of such Taxes, subject to
<PAGE>
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credit being given for the monthly payments made under the provisions
of paragraph 5.3(c) and subject to making due adjustment when the Term
subsists during only a part of such calendar year. The Landlord shall
refund to the Tenant or give a credit to the Tenant for any amount of
any overpayment made by the Tenant occasioned by the Taxes for such
calendar year being less than the estimate of the Taxes for such
calendar year provided by the Landlord under paragraph 5.3(c). The
certificate of a chartered accountant appointed by the Landlord shall,
in the event of dispute, be conclusive and binding upon the Landlord
and the Tenant as to any amounts payable under this paragraph 5.3, and
the cost of obtaining such certificate shall be borne by the Tenant.
(e) If, in the sole opinion and discretion of the Landlord, the Taxes or
any part thereof is not fair and equitable, the Landlord may take all
steps necessary to contest or appeal the validity of the Taxes or any
part thereof, and the Tenant shall not postpone or omit payment of the
Taxes or any part thereof which is the responsibility of the Tenant
under the terms of this Lease, whether because of any such appeal or
contest or otherwise, but shall pay the same according to the assessed
charge thereof, and the Tenant agrees that it will not initiate or be
a party with anyone but the Landlord to any proceeding or appeal to
contest the validity of the Taxes or any part thereof without the
express written consent of the Landlord.
5.4 Operating Expenses
Prior to the commencement of each Lease Year (in this paragraph called a
"Fiscal Year"), or as soon thereafter as is reasonably possible, the Landlord
shall furnish to the Tenant an estimate of the Project Operating Expenses and
the Building Operating Expenses for such Fiscal Year and the Tenant shall pay to
the Landlord on the first day of each month of such Fiscal Year during the Term
and any renewal the amount, as calculated by the Landlord which is one-third
(1/3) of the Project Proportionate Share of such Project Operating Expenses and
one-third (1/3) of the Building Proportionate Share of such Building Operating
Expenses, subject to making due adjustment where the Term did not subsist during
the whole of such Fiscal Year. In the event that the actual Project Operating
Expenses in any Fiscal Year exceed the estimate of the Project Operating
Expenses made by the Landlord for such Fiscal Year, the Tenant agrees to pay
within fourteen (14) days of written demand the Project Proportionate Share of
such excess. In the event that the actual Building Operating Expenses in any
Fiscal Year exceed the estimate of the Building Operating Expenses made by the
Landlord for such Fiscal Year, the Tenant also agrees to pay within fourteen
(14) days of written demand the Building Proportionate Share of such excess. The
Landlord shall give credit to the Tenant for the amount of any overpayment made
by the Tenant occasioned by the actual Project Operating Expenses for such
Fiscal Year being less than the estimate of the Project Operating Expenses for
such Fiscal Year or by the actual Building Operating Expenses for such Fiscal
Year being less than the estimate of the Building Operating Expenses for such
Fiscal Year. Upon the expiry of the Term and the fulfilment by the Tenant of all
of its obligations under this Lease any excess shall be refunded to the Tenant.
The certificate of an officer of the Landlord shall, in the event of dispute, be
conclusive and binding upon the Landlord and the Tenant as to any amounts
payable under this paragraph 5.4. This paragraph 5.4 is subject to making due
adjustment where the Term did not subsist during the whole of such Fiscal Year.
The Landlord
<PAGE>
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shall provide to the Tenant an annual statement of the Project Operating
Expenses and the Building Operating Expenses. If the Tenant does not give to the
Landlord written notice of objection to such statement within sixty (60) days
from the date of receipt of such statement of the Project Operating Expenses and
the Building Operating Expenses, then the Tenant shall be conclusively deemed to
have accepted such statement and shall have no further right to dispute the
Project Operating Expenses or the Building Operating Expenses covered by such
statement, or any part thereof. If, at any time during any Fiscal Year, less
than ninety-five (95%) percent of the Rentable Area of the Building is either
occupied by tenants or unoccupied but having a portion of the Building Operating
Expenses paid in respect of it and if the Tenant is in occupation of the
Premises the Landlord shall have the right to reasonably allocate the amount of
any cost included in the Building Operating Expenses that is determined on an
incremental basis (for example, on a per square foot or a per floor basis) and
that is related to tenant occupancy amongst the tenants in occupation so that
the Landlord will fully recover its expenditure therefor, provided, however,
that the Tenant shall never be required to pay more than it would have paid if
all of the Rentable Area of the Building were fully occupied.
5.5 Insurance
(a) The Tenant shall, at its sole cost and expense during the Term and
during such other period of time that the Tenant occupies the
Premises, take out and maintain in full force and effect, the
following:
(i) "all risks" insurance upon all merchandise, stock-in-trade,
furniture, fixtures, equipment, leasehold improvements and
other property of every kind and description located at the
Premises, owned by the Tenant or for which the Tenant is
responsible or legally liable, in an amount at least equal
to the full insurable value thereof, calculated on a
replacement cost basis. In the event that a dispute arises
as to that sum which represents full replacement cost, the
decision of the Landlord's insurance advisers, acting
reasonably, shall be conclusive;
(ii) "broad form" boiler and machinery insurance upon any
boilers, pressure vessels or mechanical equipment located at
the Premises in such amount as the Landlord may reasonably
require from time to time;
(iii) comprehensive bodily injury and property damage liability
insurance applying to the operations of the Tenant carried
on from the Premises and which shall include, without
limitation, personal injury liability, product liability,
contractual liability, non-owned automobile liability,
protective liability and tenant's legal liability with
respect to the occupancy by the Tenant of the Premises; and
such insurance shall be written for an amount of not less
than two million ($2,000,000.00) dollars per occurrence, or
such higher amount as the Landlord may from time to time
reasonably require; and
(iv) any other form or forms of insurance as the Landlord or the
Landlord's Mortgagees may reasonably require from time to
time in amounts and for perils against which a prudent
tenant would protect itself in similar
<PAGE>
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circumstances.
(b) All policies of insurance referred to in this paragraph 5.5 shall
include the following provisions:
(i) the policies shall not be affected or invalidated by any
act, omission or negligence of any person which is not
within the knowledge or control of the insured thereunder;
(ii) all property damage policies written on behalf of the Tenant
shall contain a waiver of any subrogation rights which the
Tenant's insurer(s) may have against the Landlord and
against those for whom the Landlord is, in law, responsible,
whether any insured loss or damage is caused by the act,
omission or negligence of the Landlord or by those for whose
acts the Landlord is, in law, responsible or otherwise;
(iii) all policies of liability insurance shall name the Landlord
and any persons or corporations designated by the Landlord,
as additional insureds and shall provide that each person,
firm or corporation insured under such policies shall be
insured in the same manner and to the same extent as if
separate policies had been issued to each; and
(iv) all policies shall contain an undertaking by the insurers to
notify the Landlord and the Landlord's Mortgagees, in
writing, not less than thirty (30) days prior to any
cancellation or other termination thereof, or any change
which restricts or reduces the coverage afforded thereby.
(c) All policies of insurance referred to in this paragraph 5.5 shall be
underwritten by insurers acceptable to the Landlord and on policy
forms satisfactory to the Landlord. The Tenant agrees that
certificates of insurance or, if required by the Landlord or any of
the Landlord's Mortgagees, certified copies of each policy, will be
delivered to the Landlord as soon as practicable after the placing
thereof. The Tenant shall, when required by the Landlord, forthwith
provide to the Landlord evidence that all premiums for all insurance
policies have been paid.
(d) For good and valuable consideration, the Tenant does hereby release
and relieve the Landlord and those persons for whom the Landlord is,
in law, responsible, from liability and responsibility for, and waives
its entire claim for recovery for any loss or damage whatsoever
arising out of or incident to the occurrence of any of the perils
covered by, or which would be covered by, the insurance policies which
the Tenant is obligated to obtain and maintain in force under the
terms of this Lease, whether any such loss or damage is caused by the
act, omission or negligence of the Landlord or by those persons for
whom the Landlord is, in law, responsible or otherwise.
(e) The Tenant shall not do or permit anything to be done upon the Land,
the Building or the Premises whereby any policy of insurance against
loss or damage to the Land,
<PAGE>
-13-
the Building or the Premises or against legal liability for damage to
persons or property caused by the ownership, maintenance, use or
occupancy of the Land, the Building or the Premises, or by reason of
the conduct of any business carried on thereon, may be invalidated,
and, for such purpose, upon receipt of notice in writing from any
insurer of the Land, the Building or the Premises requiring the
execution of works or a discontinuance of any operations in order to
correct such situation, the Tenant shall comply therewith. The Tenant
shall also comply with any and all regulations or orders of the
Insurer's Advisory Organization of Canada with respect to the
Premises.
(f) The Tenant shall not do or permit anything to be done or exist upon
the Premises whereby the rate of premium quoted by any insurer in
respect of the insurance of the Building or any building or part of a
building or the contents thereof adjoining or near the Premises shall
at any time be higher than the rate usually charged in respect of the
Building or such adjoining or neighbouring building. Without
restricting the rights of the Landlord hereunder in the event of any
breach by the Tenant of this subparagraph 5.5(f), the Tenant shall
repay to the Landlord, on demand, from time to time during the Term
and any renewal thereof an amount equal to the increase in the rate of
premium for such insurance above the usual rate of premium for such
insurance, resulting from anything done or existing upon the Premises.
In determining whether increased premiums are a result of the Tenant's
use or occupancy of the Premises, a schedule issued by the insurer of
the Building or its agent computing the insurance rate of the
adjoining or neighbouring building or the Building showing the various
components of such rate shall be conclusive evidence of the several
items and charges which make up such rate.
(g) The Tenant agrees that if the Tenant fails to take out or keep in
force any insurance coverage referred to in this paragraph 5.5, or if
any such insurance is not approved by the Landlord and the Landlord's
Mortgagees, and the Tenant does not rectify the situation within
seventy-two (72) hours after written notice by the Landlord to the
Tenant setting forth the Landlord's objections, then the Landlord
shall have the right, without assuming any obligation in connection
therewith, to effect such insurance coverage and shall have the right
to recover all costs and premiums incurred in effecting such insurance
coverage from the Tenant pursuant to paragraph 7.5 hereof.
5.6 Repair
The Tenant shall examine the Premises before taking possession hereunder
and such taking of possession shall be conclusive evidence as against the Tenant
that at the Commencement Date the Premises were in good order and repair. The
Tenant shall, at all times during the Term and any renewal thereof, promptly, at
its own expense, repair, decorate, cleanse, renew and maintain the Premises in a
first class condition, including without limiting the foregoing the interior
walls and the floor of the Building and all other fixtures, machinery,
facilities, equipment and appurtenances comprising the Premises or any part
thereof, except repair resulting from reasonable wear and tear. At the end or
sooner termination of the Term or any renewal thereof the Tenant shall yield up
to the Landlord, without notice from the Landlord, the Premises including all
fixtures, repaired, decorated,
<PAGE>
-14-
paved, cleaned, renewed and maintained in the condition aforesaid. Without
limiting the generality of the foregoing, the Tenant shall heat the Premises in
a reasonable manner so as to prevent any damage thereto by reason of frost or
moisture.
5.7 Repair on Notice
The Tenant shall permit the Landlord and its duly authorized agents or
nominees, with or without workmen and others, at all reasonable times to enter
upon the Premises for the purpose of examining the state of repair, condition
and use thereof, and to permit such entry after the Landlord shall have given
twenty-four (24) hours' notice in writing to the Tenant of such intended entry
and examination and in every case the Tenant shall afford the Landlord all aid
and facilities in such entry and examination and upon notice in writing of
defect or want of repair being given by the Landlord to the Tenant, to cause the
same to be repaired, as required by paragraph 5.6 hereof, within thirty (30)
days from the date of the giving of such notice by the Landlord. If the Tenant
shall at any time default in the performance or observance of any of the
covenants in this Lease for or relating to the repair, maintenance, cleaning,
renewal or decoration of the Premises or any part thereof and such default shall
continue for thirty (30) days after notice in writing from the Landlord of
default in respect of repair, maintenance, cleaning, renewal or decoration of
the Premises then the Tenant shall permit the Landlord and its duly authorized
agents and nominees, with or without workmen and others, and without prejudice
to the Landlord's right of re-entry, to enter into and upon the Premises and
repair, decorate, clean, renew and maintain the same at the expense of the
Tenant and the Tenant shall afford the Landlord all aid and facilities in doing
or causing the same to be done, and shall repay to the Landlord on demand all
costs and expenses in respect of such repairs, maintenance, cleaning, renewal
and decoration as aforesaid.
5.8 Business and Trade Fixtures
The Tenant may install its usual business and trade fixtures in the usual
manner, provided such installation does not damage the Premises or the Building
and provided further that the Tenant shall have, if requested by the Landlord,
submitted plans and specifications for such business and trade fixtures to the
Landlord and obtained its prior written consent thereto, which consent shall not
be unreasonably withheld. All business and trade fixtures owned or installed by
the Tenant in or on the Premises shall remain the property of the Tenant and
shall be removed by the Tenant at the expiration of the Term or any renewal
thereof or at the sooner termination thereof, provided that the Tenant at its
expense shall repair any damage to the Premises, the Building and the Land
caused by such removal, and provided further, that the Tenant shall not be in
default under any covenant or agreement contained herein at the time of such
removal, and if in default, the Landlord shall have a lien on the Tenant's
business and trade fixtures as security against loss or damage resulting from
any such default by the Tenant and the Tenant's business and trade fixtures
shall not be removed by the Tenant until such default is cured, unless otherwise
directed by the Landlord. The Landlord may elect to require the Tenant to remove
all or any part of the business and trade fixtures owned or installed by or on
behalf of the Tenant at the expiration or termination of the Term or any renewal
thereof, in which event such removal shall be done at the Tenant's expense and
the Tenant shall at its expense, repair any damage to the Premises, the Building
and the Land caused by such removal. If the Tenant does not remove its business
and trade fixtures forthwith after written demand by the Landlord, such property
shall, if the Landlord elects, be deemed to become the
<PAGE>
-15-
Landlord's property or the Landlord may remove the same at the expense of the
Tenant and the cost of such removal shall be paid by the Tenant forthwith to the
Landlord on written demand, and the Landlord shall not be responsible for any
loss or damage to such property as a result of such removal.
5.9 Alterations and Additions
The Tenant shall not alter or change the position or style of, or add to,
the Premises or any part thereof, without in any and every such case having
first submitted plans and specifications thereof to the Landlord and having
obtained the prior written consent of the Landlord thereto, such consent not to
be unreasonably withheld, and, unless otherwise provided by such consent, all
such alterations, additions, erections or excavations shall be done either by or
under the direction of the Landlord, as the Landlord may determine, but at the
cost of the Tenant. All work shall be done in a good and workmanlike manner and
at such times and in such manner as the Landlord may approve, and only by
contractors or tradesmen approved in writing by the Landlord. The Tenant shall
pay to and reimburse the Landlord forthwith on demand for all costs and expenses
incurred by the Landlord in the review and approval of any plans and
specifications by the Landlord's architects and engineers. The Tenant shall
obtain and pay for all required building and occupancy permits in respect of its
work as aforesaid. The Tenant shall, at its own cost and expense, take out or
cause to be taken out any additional insurance coverage reasonably required by
the Landlord to protect the respective interests of the Landlord and the Tenant
during all periods when any such work is being performed. Any and all
installations, alterations, additions, partitions, improvements or fixtures
other than the Tenant's business and trade fixtures in or upon the Premises,
whether placed there by the Tenant or the Landlord or a previous occupant of the
Premises, shall, immediately upon such placement, become and shall thereafter
remain the property of the Landlord without compensation therefor to the Tenant.
Notwithstanding anything herein contained, the Landlord shall be under no
obligation to repair, maintain, replace or insure such installations,
alterations, additions, partitions and fixtures or anything in the nature of a
leasehold improvement made or installed by or on behalf of the Tenant or a
previous occupant of the Premises. The Landlord may elect that any or all
installations, alterations, additions, partitions, improvements or fixtures made
or installed by or on behalf of the Tenant hereunder or under the provisions of
any previous lease of the Premises to the Tenant or any other tenants be removed
at the expiry or earlier termination of the Term or any renewal thereof and it
shall be the Tenant's obligation to restore the Premises to the condition in
which they were prior to such alterations, installations, additions,
improvements, partitioning and fixturing. Such removal and restoration shall be
at the sole expense of the Tenant.
5.10 Rail Spur
If the Building does now or hereafter have access to a railway spur or is
now or hereafter served by a railway spur the Tenant shall forthwith execute and
deliver any agreements in respect thereof which are required by the railway
company or other authority operating the said railway or required by the
Landlord, and the Tenant shall observe and perform all terms, conditions,
covenants and obligations under the said agreements and any and all requirements
whatsoever of the railway company or other authority operating the said railway.
The Tenant shall indemnify and save harmless the Landlord from and against any
and all loss, cost, expense, damage, claims and liability
<PAGE>
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whatsoever in respect of the use of the railway spur by the Tenant and in
respect of the said agreements and all requirements of the railway company or
other authority operating the said railway.
5.11 Use of Premises
The Tenant shall not use the Premises nor allow the Premises to be used for
any purpose other than the development and administrative headquarters of the
company, nor in any manner inconsistent with such use and occupation, and the
Tenant shall not, at any time during the Term or any renewal thereof, commit or
suffer to be committed any waste upon the Premises nor shall the Tenant use,
exercise, or carry on, or permit or suffer to be used, exercised or carried on,
in or upon the Premises, or any part thereof, any noxious, noisome or offensive
art, trade, business, occupation or calling, or keep, sell, use, handle or
dispose of any merchandise, goods or things which are objectionable, or by which
any of the Premises, the Land or the Building or any part thereof may be damaged
or injuriously affected, and no act, matter or thing whatsoever shall, at any
time during the Term or any renewal thereof, be done in or upon the Premises, or
any part thereof, which may result in annoyance, nuisance, grievance, damage or
disturbance to other tenants or occupants of the Building or to the occupiers or
owners of any other lands or premises or to the holders of any registered
easement, right of way or other encumbrance charging the whole or part of the
Land or the Building. The Tenant shall use its best endeavours to prevent
anything being done on the Premises or the Land which may result in the Land or
any part thereof (other than the Premises) being picketed or otherwise subjected
to industrial action or demonstrations, political or otherwise. In the event of
such picketing, industrial action or demonstrations the Tenant shall forthwith
take all action and proceedings necessary to cause such picketing, industrial
action and demonstrations to cease without delay. The Tenant shall not place in
the Premises any heavy machinery or equipment without first obtaining the
consent in writing of the Landlord. The Tenant shall occupy the Premises for the
purpose aforesaid continuously and without interruption throughout the Term and
any renewal thereof. The Tenant shall immediately advise the Landlord of the
presence of and shall do all things necessary to remove, any dangerous condition
from time to time existing on the Premises and arising as a result of the act or
omission of the Tenant or any person for whom the Tenant is, at law,
responsible.
5.12 Signs
The Tenant shall not, at any time, affix or exhibit or permit to be affixed
or exhibited upon any part of the Land, the Building or the Premises any sign,
picture, notice, lettering, direction or other advertising or informational
device of whatever nature (herein collectively called the "Signs"), except such
as shall have been first approved in writing by the Landlord, which approval may
be unreasonably withheld, and which comply at all times with the requirements of
any lawful authority having jurisdiction over the same, provided that if any of
the Signs no longer complies with the terms of the consent given by the Landlord
or the requirements of any lawful authority having jurisdiction over the same
then the Landlord, after giving the Tenant thirty (30) days' notice, shall have
the right at any time to remove any such Signs at the Tenant's expense and the
costs, charges and expenses of such removal shall forthwith be paid by the
Tenant to the Landlord. The provisions of paragraphs 5.7 and 5.8 hereof shall
also apply to the Signs.
<PAGE>
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5.13 Rubbish
The Tenant shall keep the Premises clean and tidy and in good order and in
particular shall not form or permit to be formed any refuse dump, rubbish heap
or scrap heap upon the Premises and the Tenant shall remove, not less frequently
than once a month, all refuse, rubbish, scrap and other waste matter which may
have accumulated on the Premises.
5.14 Pollution
The Tenant shall not discharge nor permit the discharge of any oil or
grease or any deleterious, objectionable, dangerous, radioactive, poisonous or
explosive matter or substance into any waters, ditches, water courses, culverts,
drains or sewers and the Tenant shall take all reasonable measures for ensuring
that any effluent discharged shall not be corrosive, poisonous or otherwise
harmful to or cause obstruction, deposit or pollution within any waters,
ditches, water courses, culverts, drains or sewers or to or within any sewage
disposal works or to the bacteriological process of sewage purification, and the
Tenant shall forthwith at the Landlord's request provide facilities for testing
and monitoring the effluent from the Tenant's operations and shall permit the
Landlord access to the Premises for the purpose of carrying out such testing and
monitoring from time to time. In addition, the Tenant shall not at any time
whatsoever dispose of or permit to be disposed of on, in or under the Land, the
Building or the Premises, any oil or grease or any deleterious, objectionable,
dangerous, poisonous or explosive substance or matter nor permit any such
substance or matter to be discharged or accumulated on, in or under the Land,
the Building or the Premises, including without limitation, any radioactive
matter or substance, any radioactivity, or any microwaves. The Tenant shall
construct, maintain and operate every furnace and burner employed on the
Premises so as to substantially consume or burn the smoke arising from every
furnace and burner and shall not use or suffer any such furnace or burner to be
used negligently so that the smoke arising therefrom is not substantially
consumed or burned and shall not cause or permit any grit, dust or noxious or
offensive effluvia to be emitted from any engine, furnace, burner or apparatus
on the Premises without using the best practicable means reasonably available
for preventing or counteracting such emissions.
5.15 Abate Nuisance
Upon written notice to the Tenant from the Landlord or from any lawful
authority having jurisdiction requiring the abatement of any nuisance caused by
vibration, noise or offensive smell or by any undue emission of smoke, vapour or
dust caused by the Tenant or arising directly or indirectly out of the
operations carried on upon the Premises, the Tenant shall forthwith abate such
nuisance accordingly.
5.16 Obstruction of Roads
The Tenant shall not permit any vehicles owned by or under the control of
the Tenant to cause an obstruction on any roads on the Land and the Tenant shall
use its best endeavours to ensure that all persons doing business with the
Tenant and their servants and workmen shall not permit any vehicles to cause
such obstruction as aforesaid and the Tenant shall also use its best endeavours
to ensure that vehicles owned by or under the control of the Tenant, its
employees or
<PAGE>
-18-
persons doing business with the Tenant shall observe any regulations and
instructions made or given by the Landlord or by any other person, corporation
or body having authority to make or give such regulations or instructions with
regard to the operation and parking of vehicles on the said roads or other areas
provided for the parking of vehicles on the Land.
5.17 No Excavation
The Tenant shall not excavate, dig or extract any sand, gravel, earth or
minerals of any description out of the Premises except for the purpose of
building upon the Land insofar as the same is permitted in writing by the
Landlord, nor shall the Tenant sink any well on the Premises. Any excess fill
material shall, at the option of the Landlord, be placed elsewhere on the Land
by the Tenant as directed by the Landlord without any cost or expense to the
Landlord and such material shall, upon placement, become the property of the
Landlord.
5.18 Stacking Material
The Tenant shall not stack any materials on the Premises to a greater
height than that permitted by any lawful authority having jurisdiction. All
stacking shall be kept in a clean and tidy condition.
5.19 No Auctions
The Tenant shall not permit any sale by auction nor any fire sale,
bankruptcy sale, moving sale, going-out-of-business sale or bulk sale to be held
upon the Premises or any part thereof.
5.20 Will Not Terminate Agreements
Except where required to do so by the terms of this Lease, the Tenant shall
not enter into, amend or terminate any agreement with any public utility
corporation or railway company relating to or in any manner whatsoever affecting
the Premises.
5.21 Assignment and Subletting
(a) The Tenant shall not assign this Lease or any interest therein, nor
sublet the Premises or any part thereof, nor part with or share
possession of all or any part of the Premises, without the prior
written consent of the Landlord, which consent may be unreasonably
withheld.
(b) Notwithstanding and without prejudice to any other provision herein,
in the event that the Tenant desires to assign, sublet or part with or
share possession of all or any part of the Premises, or to transfer
this Lease in any other manner, in whole or in part, or to transfer
any estate or interest thereunder, then and so often as such event
shall occur the Tenant shall give prior written notice to the Landlord
of such desire, specifying therein the proposed assignee, transferee,
sublessee or occupier and shall provide to the Landlord such
information on the nature of the business of the proposed assignee,
transferee, sublessee or occupier and its financial responsibility
<PAGE>
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and standing as the Landlord may reasonably require and the terms and
conditions of the proposed assignment, transfer, sublease or
possession and shall deliver to the Landlord a copy of the assignment,
transfer or sublease intended to be executed by the Tenant and the
assignee, transferee or subtenant, and the Landlord shall, within
thirty (30) days thereafter, notify the Tenant in writing, that:
(i) it consents; or
(ii) it does not consent as aforesaid to the assignment,
transfer, subletting or parting with or sharing possession
as the case may be.
(c) Provided always that no such assignment, transfer, subletting or
parting with or sharing possession shall:
(i) in any manner release the Tenant from its obligations for
the payment of the Rent and the observance and performance
of the covenants, terms and conditions herein provided; or
(ii) be made to any person, firm, partnership, or corporation
carrying on any business which the Landlord is obliged to
restrict by reason of any other lease or contract relating
to any other premises located on the Land.
(d) If the Tenant is a corporation or if this Lease is assigned as
aforesaid to a corporation, and if at anytime during the Term any part
or all of the corporate shares or voting rights of shareholders of the
Tenant shall be transferred by sale, assignment, bequest, inheritance,
trust, operation of law or other disposition, or treasury shares be
issued so as to result in a change in the control of the said
corporation by reason of ownership of greater than fifty (50%) percent
of the voting shares of the corporation or otherwise having changed
from one person or group of persons to another person or group of
persons without the prior written consent of the Landlord, which
consent will not be unreasonably withheld, then and so often as such a
change of control shall occur the Landlord shall have the right to
terminate this Lease at anytime after such change of control by giving
the Tenant sixty (60) days' prior written notice of such termination.
This subparagraph 5.21(d) shall not apply to the Tenant if on and from
the Commencement Date the control of the Tenant is represented by
shares listed on a security exchange regulated by governmental
authority. The Tenant shall, upon request of the Landlord, make
available to the Landlord from time to time for inspection or copying
or both, all books and records of the Tenant which, alone or with
other data, show the applicability or inapplicability of this
subparagraph 5.21(d).
(e) The Tenant shall not permit any part of the Premises to be used or
occupied by any persons other than the Tenant or any subtenants
permitted under subparagraph 5.21(b) and the employees of the Tenant
and of any such permitted subtenant, and shall not permit any part of
the Premises to be used or occupied by any licensee or concessionaire,
or permit any persons to be upon the Premises other than the Tenant,
such permitted subtenants, and their respective employees, customers
and others
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having business with them.
(f) The Tenant shall insert in every permitted sublease of the Premises a
covenant by the sublessee with the sublessor to produce to the
Landlord within one (1) month immediately following the making thereof
a copy of every assignment of the sub-demised premises or any part
thereof made by the sublessee or the persons deriving title under it.
(g) The Tenant shall, at the request of the Landlord, require any assignee
of the interests of the Tenant hereunder, at the time of such
assignment, to enter into a written agreement with the Landlord
whereby the assignee covenants and agrees with the Landlord to observe
and perform all of the covenants, agreements, provisos, terms and
conditions of this Lease, provided that if the Tenant fails to require
the assignee to enter into such a written agreement at the Landlord's
request the Landlord may refuse to grant its consent to the
assignment, or where such consent is not required the assignment shall
not be effective until such written agreement is executed by the
assignee. Without in any way restricting the generality of the
Landlord's right to refuse to consent to an assignment or subletting,
the Landlord may refuse to grant its consent to an assignment or
subletting in the event that this Lease is not in good standing.
(h) The Tenant shall forthwith upon demand by the Landlord, pay to or
reimburse to the Landlord such administration fee as the Landlord may
reasonably charge from time to time together with all solicitors' fees
and all other costs, charges, and expenses incurred by the Landlord in
connection with the Tenant's request for consent to any assignment,
subletting or parting with or sharing of possession.
5.22 Easements
The Tenant shall not, without the prior written consent of the Landlord,
permit any encroachment, right of way, easement or other encumbrance to be made
or acquired into, against or upon the Premises or any part thereof.
5.23 Liens
The Tenant shall permit the Landlord to post and shall keep posted in at
least two (2) conspicuous places on the Premises any notices which the Landlord
may desire to post under the provisions of the Builders' Lien Act of British
Columbia and any statute which may amend or replace such statute. The Tenant
shall use its best endeavours so that no claim of lien shall be filed in respect
of any work which may be carried out by it or on its behalf on the Premises and,
if a claim of lien shall be filed in respect of any such work, the Tenant shall
take all necessary steps to have the claim of lien cancelled and discharged from
the Land, the Building and the Premises within fifteen (15) days of the date the
Tenant has knowledge of such filing and the Tenant shall indemnify and save
harmless the Landlord from any and all loss, cost, expense, damage and liability
in respect of such claim of lien. The Landlord, in addition to any right or
remedy, shall have the right, but shall not be obliged, to discharge any claim
of lien from all or any portion of the Land, the Building and
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the Premises by paying the amount claimed to be due or by procuring a discharge
of such liens by deposit in the appropriate court and in any such event the
Landlord shall be entitled, if it so elects, to expedite the prosecution of any
action for the enforcement of such claim of lien by the lien claimant and to pay
the amount of the judgment, if any, in favour of the lien claimant with interest
and costs. In any such event the Tenant shall forthwith pay to and reimburse the
Landlord for all money expended by the Landlord and all costs and expenses
incurred by the Landlord.
5.24 Registered Charges
The Tenant shall pay all money owed by it under any conditional sale
agreement or other charge registered or filed against the Premises, and
immediately upon all of the payments having been made thereunder, the Tenant
shall obtain a memorandum of satisfaction or other appropriate document of
discharge and shall register the same at its own expense in the proper land
title office or other appropriate office of public record as the Landlord may
require to discharge the same from the title to the Premises.
5.25 Entry for Benefit of Adjoining Premises
The Tenant shall permit the Landlord, its agents and workmen, and the
tenants of any adjoining or neighboring premises and their respective agents and
workmen, to enter upon the Premises at all reasonable times so far as may be
necessary or useful in order to construct, examine, repair or rebuild any
adjoining or neighboring premises, or to cleanse, empty or repair any of the
sewers, drains or gutters from the same, or for any other reasonable purpose,
provided that the Landlord shall make good all damage occasioned by the exercise
of such rights by the Landlord, its agents or workmen, and insofar as any tenant
of any adjoining or neighboring premises and its respective agents and workmen
are concerned, no such rights shall be exercisable until such tenant and its
agents and workmen shall have covenanted with the Tenant to make good all damage
occasioned by the exercise of such rights by those of them concerned.
5.26 Exhibit Premises
The Landlord shall have the right to exhibit the Premises to:
(a) prospective tenants or subtenants during the six (6) month period
prior to the Expiry Date (if the Tenant has not exercised its right of
renewal) and during the six (6) month period prior to the end of any
renewal of the Term; and
(b) the Landlord's Mortgagees and prospective mortgagees and any
prospective purchaser of the whole or any part of the Landlord's
interest in the Premises;
and for such purposes the Landlord shall have the right of entry to the Premises
at any reasonable time, with the approval of the Tenant (such approval not to be
unreasonably withheld), and the Tenant at its option may have a servant or agent
present at the time of such entry.
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5.27 Registration of Lease
The Tenant covenants and agrees with the Landlord that the Landlord shall
not be obliged to execute or deliver this Lease in form registrable under the
Land Title Act of British Columbia or any other statute of the Province of
British Columbia. All costs and expenses in connection with the registration of
this Lease and any plans required for registration shall be borne by the Tenant.
5.28 Compliance with Laws
The Tenant shall do, observe and perform all of its obligations and all
matters and things necessary or expedient to be done, observed or performed by
the Tenant by virtue of any law, statute, by-law, ordinance, regulation or
lawful requirements of any governmental authority or any public utility or
railway company lawfully acting under statutory authority and all demands and
notices in pursuance thereof whether given to the Tenant or the Landlord and in
any manner or degree affecting the exercise or fulfilment of any right or
obligation arising under or as a result of this Lease and affecting the Premises
and the use thereof by the Tenant. If any such demand or notice is given
lawfully requiring the execution of works by reason of anything done, omitted or
permitted by the Tenant, then:
(a) if such notice is given to the Tenant, the Tenant shall forthwith
deliver the same or a true copy thereof to the Landlord and the Tenant
shall forthwith, at its own expense, execute to the satisfaction of
the Landlord and the person giving such notice all such works as the
Landlord may approve in writing in order to comply with the
requirements of the said notice; or
(b) if such notice is given to the Landlord, the Landlord shall notify the
Tenant and thereupon the Tenant shall, at its own expense, forthwith
execute to the satisfaction of the Landlord and the person giving such
notice all such works as the Landlord and the person giving such
notice may require in order to comply with the requirements of the
said notice.
Notwithstanding the foregoing, the Landlord shall have the right to execute any
such works and the Tenant shall afford to the Landlord all necessary access to
the Premises and other facilities for that purpose and the Tenant shall, on
demand by the Landlord, pay to the Landlord all costs and expenses incurred by
the Landlord in executing and performing any and all such works.
5.29 Provide Financial Information
Whenever the Landlord, in connection with any financing of the Premises or
the Land or any part thereof, shall require information relating to the
financial position of the Tenant, then the Tenant, within thirty (30) days after
receipt by it of a notice in writing from the Landlord requesting such
information, shall furnish directly to the prospective lender or lenders copies
of the audited financial statements of the Tenant, including balance sheet and
statements of profit and loss and surplus or deficit, in respect of each of the
five (5) years immediately preceding the year in which such notice is given. All
such information shall be used by the lenders in connection with such financing
only and shall be supplied to the lenders on the condition that the information
be treated on a confidential basis.
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5.30 Subordination
This Lease is and shall be subject, subordinate and postponed to all
mortgages, including any debentures and any deeds of trust and mortgages
securing bonds and all indentures supplemental thereto (herein collectively
called the "Mortgages") which may now or hereafter charge the Land, the Building
or the Premises and to all renewals, modifications, consolidations, replacements
and extensions of the Mortgages, to the intent that, without execution of any
document other than this Lease, the Mortgages and all renewals, modifications,
consolidations, replacements and extensions thereof shall have priority over
this Lease notwithstanding the respective dates of execution or registration
thereof. Without limiting the generality of the foregoing, the Tenant agrees to
execute promptly any document in confirmation of such subordination,
postponement and priority which the Landlord may request and the Tenant hereby
irrevocably constitutes and appoints the Landlord the agent and attorney of the
Tenant for the purpose of executing any such document and of making application
in the name of the Tenant at any time and from time to time to register
postponements of this Lease in favour of any of the Mortgages or any renewal,
modification, consolidation, replacement or extension of any of the Mortgages in
order to give effect to the foregoing provisions of this paragraph. Provided
however, the subordination and postponement of this Lease to any of the
Mortgages shall not be effective with respect to a specific Mortgage unless and
until the Landlord's Mortgagee holding such Mortgage shall confirm in writing to
the Tenant that the Tenant shall have the right, if not in default under this
Lease, to remain in possession of the Premises in accordance with the terms of
this Lease in the event such Landlord's Mortgagee obtains title to the Premises
by way of foreclosure or otherwise.
5.31 Attornment
Whenever required by any of the Landlord's Mortgagees under any of the
Mortgages the Tenant shall attorn to and become a tenant or licensee of such
Landlord's Mortgagee or any purchaser from such Landlord's Mortgagee in the
event of an exercise by such Landlord's Mortgagees of the power of sale in any
of the Mortgages set out, for the then unexpired residue of the Term upon all of
the terms and conditions hereof.
5.32 Estoppel Certificate
The Tenant shall at any time and from time to time upon ten (10) days'
prior notice from the Landlord execute and deliver to the Landlord or the
Landlord's Mortgagees or a prospective purchaser of the Land, the Building or
the Premises or the whole or any portion of the Landlord's interest in the Land,
the Building or the Premises, a statement in writing confirming the terms of
this Lease, certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the modifications and that the same is in full
force and effect as modified), the amount of the Rent then being paid hereunder,
the dates to which the Rent and other charges hereunder have been paid, that the
Landlord has complied with all the terms of this Lease, that the Premises are
acceptable to the Tenant, that the Tenant shall not amend, modify or surrender
this Lease or make any prepayment of the Rent other than the Rent for the
current month without the prior written consent of the Landlord's Mortgagees,
that there are no outstanding set-offs or equities disclosed or undisclosed as
between the Landlord and the Tenant, that no money other than a maximum of one
month's Rent
<PAGE>
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in accordance with the provisions of the Lease has been prepaid by the Tenant to
the Landlord, that the Tenant is aware of the assignment by the Landlord to the
Landlord's Mortgagees of all Rents under this Lease, and any other matters
pertaining to this Lease in respect of which the Landlord may desire
certification. The Tenant hereby irrevocably constitutes and appoints the
Landlord the agent and attorney of the Tenant for the purpose of executing and
delivering such certificate or certificates for and on behalf of the Tenant.
5.33 Indemnify Landlord
The Tenant shall indemnify and save harmless the Landlord from and against
any and all manner of actions or causes of action, damages, costs, loss or
expenses or whatever kind which the Landlord may sustain, incur or be put to by
reason of or arising out of this Lease, or any act or omission of the Tenant or
any persons for whom the Tenant is, at law, responsible, or from the use or
occupation of all or any portion of the Land, the Building and the Premises and
without limiting the generality of the foregoing, from the non-observance or
non-performance by the Tenant, or any persons for whom the Tenant is, at law,
responsible, of any of the obligations imposed under the provisions of any laws,
ordinances, regulations or requirements of any federal, provincial, municipal or
other authorities, or any of the covenants and agreements in this Lease
contained by the Tenant to be observed and performed and such liability to
indemnify and save harmless shall survive any termination of this Lease, and the
expiry of the Term or any renewal thereof, anything in this Lease to the
contrary notwithstanding.
ARTICLE 6 - LANDLORD'S COVENANTS
The Landlord covenants with the Tenant as follows:
6.1 Quiet Enjoyment
For quiet enjoyment, subject to the rights of owners or occupiers of the
easements and rights-of-way, if any, now or hereafter registered against title
to the Land, the Building or the Premises.
6.2 Landlord's Insurance
(a) Except as may be otherwise provided in this Lease and to the extent
that such insurance coverage shall be available at a reasonable cost
acceptable to the Landlord, the Landlord shall, during the Term and
any renewal thereof, take out and maintain in full force and effect
insurance against all risks of physical loss or damage to the
Building, and such fixtures and improvements as the Landlord shall
determine, including the perils of flood and earthquake and including
business interruption or loss of rental income insurance, in amounts
equal to the full insurable value thereof, calculated on a replacement
cost basis, and subject to such deductibles as the Landlord may
reasonably determine. Provided however, the full insurable value shall
not include, and the insurance shall not cover, any property of the
Tenant, whether owned by the Tenant or held by it in any capacity, nor
leasehold improvements whether made by or on behalf of the Tenant.
<PAGE>
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(b) The Landlord shall, upon written request by the Tenant, provide the
Tenant with evidence from time to time that such insurance has been
effected.
(c) The Landlord may, but shall not be obligated to, take out and carry
any other form or forms of insurance as the Landlord or the Landlord's
Mortgagees may consider advisable or beneficial, including, without
limiting the foregoing, comprehensive liability insurance and boiler
and machinery insurance.
(d) Notwithstanding any contribution by the Tenant to the payment of any
insurance premiums or costs as provided for herein, no insurable
interest shall be conferred upon the Tenant under policies carried by
the Landlord.
6.3 Common Areas and Facilities
(a) The use and occupation by the Tenant of the Premises shall include the
non-exclusive license to use, in common with others entitled thereto,
the Common Areas and Facilities, subject, however, to the provisions
of this Lease and to the exclusive control, management and direction
of the Landlord and subject to the reservations and exceptions set
forth in Article 2 of this Lease in respect of any portion of the
Common Areas and Facilities. Notwithstanding the foregoing the
Landlord shall have the right to alter the location and size of the
areas which are the subject of the said licence provided that
reasonable access to the Premises is provided to the Tenant.
(b) The Common Areas and Facilities will at all times be subject to the
exclusive control and management of the Landlord and will be provided
or designated by the Landlord from time to time for the general use by
or for the benefit of the Tenant and its employees, invitees and
licensees in common with the other tenants of the Landlord and such
others as may be designated by the Landlord. The Landlord has the
right from time to time to establish, modify and enforce rules and
regulations with respect to the Common Areas and Facilities including
those related to their use, maintenance and operation and the rules
and regulations in all respect will be observed and performed by the
Tenant and the employees, invitees and licensees of the Tenant. The
Landlord has the right to change the area, level, location and
arrangement of the Common Areas and Facilities including the
improvements, facilities, equipment, installations and other rights
and things forming from time to time part or parts thereof and to
enter into, modify and terminate easement and other agreements
pertaining to the use and maintenance thereof, and to construct,
maintain and operate lighting facilities and to police the Common
Areas and Facilities and to close all or any portion thereof to such
extent as may in the reasonable opinion of the Landlord be legally
sufficient to prevent a dedication thereof or the accrual or creation
of rights to any person or the public therein and to obstruct or close
off any or all of the Common Areas and Facilities for the purpose of
maintenance or repair and to do and perform such other acts and things
in and to the Common Areas and Facilities as the Landlord considers
advisable.
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(c) The Tenant covenants that it will and will cause its employees,
licensees and invitees to observe all regulations made by the Landlord
from time to time with respect to parking on those portions of the
Land provided for that purpose and that the Tenant shall supply
automobile license numbers of its employees to the Landlord upon
request. In particular, the Landlord reserves the right to remove any
automobile infringing regulations made by the Landlord with respect to
parking from time to time, such removal to be at the risk and expense
of the Tenant.
(d) It is understood and agreed that notwithstanding anything herein to
the contrary, the Landlord shall have the right at all times and from
time to time, throughout the term of this Lease and any renewal to:
(i) change the area, size, level, location and/or arrangement of
the Building and the Land and any part thereof including the
Common Areas and Facilities;
(ii) construct other buildings, structures or improvements on the
Land and make alterations thereof, additions thereto, or
re-arrangements thereof, demolish parts thereof, build
additional storeys on the Building (and for such purposes to
construct and erect columns and support facilities in the
Building), and construct additional buildings or facilities
adjoining or proximate to the Building;
(iii) relocate or rearrange the parking areas and other parts of
the Common Areas and Facilities from those existing at the
Commencement Day, make changes and additions to the pipes,
conduits and ducts or other structural and non-structural
installations in the Building and the Premises where
desirable to serve the Common Areas and Facilities and other
premises in the Building or to facilitate expansion or
alteration of the Building (including, without limitation,
the construction and erection of columns and support
facilities) but shall not unreasonably interfere with the
use and enjoyment of the Premises beyond the extent
necessarily incidental to such changes, additions and
installations, and shall make good any damage to the
Premises arising in the course of such changes and
additions;
(iv) add additional lands to the Land; and
(v) temporarily obstruct or close off the Common Areas and
Facilities or any parts thereof for the purpose of
maintenance, repair or construction.
The Landlord agrees to use its reasonable efforts to complete all
construction, alterations, maintenance and repairs as expeditiously as
possible under the circumstances.
(e) The Tenant shall not have any right to object to nor any right to any
claim of damages, compensation or other sums whatsoever, nor any right
of set-off or
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reduction of the Rent as a result of or on account of any exercise of
the Landlord's rights under paragraph 6.3 of this Lease. It is further
understood and agreed that the exercise by the Landlord of its rights
set forth in paragraph 6.3 of this Lease shall not be deemed to be
constructive or actual eviction of the Tenant, nor a breach of any
covenant of quiet enjoyment or other covenant contained in this Lease.
ARTICLE 7 - MUTUAL COVENANTS, AGREEMENTS AND PROVISOS
AND IT IS HEREBY AGREED BY THE LANDLORD AND THE TENANT AS FOLLOWS:
7.1 No Warranties
The Tenant acknowledges and agrees that no representations, warranties,
agreements or conditions have been made other than those expressed herein, and
that no agreement collateral hereto shall be binding upon the Landlord unless it
be made in writing and duly executed on behalf of the Landlord.
7.2 No Waiver
(a) The failure of the Landlord to exercise any right or option in
connection with any breach or violation of any term, covenant or
condition herein contained shall not be deemed to be a waiver or
relinquishment of such term, covenant or condition or any subsequent
breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of the Rent or any portion
hereunder by the Landlord shall not be deemed to be a waiver of a
preceding breach by the Tenant of any term, covenant or condition of
this Lease other than the failure of the Tenant to pay the particular
amount of the Rent so accepted, regardless of the Landlord's knowledge
of such preceding breach at the time of acceptance of such amount of
the Rent.
(b) The acceptance of any of the Rent from, or the performance of any
obligation hereunder by, a person other than the Tenant shall not be
construed as an admission by the Landlord of any right, title or
interest of such person as a subtenant, assignee, transferee or
otherwise in the place and stead of the Tenant.
(c) The acceptance by the Landlord of a part payment of any money required
to be paid hereunder shall not constitute waiver or release of the
right of the Landlord to payment in full of such money.
7.3 Notices
All notices, demands and requests which may or are required to be given
pursuant to this Lease shall be in writing and shall be sufficiently given if
delivered personally to the party or an officer of the party for whom it is
intended or mailed prepaid and registered, in the case of the Landlord and the
Tenant to the respective addresses specified on page 1 of this Lease, or at such
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other addresses in British Columbia as the parties may from time to time advise
by notice in writing. The Tenant shall require any mortgagee, assignee or
sublessee of the Tenant's interest hereunder to supply their respective mailing
addresses to the Landlord. The date of receipt of any such notice, demand or
request shall be deemed to be the date of delivery of such notice, demand or
request if served personally or if mailed as aforesaid on the third day next
following the date of such mailing (excluding Saturdays, Sundays and statutory
holidays in British Columbia), unless there is between the date of mailing and
actual receipt a mail strike or other labour dispute which adversely affects
mail service in British Columbia, in which case:
(a) the party giving the notice, demand or request shall deliver such
notice, demand or request by an alternative method; and
(b) the time of giving such notice, demand or request shall be the time of
actual receipt of such notice, demand or request.
7.4 Damage and Destruction
(a) If the Premises are damaged by fire or other casualty thereby
materially restricting the use of the Premises, then the Annual Basic
Rent shall abate only to the extent that the Annual Basic Rent is
covered by insurance and paid to the Landlord.
(b) Except as provided in subparagraph 7.4(c) hereof, if the Premises are
damaged by fire or other casualty insured against by the Landlord
hereunder, then the damage to the Premises shall be repaired by the
Landlord at its expense except that repairs to installations,
alterations, additions, partitions, improvements and fixtures made by
or on behalf of the Tenant or any previous tenant or occupant of the
Premises or any part thereof shall be performed by the Tenant or, at
the option of the Landlord, shall be performed by the Landlord at the
expense of the Tenant. All repairs which the Landlord is required to
make hereunder shall be made with due diligence, provided that the
Landlord shall not be liable to the Tenant for any loss or damage
suffered by the Tenant as a result of any delay which may arise by
reason of adjustment of insurance on the part of the Landlord or on
account of labour troubles or any other cause beyond the Landlord's
control. The Tenant shall, out of its own money, make up any
deficiency necessary to repair, rebuild or make fit the Premises for
the purposes of the Tenant, as follows:
(i) to the extent to which insurance coverage required to be
placed under this Lease is unobtainable by the Landlord or
is only obtainable at a cost which the Landlord considers
unreasonable; and
(ii) to the extent of the amount of any deductible contained in
any insurance policy effected by the Landlord pursuant to
its covenant to insure herein contained.
Where the Landlord finds that insurance coverage required to be placed
under this Lease is unobtainable by the Landlord or is only obtainable
at a cost which the
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Landlord considers unreasonable, the Landlord shall have so advised
the Tenant in writing.
(c) If, in the Landlord's opinion, the Building in which the Premises are
located is damaged by fire or other casualty to the extent that it
cannot reasonably be repaired or rebuilt within one hundred twenty
(120) days after the occurrence of such damage and if the Landlord
shall decide not to restore the same then the Landlord shall within
ninety (90) days after the happening of such fire or other casualty
give to the Tenant a notice in writing of such decision and thereupon
the Term and any renewal of this Lease shall expire forthwith and the
Tenant shall vacate the Premises and surrender the same to the
Landlord. If the Building in which the Premises are located is damaged
as aforesaid and the Landlord does not give notice as aforesaid, then
the Landlord shall diligently proceed to repair the Building,
excluding installations, additions, partitions, improvements and
fixtures made by or on behalf of the Tenant or any previous tenant or
occupant of the Premises, subject to any reasonable delay which may
arise by reason of adjustment of insurance on the part of the Landlord
or on account of labour troubles or any other cause beyond the
Landlord's control. If the Building in which the Premises are located,
excluding installations, additions, partitions, improvements and
fixtures made by or on behalf of the Tenant or any previous tenant or
occupant of the Premises, is not repaired within nine (9) months from
the time of the fire or other casualty causing the damage (subject to
such time period being extended by the length of any reasonable delay
which may arise by reason of adjustment of insurance on the part of
the Landlord or on account of labour troubles or any other cause
beyond the Landlord's control) the Tenant may at its option, to be
exercised within ten (10) days of the termination of the said period
of nine (9) months (or the termination of such later period as
extended hereby) by notice in writing, terminate this Lease. Upon the
termination of this Lease by the Landlord as provided in this
subparagraph 7.4(c) the Tenant's liability for the Rent shall cease as
of the day following the fire or casualty, but in the event of the
termination of this Lease by the Tenant as provided in this
subparagraph 7.4(c) the Rent shall be due and payable for the period
of time up to the date of the termination of this Lease by the Tenant.
7.5 Payments by Landlord Regarded as Rent
If the Tenant shall fail to observe or perform any of the covenants or
obligations of the Tenant under or in respect of this Lease the Landlord may
from time to time at its discretion perform or cause to be performed any of such
covenants or obligations or any part thereof and for such purpose may do such
things as may be requisite and may enter upon the Premises to do such things and
all costs and expenses incurred and expenditures made by or on behalf of the
Landlord shall be forthwith paid by the Tenant to the Landlord and if the Tenant
fails to pay the same the Landlord may add the same to the Rent and recover the
same by all remedies available to the Landlord for the recovery of Rent in
arrears, provided that if the Landlord commences or completes either the
performance or the causing to be performed of any of such covenants or
obligations or any part thereof, the Landlord shall not be obliged to complete
such performance or causing to be performed or be later obliged to act in like
fashion. If the Landlord shall suffer or incur any damage,
<PAGE>
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loss, cost or expense whatsoever for which the Tenant is in any way liable
hereunder, by reason of any failure of the Tenant to observe or comply with any
of the covenants or agreements of the Tenant herein contained, then in every
such case the amount of any such damage, loss, cost or expense shall be due and
payable by the Tenant to the Landlord on demand by the Landlord and the Landlord
shall have the right at its option to add the cost or amount of any such damage,
loss, cost or expense to the Rent hereby reserved and any such amount shall
thereupon immediately be due and payable as Rent and recoverable by the Landlord
by all remedies available to the Landlord for the recovery of Rent in arrears.
7.6 Re-entry on Default
The Tenant further covenants with the Landlord that in the event of the
breach, non-observance or non-performance of any covenant, agreement,
stipulation, proviso, condition, rule or regulation herein contained on the part
of the Tenant to be kept, performed or observed hereunder and any such breach,
non-observance or non-performance shall continue for fifteen (15) days after
written notice thereof to the Tenant by the Landlord, or notwithstanding the
foregoing, if any payments of the Rent or any part thereof, whether the same are
demanded or not, are not paid when they become due, or in case the Premises
shall be vacated or become vacated or remain unoccupied for thirty (30) days, or
in case the Term shall be taken in execution or attachment for any cause
whatsoever, then and in any such case the Landlord in addition to any other
remedy now or hereafter provided may re-enter and take possession immediately of
the Premises or any part thereof in the name of the whole by force if necessary
without any previous notice of intention to re-enter and may remove all persons
and property therefrom and may use such force and assistance in making such
removal as the Landlord may deem advisable to recover at once full and exclusive
possession of the Premises and such re-entry shall not operate as a waiver or
satisfaction in whole or in part of any right, claim or demand arising out of or
connected with any breach, non-observance or non-performance of any covenant or
agreement on the part of the Tenant to be kept, observed or performed.
7.7 Execution
If the Term or any renewal thereof or any of the goods and chattels of the
Tenant shall at any time during the Term or any renewal thereof be seized or
taken in attachment by any creditor of the Tenant or if a writ of execution,
sequestration or extent shall issue against the goods and chattels of the Tenant
or if the Tenant shall execute any chattel mortgage or bill of sale of its goods
and chattels (other than one incidental to any public issue of bonds, debentures
or other securities of the Tenant or to any reorganization of the Tenant or its
amalgamation with any other company) or if any petition or other application is
presented to any court of competent jurisdiction for the dissolution,
liquidation or winding up of the Tenant or for the appointment of a receiver or
receiver and manager, or if the Tenant shall become bankrupt or insolvent or
take the benefit of any statute now or hereafter in force for bankrupt or
insolvent debtors, or if the Tenant shall abandon or attempt to abandon the
Premises, or if the Premises shall be used for any purpose other than that for
which they were let without the prior written consent of the Landlord, or if the
Tenant shall make an assignment for the benefit of creditors or shall make any
sale or other disposition of its goods and chattels pursuant to or which should
legally have been done pursuant to any legislation relating to bulk sales
(except one incidental to any reorganization of the Tenant, if any, or its
amalgamation
<PAGE>
-31-
with any other company), then and in every case the then current and the next
ensuing three (3) months' Annual Basic Rent, the Additional Rent for the current
year (to be determined at rates estimated by the Landlord acting reasonably) and
any additional money owing hereunder shall immediately become due and payable;
and the Landlord may re-enter and take possession of the Premises, or any part
thereof in the name of the whole, and have again, repossess and enjoy the
Premises in its former estate, anything herein to the contrary notwithstanding,
as though the Tenant were holding over after the expiration of the Term, and the
Term and any renewal thereof shall, at the option of the Landlord, forthwith
become forfeited and determined and the then current and the next ensuing three
(3) months' Annual Basic Rent, the Additional Rent for the current year (to be
determined at rates estimated by the Landlord acting reasonably) and any
additional money owing hereunder shall be recoverable by the Landlord as if it
were Rent in arrears, but the Tenant shall remain liable under this Lease.
7.8 Sale and Reletting
The Tenant further covenants and agrees that on the Landlord becoming
entitled to re-enter upon the Premises under any of the provisions of this Lease
the Landlord, in addition to all other rights and remedies, shall have the right
to enter the Premises as the agent of the Tenant either by force or otherwise,
without being liable for any prosecution therefor and to relet the Premises as
the agent of the Tenant, and to receive all rent therefor, and as agent of the
Tenant to take possession of any business and trade fixtures of the Tenant and
any goods and property whatsoever on the Premises and to sell the same at public
or private sale without notice and to apply the proceeds of such sale and any
rent derived from reletting the Premises, after deducting its costs of
conducting such sale and its costs of reletting, in payment of the Rent due
under this Lease, and the Tenant shall be liable to the Landlord for any
deficiency.
7.9 Termination
The Tenant further covenants and agrees that on the Landlord becoming
entitled to re-enter upon the Premises under any of the provisions of this
Lease, the Landlord in addition to all other rights and remedies shall have the
right to determine forthwith this Lease and the Term or any renewal thereof by
giving notice in writing addressed to the Tenant of its intention so to do, and
thereupon the Rent shall be computed, apportioned and paid in full to the date
of such determination of this Lease, and any other payments for which the Tenant
is liable under this Lease shall be paid and the Tenant shall forthwith deliver
up possession of the Premises to the Landlord and the Landlord may re-enter and
take possession of the Premises.
7.10 Distress
Whensoever the Landlord shall be entitled to levy distress against the
goods and chattels of the Tenant it may use such force as it may deem necessary
for the purpose and for gaining admission to the Premises without being liable
for any action in respect thereof or for any loss or damage occasioned thereby
and the Tenant hereby expressly releases the Landlord from all actions,
proceedings, claims or demands whatsoever for or on account of or in respect of
any such forcible entry or any loss or damage sustained by the Tenant in
connection therewith. The Tenant waives and renounces the benefit of any present
or future statute taking away or limiting the Landlord's right
<PAGE>
-32-
of distress, and covenants and agrees that notwithstanding any such statute none
of the goods and chattels of the Tenant on the Premises at any time during the
Term or any renewal thereof shall be exempt from levy by distress for Rent in
arrears.
7.11 Landlord's Expenses Enforcing Lease
If it shall be necessary for the Landlord to retain the services of any
person for the purpose of assisting the Landlord in enforcing any of its rights
hereunder or otherwise available at law, the Landlord shall be entitled to
collect from the Tenant the cost of all such services including, but not limited
to, all legal fees and disbursements incurred in enforcing the Landlord's rights
hereunder and in connection with all necessary court proceedings at trial or on
appeal on a solicitor and own client basis, as if the same were Rent reserved
and in arrears hereunder.
7.12 Remedies Cumulative
No remedy conferred upon or reserved to the Landlord under this Lease, by
statute or otherwise, shall be considered exclusive of any other remedy, but the
same shall be cumulative and shall be in addition to every other remedy
available to the Landlord and all such remedies and powers of the Landlord may
be exercised concurrently and from time to time and as often as the Landlord
deems expedient.
7.13 Damage or Injury
The Landlord shall not be liable for any personal injury, death or property
loss or damage sustained by the Tenant, or its employees, agents, sublessees,
licensees or those doing business with it in the Premises or anywhere on the
Land, no matter how caused, and the Tenant shall indemnify the Landlord against
all actions or liabilities arising out of such personal injury, death or
property damage or loss. The Tenant hereby releases the Landlord and its
officers, agents and employees from all claims for damages or other expenses
arising out of such personal injury, death or property loss or damage. Without
limiting the foregoing, the Landlord shall not be liable for any personal
injury, death or property loss or damage sustained by the Tenant or its
employees, agents, sublessees, licensees or invitees in the Premises or anywhere
on the Land caused by theft or breakage or by steam, water, rain, snow,
radioactive materials, microwaves, deleterious substances, gases, pollutants or
any other materials or substances which may leak into, issue or flow from any
part of the Land or any adjacent or neighboring premises or lands and premises
or from the water, steam or drainage pipes or plumbing works of the same or from
any place, or any loss or damage caused by or attributable to the condition or
arrangements of any electric or other wiring or any damage caused by anything
done or omitted to be done by any other tenant or occupant of the Land, and the
Tenant shall indemnify the Landlord against all actions or liabilities arising
out of such personal injury, death or property damage or loss. The Tenant hereby
releases the Landlord and its officers, agents and employees from all claims for
damages or other expenses arising out of such personal injury, death or property
loss or damage.
7.14 Holding Over
If the Tenant shall hold over after the expiration of the Term or any
renewal thereof
<PAGE>
-33-
and the Landlord shall accept the Rent or any portion thereof the new tenancy
thereby created shall be deemed a monthly tenancy and not a yearly tenancy and
shall be subject to the covenants and conditions herein contained insofar as the
same are applicable to a tenancy from month to month, except that if the Tenant
remains in possession without the Landlord's written consent, the monthly
instalments of Annual Basic Rent shall be two (2) times the monthly instalments
of Annual Basic Rent payable for the last month of the Term or any renewal
thereof, prorated on a daily basis for each day that the Tenant remains in
possession, and in addition the Tenant shall be liable for all costs, expenses,
losses and damages resulting or arising from the failure of the Tenant to
deliver up possession of the Premises to the Landlord.
7.15 Inability to Perform
Whenever and to the extent that the Landlord shall be unable to fulfill, or
shall be delayed or restricted in the fulfilment of any obligation hereunder by
reason of being unable to obtain the material, goods, equipment, service,
utility or labour required to enable it to fulfill any such obligation or by
reason of any statute, law or order-in-council or any regulation or order passed
or made pursuant thereto or by reason of the order or direction of any
administrator, controller or board, or any governmental department or officer or
other authority, or by reason of not being able to obtain any permission or
authority required thereby, or by reason of any other cause beyond its control
whether of the foregoing character or not, the Landlord shall be entitled to
extend the time for fulfilment of such obligation by a time equal to the
duration of such delay or restriction, and the Tenant shall not be entitled to
compensation for any inconvenience, nuisance or discomfort or damage thereby
occasioned, and shall not be entitled to cancel or terminate this Lease.
7.16 Interest
Interest on any money due to the Landlord under this Lease shall be paid by
the Tenant and shall accrue at the rate of eighteen (18%) percent per annum,
such rate of interest to be calculated and compounded monthly, not in advance,
from the respective date upon which any such money becomes due to the Landlord.
7.17 Rules and Regulations
The Tenant shall observe and shall cause its employees, servants, invitees,
licensees, agents and all others over whom the Tenant exercises any control to
observe faithfully and comply with such reasonable rules and regulations as the
Landlord may from time to time adopt for the Land and the buildings and
improvements on the Land. Nothing in this Lease shall be construed to impose
upon the Landlord any duty or obligation to enforce the rules and regulations or
the terms, covenants or conditions in any other lease against any other tenant
of premises on the Land, and the Landlord shall not be liable to the Tenant for
violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees or any other person.
7.18 Expropriation
If the whole of the Building shall be acquired or condemned by an authority
having the power for such acquisition or condemnation then the Term and any
renewal thereof shall cease
<PAGE>
-34-
from the date of entry by such authority. Nothing herein contained shall prevent
the Landlord or the Tenant or both from recovering damages from such authority
for the value of their respective interests or for such other damages and
expenses allowed by law.
7.19 Accrual of Annual Basic Rent
The Annual Basic Rent shall accrue from day to day. Where the calculation
of any Additional Rent is not made until the termination or expiry of this
Lease, the obligation of the Tenant to pay such Additional Rent shall survive
the termination or expiry of this Lease and such amounts shall be payable by the
Tenant upon demand by the Landlord.
7.20 Metric Equivalent
Wherever there is any reference in this Lease to a measurement or an area
or the requirement for a measurement or calculation of an area any such
measurement or area may be expressed in either units of imperial measurement or
their metric equivalent as published by Canada Mortgage and Housing Corporation
or any other agency of the Government of Canada designated by the Landlord.
7.21 Net Lease
It is the intention of the parties hereto that this Lease shall be a net
lease and that the Rent provided to be paid to the Landlord hereunder shall be
net to the Landlord and shall yield to the Landlord the entire such rental
during the Term and any renewal thereof without abatement for any cause
whatsoever except as set forth in subparagraph 7.4(a). Save as specifically set
forth in this Lease, all costs, expenses and obligations of every kind and
nature whatsoever relating to the Premises, whether or not herein referred to
and whether or not of a kind now existing or within the contemplation of the
parties hereto, shall be paid by the Tenant.
7.22 Governing Law
This Lease shall be construed in accordance with, and governed by, the laws
of the Province of British Columbia.
7.23 Number and Gender
Where required the singular number shall be deemed to include the plural
and the neuter gender the masculine or feminine.
7.24 Covenants
The Landlord and the Tenant agree that all of the provisions of this Lease
are to be construed as covenants and agreements as though the words importing
such covenants and agreements were used in each separate provision thereof.
Should any provision or provisions of this Lease be illegal or not enforceable
it or they shall be considered separate and severable from this Lease and its
remaining provisions shall remain in force and be binding upon the parties
hereto as
<PAGE>
-35-
though the said provision or provisions had never been included.
7.25 Time of the Essence
Time shall be of the essence of this Lease, save as herein otherwise
specified.
7.26 Headings
Any captions, headings and marginal notes throughout this Lease are for
convenience and reference only and the words and phrases contained therein shall
in no way be held or deemed to define, limit, describe, explain, modify, amplify
or add to the interpretation, construction or meaning of any provision of or the
scope or intent of this Lease nor in any way affect this Lease.
7.27 Enurement
This Lease shall extend to, be binding upon and enure to the benefit of the
Landlord and the Tenant and their respective heirs, executors, administrators,
successors and permitted assigns.
7.28 Joint and Several Liability
All covenants, liabilities and obligations entered into or imposed upon the
Tenant, if more than one person, and the Landlord, if more than one person,
shall be joint and several covenants, liabilities and obligations.
7.29 Continuation of Obligations
This Lease and the obligation of the Tenant hereunder shall continue in
full force and effect notwithstanding any change in the person or persons
comprising the Landlord.
7.30 Landlord's Limit of Liability
The term "Landlord" as used in this Lease so far as covenants or
obligations on the part of the Landlord are concerned shall be limited to mean
the Landlord as hereinbefore set out while it retains its interest in the
Premises, but upon a sale, transfer or other disposition of that interest, the
Landlord shall be automatically relieved after the date of such sale, transfer
or other disposition of and from all liability arising out of the requirement
for performance of any obligations on the part of the Landlord herein contained,
it being understood and agreed hereby that the obligations contained in this
Lease on the part of the Landlord shall be binding upon the Landlord, its
successors and assigns, only during and in respect of the respective successive
periods of its interest in the Premises. The Tenant agrees to attorn to a
purchaser, transferee or person acquiring the interest of the Landlord in the
Premises, such attornment to be effective and self-operative without the
necessity of the execution of any further instrument on the part of the
Landlord, the Tenant or any other person.
<PAGE>
-36-
7.31 Consents
(a) Wherever and whenever the approval or consent of the Landlord is
required to be obtained, such approval or consent may be given by such
officer, agent, committee, person or persons as may from time to time
be nominated or appointed in writing by the Landlord for such purpose,
and any such power of nomination or appointment may be delegated by
the Landlord. Such nominees, appointees or delegates shall have the
right to withhold approval of or consent to and may reject any matter
or thing submitted for approval or consent, and every such approval or
consent given shall be in writing and may contain such conditions and
stipulations as the Landlord may deem fit.
(b) Whenever the Landlord shall withhold its leave, consent or approval,
in any case where its leave, consent or approval is required under
this Lease, the Landlord shall not be deemed to be withholding such
leave, consent or approval unreasonably if the reason therefor is the
due preservation of a standard of planning and maintenance as high as
that required by the Landlord elsewhere on the Land.
7.32 Amendments
This Lease shall constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and shall not be modified, amended or
waived except by an instrument in writing duly executed and delivered by the
parties hereto or by their successors and permitted assigns.
7.33 Schedule "C"
The provisions contained in Schedule "C" attached hereto (if any) are
incorporated in and form part of this Lease.
IN WITNESS WHEREOF the parties hereto have duly executed and delivered this
Lease as of the day and year first above written.
THE CORPORATE SEAL of Ableauctions.com Inc. )
hereunto affixed in the )
presence of: )
)
/s/ illegible )
- ------------------------------------------ ) C/S
Authorized Signatory - Abdul Ladha )
<PAGE>
-37-
THE CORPORATE SEAL of Derango Resources Inc.)
was hereunto affixed in the )
presence of: )
)
/s/ illegible )
- ------------------------------------------ ) C/S
Authorized Signatory - Abdul Ladha )
<PAGE>
SCHEDULE "A"
Plan of the Building
--------------------
(to be attached)
<PAGE>
SCHEDULE "B"
Plan of Premises
----------------
(to be attached)
(Premises to be outlined in red)
<PAGE>
SCHEDULE "C"
7.34 Renewal
The Landlord covenants and agrees with the Tenant that if the Tenant duly
and punctually pays the Rent and observes and performs the covenants, provisos
and agreements contained in this Lease on its part to be paid, observed and
performed, then the Tenant shall have the option, to be exercised by giving to
the Landlord written notice (herein called the "First Renewal Notice") not more
than nine (9) months and not less than six (6) months prior to the Expiry Date,
to renew this Lease for a further term of five (5) years (herein called the
"First Renewal Term") on the terms and conditions of this Lease, except for this
paragraph 7.34 and except that the amount of the Annual Basic Rent for the
Premises during the First Renewal Term is to be determined by agreement between
the Landlord and the Tenant no later than three (3) months after the date on
which the Landlord receives the First Renewal Notice from the Tenant and failing
such agreement within such period, the amount of the Annual Basic Rent for the
Premises during the First Renewal Term shall be the rent on that date being
three (3 ) months prior to the Expiry Date which would be paid as between the
Landlord and a willing tenant dealing at arm's length for premises in the
Municipality of Burnaby reasonably comparable to the Premises, as determined by
arbitration as hereinafter set forth. Provided however, the amount of the Annual
Basic Rent for the Premises during the First Renewal Term shall not be less than
the amount of the Annual Basic Rent for the Premises payable during the Term.
The Landlord and the Tenant covenant and agree that upon receipt of the First
Renewal Notice by the Landlord, the Tenant shall be obligated to lease the
Premises from the Landlord and the Landlord shall be obligated to lease the
Premises to the Tenant on the terms and conditions set forth in this paragraph
7.34. Prior to the commencement of the First Renewal Term the Landlord shall
prepare and complete a renewal lease and the Tenant shall, within fifteen (15)
days after receipt thereof, duly execute and deliver to the Landlord the renewal
lease as prepared and completed by the Landlord.
The Landlord covenants and agrees with the Tenant that if the Tenant duly
and punctually pays the Rent and observes and performs the covenants, provisos
and agreements contained in this Lease on its part to be paid, observed and
performed, then the Tenant shall have the option, to be exercised by giving to
the Landlord written notice (herein called the "Second Renewal Notice") not more
than nine (9) months and not less than six (6) months prior to the Expiry Date,
to renew this Lease for a further term of five (5) years (herein called the
"Second Renewal Term") on the terms and conditions of this Lease, except for
this paragraph 7.34 and except that the amount of the Annual Basic Rent for the
Premises during the Second Renewal Term is to be determined by agreement between
the Landlord and the Tenant no later than three (3) months after the date on
which the Landlord receives the Second Renewal Notice from the Tenant and
failing such agreement within such period, the amount of the Annual Basic Rent
for the Premises during the Second Renewal Term shall be the rent on that date
being three (3) months prior to the Expiry Date which would be paid as between
the Landlord and a willing tenant dealing at arm's length for premises in the
Municipality of Burnaby reasonably comparable to the Premises, as determined by
arbitration as hereinafter set forth. Provided however, the amount of the Annual
Basic Rent for the Premises during the First Renewal Term shall not be less than
the amount of the Annual Basic Rent for the Premises payable during the Term.
The Landlord and the Tenant covenant and agree that upon receipt of the First
Renewal Notice by the Landlord, the Tenant shall be obligated to lease the
<PAGE>
Premises from the Landlord and the Landlord shall be obligated to lease the
Premises to the Tenant on the terms and conditions set forth in this paragraph
7.34. Prior to the commencement of the First Renewal Term the Landlord shall
prepare and complete a renewal lease and the Tenant shall, within fifteen (15)
days after receipt thereof, duly execute and deliver to the Landlord the renewal
lease as prepared and completed by the Landlord.
7.35 Arbitration
If under the provisions of this Lease the Landlord and the Tenant have
failed to agree as to the amount of the Annual Basic Rent payable for the
Premises with respect to the First Renewal Term by the date required hereunder,
the determination of the Annual Basic Rent shall be referred to a single
arbitrator to be agreed upon by the Landlord and the Tenant and failing
agreement as to such arbitrator within ten (10) days after either party shall
have demanded the appointment of such arbitrator, then upon the application of
either the Landlord or the Tenant, the arbitrator shall be appointed by a Judge
of the Supreme Court of British Columbia. The determination by the arbitrator
shall be final and binding upon the Landlord and the Tenant, and their
respective successors and permitted assigns. In making the determination of the
amount of the Annual Basic Rent for the First Renewal Term the arbitrator shall
follow the basis for determination set forth in the paragraph 7.34 hereof. The
fees and expenses of the arbitrator shall be borne by the Tenant. The provisions
of this paragraph shall be deemed to be a submission to arbitration within the
provisions of the Commercial Arbitration Act, and any statutory modifications or
re-enactment thereof, provided that any limitations on the remuneration of the
arbitrator imposed by such legislation shall not be applicable. The arbitration
shall be held in the City of Vancouver, British Columbia, unless otherwise
agreed in writing by the Landlord and the Tenant. It is understood and agreed by
the Landlord and the Tenant that until the amount of the Annual Basic Rent for
the First Renewal Term is finally determined, the Tenant shall pay to the
Landlord monthly instalments on account of the Annual Basic Rent equal to the
monthly instalment of Annual Basic Rent payable for the month immediately
preceding the First Renewal Term. Once the arbitrator has determined the amount
of the Annual Basic Rent for the First Renewal Term then the Annual Basic Rent
paid as aforesaid shall be adjusted to reflect the Annual Basic Rent as
determined for the First Renewal Term and the Tenant shall, forthwith upon
request by the Landlord, pay to the Landlord interest at the rate set forth in
paragraph 7.16 of this Lease on the amount by which the monthly instalments of
the Annual Basic Rent for the First Renewal Term as finally determined exceed
the monthly instalments paid by the Tenant on account of the Annual Basic Rent
during the First Renewal Term, such interest to be computed and to accrue from
the date of commencement of the First Renewal Term until the Landlord receives
payment in full of the shortfall in the Annual Basic Rent.
7.36 Additional Covenants
The Landlord and the Tenant hereby covenant and agree each with the other:
(a) Deleted
(b) Without limiting the generality of paragraph 1.26 of this Lease,
"Tenant's Taxes" shall also include any value added or sales tax or
any similar tax which may at any time be imposed or levied by any
lawful authority and which in any way relates,
<PAGE>
either directly or indirectly, to any or all of the Rent to be paid by
the Tenant to the Landlord pursuant to this Lease, whether such tax is
payable by or assessed against the Tenant or the Landlord and,
notwithstanding anything herein contained, regardless of whether or
not such tax is payable in connection with income tax payable by the
Landlord, all to the intent that any value added or sales tax or
similar tax shall be the responsibility of the Tenant to pay or if
paid by the Landlord, the Tenant shall reimburse the Landlord for the
amount of such tax immediately upon demand by the Landlord.
(c) The business to be conducted upon and from the Premises shall be known
by the name "Ableauctions.com Inc." and by no other name whatsoever
without the prior written consent of the Landlord.
(d) Without limiting the generality of anything else herein contained, the
Tenant shall be responsible for the replacement of fluorescent tubes
in the Premises.
(e) Without limiting the generality of paragraph 5.6 of this Lease, the
Tenant acknowledges that it has inspected the Premises and accepts the
Premises on an "as is" basis and the Landlord is not obligated to make
any leasehold improvements.
(f) The Tenant has prior to execution of this Lease delivered to the
Landlord a deposit in the amount of $4,665.20 which is to be applied
towards the Basic Rent for September, 1999 and the last month's Basic
Rent, provided that if at any time the deposit or any part has not
been so applied by the Landlord and the Tenant fails to comply with
its obligations under this Lease, the Landlord may at its option and
without prejudice to any other rights and remedies of the Landlord,
apply the deposit or any part thereof towards curing such default.
Without limiting the generality of the foregoing, the application by
the Landlord towards curing the said default shall in no manner
whatsoever limit the Landlord's right to sue for and recover actual
damages suffered or to terminate the Lease or otherwise limit any of
the other rights and remedies of the Landlord.
EXHIBIT 10.15
8308 129TH AVENUE
SURREY,B.C.
OFFER TO SUB-LEASE
BETWEEN
HGP GLASS INDUSTRIES OF CANADA INC.
(SUB-LANDLORD)
AND
ABLE AUCTIONS.COM INC.
(SUB-TENANT)
Colliers Macaulay Nicolls Inc.
Leasing Division
("Agent")
<PAGE>
OFFER TO SUB-LEASE
8308 129TH AVENUE
SURREY,B.C.
(THE "BUILDING")
TO: HGP GLASS INDUSTRIES OF CANADA INC. ("Sub-Landlord")
#850-14160 Dallas Parkway
Dallas, Texas 75240
WE: ABLE AUCTIONS.COM INC. ("Sub-Tenant")
1963 Lougheed Highway
Coquitlam, B.C.
V3K 3T8
hereby offer to lease from the Landlord, upon the following terms and
conditions, approximately 22,035 square feet of office and warehouse space in
the Building located at 8308 129th Avenue, Surrey, B.C.
1. TERM
The Term of the Sub-Lease shall be twenty-six (26) months commencing on the
1st day of December, 1999 (the "Commencement Date") and expiring on the
31st day of January, 2002.
2. GROSS RENT
The Gross Rent, plus applicable Goods and Services Tax, shall be payable in
advance on the first day of each and every month during the Term in
accordance with the following schedule. Gross Rent shall include all
property taxes for the Premises but will not include utilities associated
with the Sub-Tenant's operations.
<TABLE>
Lease Term Per Square Foot
(months) Per Annum Per Annum Per Month
-------- --------- --------- ---------
<S> <C> <C> <C>
1 - 26 $5.72 $126,000 $10,500.00
</TABLE>
3. PROPERTY TAXES
[The Tenant shall be responsible for paying all property taxes associated
with the Premises and Goods and Services Tax on a monthly basis, in advance
on the first day of each month in addition to the Basic Rent.
-- PRECEDING TEXT IS IN STRIKE-OUT FORMAT IN THE ORIGINAL]
Initials
<PAGE>
-2-
[The Tenant's share of the above-noted expenses are estimated to be $1.20
per sq. ft. or $2,200.00 per month.
PRECEDING TEXT IS IN STRIKE-OUT FORMAT IN THE ORIGINAL]
4. DEPOSIT
A cheque for $22,470.00 (the "Deposit") payable to the Sub-Landlord's
agent, Colliers Macaulay Nicolls Inc., in trust, is tendered herewith as
the Deposit and to be credited in payment firstly towards the last month's
rent and thereafter towards the first rent due, plus any applicable Goods
and Services Tax, and to be returned to the Sub-Tenant if this Offer is not
accepted. In the event the Sub-Tenant defaults under the terms hereof, the
Sub-Landlord may terminate this agreement and retain the Deposit on account
of damages and not as a penalty, without prejudice to any other remedy.
5. LEASE
The Sub-Tenant covenants to abide by all the terms of the Sub-Landlord's
Lease (the "Lease") with the exception of the terms set out in this Offer
which differ from the terms of the Lease. The Sub-Landlord shall provide
the Sub-Tenant with a copy of the Lease within three (3) days after the
acceptance of this Offer to Sub-Lease.
The Sub-Tenant shall enter into a Sub-Lease Agreement incorporating the
terms of this Offer and the Lease amended where applicable, if requested by
the Sub-Landlord who shall prepare the Sub-Lease Agreement at its cost
within ten (10) days after the removal of the Sub-Tenant's and
Sub-Landlord's conditions precedent otherwise this Offer together with the
Lease shall constitute the Sub-Lease Agreement.
6. USE
The Sub-Lease Premises shall be used only for the purposes of auction
distribution, wholesale and warehousing of office furniture, various
consumer products, industrial/commercial vehicles and equipment.
7. SOLE AGREEMENT
There are no agreements, covenants, representations, warranties or
conditions in any way relating to the subject matter of this agreement
expressed or implied, collateral or otherwise, except as expressly set
forth herein.
8. TIME OF THE ESSENCE
Time is of the essence of this agreement with respect to the covenants
contained herein.
9. DEFINITIONS
Words defined in the Lease and used herein shall have the same meaning
ascribed to them by the Lease.
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10. CONSENT OF LANDLORD
This Offer is subject to the consent of the Landlord in accordance with the
terms of the Lease.
11. OFFER PROVISIONS
All terms of this Offer shall survive the completion of this transaction
and shall not merge. In the event of any conflict between the terms of this
Offer and the terms of the Lease, the terms of this Offer shall prevail.
12. EARLY OCCUPATION BY SUB-TENANT
During any period prior to the commencement of the Term (including the
period from the date upon which the Leased Premises are ready for the
construction of the Tenant Improvements until the commencement of the Term)
in which the Tenant is permitted to have occupancy of the Leased Premises,
whether exclusively or in common with the Landlord, its contractors,
sub-contractors, or employees, the Tenant shall be bound by all the
provisions of the Lease saving those requiring the payment of Basic Rent or
the Tenant's Proportionate Share of Operating Costs and Property Taxes.
13. SUB-LANDLORD IMPROVEMENTS
The Sub-Landlord will at its cost will ensure all fixturing, lighting and
HVAC are in good working order.
14. SUB-TENANT IMPROVEMENTS
The Leased Premises are leased "as is" and any alterations shall be subject
to the Tenant obtaining the approval of the local Municipal authority, the
Landlord and the Landlord's mechanical, electrical, structural consultants
and architects, at the Tenant's cost.
15. SUB-LANDLORD TO DETERMINE FINANCIAL STRENGTH OF TENANT
Acceptance of this Offer by the Landlord is conditional upon the Tenant
providing the Landlord with information regarding the financial status of
the Tenant as the Landlord may reasonably require for the purposes of
determining the financial strength of the Tenant. Within three (3) days of
the date of execution of this Offer by the Landlord, the Landlord shall
notify the Tenant of what information it requires and the Tenant shall then
have seven (7) days to supply the said information to the Landlord. The
Landlord shall have seven (7) days from the date of receipt of the
aforesaid information to determine whether or not the Tenant is of
sufficient financial strength. The condition referred to in this paragraph
shall have been satisfied when the Landlord has so notified the Tenant in
writing within the time limited above. If no such notification in writing
is given or the Landlord advises the Tenant that it is not satisfied with
the Tenant's financial strength this Offer shall become null and void and
the Deposit returned in full.
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16. CONDITIONS PRECEDENT
This Offer and Acceptance is subject to the following Conditions Precedent
being waived at the sole discretion of the Sub-Tenant.
A. The Sub-Tenants review and approval of the Sub-Landlord's Lease of the
Premises within ten (10) business days after the acceptance of this
Offer to Lease.
B. The Sub-Tenant's Board of Directors' approval of the Premises within
ten (10) business days after the acceptance of this Offer to Lease.
C. The Sub-Tenant receiving a Business License from the City of Surrey
within fifteen (15) business days after the acceptance of this Offer
to Lease.
D. The Sub-Tenant entering into a new lease with the Landlord commencing
after the expiration of the Sub-Lease Term to its sole satisfaction
within fifteen (15) business days after the acceptance of this Offer
to Lease.
If the Sub-Tenant fails to notify the Sub-Landlord in writing that the
Conditions Precedent have been satisfied or waived within the stipulated
time, this Offer shall become null and void and the deposit returned to the
Tenant.
17. CONDITIONS PRECEDENT
This Offer and Acceptance is subject to the following Conditions Precedent
being waived at the sole discretion of the Sub-Landlord.
A. The Sub-Landlord receiving approval of the Sub-Lease from its Board of
Directors.
B. The Sub-Landlord securing a termination of its Sub-Lease with the
Department of Highways in the office area of the Premises.
If the Sub-Landlord fails to notify the Sub-Tenant in writing that the
Conditions Precedent have been satisfied within fifteen (15) business days
after the acceptance of this Offer to Sub-Lease or such other time as may
be agreed, then this Agreement will become null and void and the deposit(s)
and any accrued interest shall be returned to the Tenant forthwith without
deduction and neither party shall have further obligation to the other.
This clause is for the sole benefit of the Sub-Landlord.
18. DISCLOSURE
The Sub-Landlord and the Sub-Tenant acknowledge and agree that:
(i) in accordance with the Code of Ethics of the Canadian Real Estate
Association, Colliers Macaulay Nicolls Inc. (the "Agent") has
disclosed that it is representing the Sub-Landlord and the
Sub-Tenant in the transaction described in this Agreement;
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(ii) the Agent, in order to accommodate the transaction described in
this Agreement, was and is entitled to pass any relevant
information it receives from either party or from any other
source to either of the parties as the Agent sees fit, without
being in conflict of its duties to either party; and
(iii) the Sub-Landlord shall pay the commission and compensation due to
the Agent pursuant to the transaction described in this
Agreement.
19. ACCEPTANCE
This Offer shall be irrevocable and open for acceptance until 4:00 p.m. on
the ______ day of August, 1999, after which time if not accepted this Offer
shall be null and void and the Deposit shall be returned in full to the
Sub-Tenant. This Offer may be accepted by signing and returning one
duplicate copy or facsimile of this Offer.
DATED this 22 day of August, 1999.
ABLE AUCTIONS.COM INC.
SUB-TENANT
Per: /s/ Jeremy Dodd
-------------------------------------
Per: -------------------------------------
ACCEPTANCE
The Sub-Landlord hereby accepts the above Offer this ____ day of August, 1999.
HGP GLASS INDUSTRIES OF CANADA INC.
SUB-LANDLORD
Per: /s/ illegible
-------------------------------------
Per: -------------------------------------
LANDLORD'S CONSENT
The Landlord hereby consents to the attached Offer this 22nd day of September,
1999.
SHAUNAVON HOLDINGS LTD.
LANDLORD
Per: /s/ J.J. Carey
-------------------------------------
Per: -------------------------------------
EXHIBIT 16.1
Barry L. Friedman, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
Consent of Independent Auditors
The Board of Directors
Ableauctions.com, Inc.
(formerly J.B. Financial Services, Inc.)
1963 Lougheed Highway
Coquitlam, British Columbia
Canada V3K 3T8
United States Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We have reviewed the Form 10-SB registration statement (the "Form 10-SB") filed
by Ableauctions.com, Inc. (formerly J.B. Financial Services, Inc.) (the
"Company"), and agree with the statements disclosed by the Company under Item
14. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
We consent to the use of our report included herein and to the reference to our
firm in this registration statement on Form 10.
/s/ Barry L. Friedman 11/16/99
-------------------------------- -------
Barry L. Friedman, P.C. Date
Las Vegas, Nevada
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,168,680
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<RECEIVABLES> 308,987
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0
0
<COMMON> 18,250
<OTHER-SE> 3,707,718
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<SALES> 207,936
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<CGS> 123,875
<TOTAL-COSTS> 684,628
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<INTEREST-EXPENSE> 11,115
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