Stratton Capital Corp.
TSX VENTURE : SNK.P

March 14, 2014 19:57 ET

Stratton Capital Corp. Enters into Definitive Merger Agreement with Be Nourished Inc. for Qualifying Transaction

TORONTO, ONTARIO--(Marketwired - March 14, 2014) -

THIS PRESS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

Stratton Capital Corp. (TSX VENTURE:SNK.P) ("Stratton" or the "Corporation") is pleased to announce that, further to its press release dated January 10, 2014, it has entered into a definitive merger agreement with Be Nourished Inc. ("Be Nourished") dated March 14, 2014 (the "Agreement"), in respect of its proposed acquisition of Be Nourished (the "Qualifying Transaction").

The Agreement provides for, among other things, the three-cornered amalgamation (the "Amalgamation") of Be Nourished with a wholly-owned subsidiary of Stratton to be incorporated for the purposes of the Amalgamation ("Subco"). On completion of the Amalgamation, among other things: (i) the amalgamated company will become a wholly-owned subsidiary of Stratton; and (ii) all of the outstanding common shares of Be Nourished will be cancelled and exchanged for common shares of Stratton on a share for share basis (following a share split of the Be Nourished common shares on a 64.88 for one basis) at a deemed price of $0.11 per Stratton share.

Upon the closing of the Qualifying Transaction, it is intended that Stratton will change its name to "Healthy Food Brands Incorporated" or such other acceptable name. An annual shareholders meeting of Stratton to consider usual annual business, the name change and other matters ancillary to the Qualifying Transaction has been called and will be held in Toronto on Friday, March 28, 2014. Completion of the proposed Qualifying Transaction is subject to, among other things, receipt of all necessary regulatory and shareholder approvals.

Terms of the Proposed Qualifying Transaction

Prior to the completion of the proposed Qualifying Transaction, Be Nourished is required to effect a share split (the "Split") of its outstanding common shares on the basis of 64.88 common shares for every outstanding share. The Amalgamation, the proposed Split and other matters ancillary to the Qualifying Transaction will be considered at a meeting of shareholders of Be Nourished to be held prior to the completion of the proposed Qualifying Transaction. As the proposed Qualifying Transaction is not a "Non Arm's Length Qualifying Transaction" (within the meaning of the policies of the TSX Venture Exchange ("Exchange")), the Amalgamation contemplated by the Agreement does not require approval of the shareholders of Stratton.

Pursuant to the Amalgamation, among other things, holders of Be Nourished common shares will receive one common shares of Stratton for each one Be Nourished common share (post-Split) held immediately prior to the Amalgamation (the "Exchange Ratio").

In addition, holders of warrants to purchase common shares of Be Nourished will receive from Stratton, a warrant to purchase the same number of common shares of Stratton at the same exercise price per share as previously provided for in former Be Nourished warrants (post-Split), reflecting the one for one Exchange Ratio.

Upon completion of the Qualifying Transaction, it is expected that Stratton will be a Tier 2 issuer pursuant to the policies of the Exchange. Based on the number of Be Nourished common shares anticipated to be outstanding prior to closing, and assuming the exchange of each Be Nourished Subscription Receipt (as defined below) for one Be Nourished common share and one Be Nourished share purchase warrant prior to the Amalgamation, there would be approximately 64,435,275 Stratton common shares outstanding upon completion of the Qualifying Transaction, on a non-diluted basis. On completion of the Qualifying Transaction, the current shareholders would hold an aggregate of approximately 7,953,251 common shares, or approximately 12.34% of the outstanding common shares, the shareholders of Be Nourished prior to closing would hold an aggregate of approximately 20,118,388 common shares of Stratton, or approximately 31.2%, and investors in the Be Nourished Private Placement (as defined below), assuming the maximum offering, would hold an aggregate of approximately 36,363,636 common shares, or approximately 56.43%.

Private Placement

Stratton and Be Nourished have engaged Haywood Securities Inc. to act as agent (the "Agent") in connection with a brokered private placement (the "Private Placement") of up to 36,363,636 subscription receipts ("Subscription Receipts") at a price $0.11 per Subscription Receipt, to raise gross proceeds of up to C$4.0 million. Each Subscription Receipt will be automatically exercised, without any further action required by the holder (and for no additional consideration), for one unit (a "Unit") comprised of one common share of Be Nourished and one common share purchase warrant of Be Nourished (a "Warrant"), subject to adjustment in certain events, upon the satisfaction of the Escrow Release Conditions (as will be defined in the trust indenture to govern the Subscription Receipts and which will principally require that all conditions to the proposed Qualifying Transaction other than the payment of the purchase consideration shall have been satisfied or waived). Each Warrant will be exercisable to acquire one common share of Be Nourished for a period of 24 months following the issuance thereof upon the exercise of the Subscription Receipts at an exercise price of $0.15 per Be Nourished share, subject to adjustment in certain events. The proceeds of the Private Placement will be placed in escrow and held by a third party escrow agent pending completion of the Escrow Release Conditions. In the event that Be Nourished has not satisfied the Escrow Release Conditions prior to 5:00 p.m. (EST) on May 31, 2014 (the "Escrow Deadline"), the escrowed funds, together with any interest accrued thereon, shall be returned to the holders of the Subscription Receipts and the Subscription Receipts shall be cancelled. While it is currently contemplated that the Subscription Receipts will be issued by Be Nourished, the Agent may elect at its option that the Subscription Receipts be issued by Stratton instead.

In consideration for their services in connection with the Private Placement, Be Nourished is required to pay the Agent a commission equal to 7.25% of the gross proceeds from the sale of the Subscription Receipts, which commission will be deposited in escrow, and will issue to the Agent subscription receipts ("Compensation Subscription Receipts") which shall be automatically exchanged for compensation options (the "Compensation Options") upon satisfaction of the Escrow Release Conditions entitling the Agent to purchase that number of Units equal to 8.0% of the aggregate number of Subscription Receipts issued under the Private Placement at an exercise price of $0.11 per Unit. The Compensation Options shall have a term of 24 months from the closing of the Private Placement. If the Escrow Release Conditions have not been satisfied on or prior to the Escrow Deadline, the Compensation Subscription Receipts shall thereafter be cancelled.

Proposed Directors and Senior Management Team

Upon the closing of the Qualifying Transaction, it is anticipated that directors and senior officers of the resulting company will be those set out in Stratton's press release dated January 10, 2014, with the exception that it is now proposed that the board of directors of the resulting company will consist of seven directors instead of six and, subject to regulatory approval, Mr. Shawn Sugarman will additionally be appointed to the board. A brief resume for Mr. Sugarman is set out below:

Shawn Sugarman - Proposed Director of Resulting Issuer

Shawn Sugarman has a distinguished career in the food and beverage and consumer electronics sectors. Mr. Sugarman had a 19-year career with The Coca-Cola Company where he led several divisions, including Coca-Cola Nestle Refreshments- Asia Pacific, Minute Maid Canada, Minute Maid RTD North America and Odwalla. After leaving Coke, Mr. Sugarman became CEO of Dana Innovations and led the renaissance of the Sonance brand, regaining leadership in whole-home audio solutions. Mr. Sugarman is currently co-founder and director of Pellisari LLC, an audio design company. He also runs a consulting practice catering to companies in the food and beverage industry. Mr. Sugarman earned his BA in Economics at Principia College and his MBA from The University of Texas in 1985.

Sponsorship

Stratton has applied to the Exchange for an exemption from the sponsorship requirements of the Exchange in connection with the proposed Qualifying Transaction.

Stratton Capital Inc.

Stratton is a Capital Pool Company and intends for the acquisition of Be Nourished to constitute its Qualifying Transaction as such term is defined in the policies of the TSX Venture Exchange (the "Exchange"). The Qualifying Transaction is not a non-arm's length transaction pursuant to the policies of the Exchange.

Cautionary Note

Completion of the Qualifying Transaction is subject to a number of conditions, including but not limited to, completion of the Private Placement, Exchange acceptance and any other necessary regulatory approvals, and approval by the shareholders of Be Nourished. Where applicable, the Qualifying Transaction cannot close until, among other things, the required Exchange and Be Nourished shareholder approval is obtained. There can be no assurance that the Qualifying Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon.

Trading in the securities of a Capital Pool Company should be considered highly speculative.

Forward-Looking Statements

Certain information set forth in this press release may contain "forward-looking statements" or "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein may constitute forward-looking statements. Any such forward-looking statements may be identified by words such as "will", "expects", "anticipates", "believes", "projects", "plans" and similar expressions. Any such statements are not guarantees of future performance and undue reliance should not be placed on them. Any such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Stratton's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. There can be no assurance that any such forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Stratton undertakes no obligation to update any such forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on any such forward-looking statements.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

The securities described in this press release have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to a U.S. person absent an available exemption from the registration requirements of such Act.

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