<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b) or 12(g) of
the Securities Act of 1934
JAVA GROUP, INC.
- - --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
DELAWARE 11-2987370
- - ------------------------------------------------ --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
404-999 Canada Place
Vancouver, British Columbia, Canada V6C 3E2
- - ------------------------------------------------ --------------------
(Address of Principal Executive Offices) (Zip Code)
(604) 641-1362
-------------------------------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
------------------- ------------------------------
Not applicable Not applicable
- - ------------------------------------ -----------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.0001 per share
- - --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . . . .1
Item 2. Plan of Operation. . . . . . . . . . . . . . . . . . . . . .9
Item 3. Description of Property . . . . . . . . . . . . . . . . . .11
Item 4. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . . .12
Item 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . . . . . . . .13
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . .14
Item 7. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . . . . . .14
Item 8. Description of Securities . . . . . . . . . . . . . . . . .14
PART II
Item 1. Market Price of and Dividends on the
Registrant's Common Equity and Other
Stockholder Matters. . . . . . . . . . . . . . . . . . . .15
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .16
Item 3. Changes in and Disagreements With
Accountants. . . . . . . . . . . . . . . . . . . . . . . .16
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . .16
Item 5. Indemnification of Directors and Officers. . . . . . . . . .17
PART F/S Financial Statements and Exhibits. . . . . . . . . . . . . .19
PART III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . .19
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . .19
<PAGE>
Item 1. DESCRIPTION OF BUSINESS
GENERAL
Java Group, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on May 25, 1989 under the name Montrose Ventures, Inc.
(which was changed to Java Group, Inc. on August 25, 1993). The Company's
principal executive offices are located at 404-999 Canada Place, Vancouver,
British Columbia, Canada V6C 3E2, and its telephone number is (604) 641-1362.
As used herein, the term "Company" means Java Group, Inc. and 464431 B.C. Ltd.,
a wholly-owned Canadian subsidiary of the Company.
In August 1993, the Company entered the retail coffee house business
following a change of control in the Company's management and ownership effected
by Robert P. Gillingham, currently the President and principal stockholder of
the Company.
In July 1993, prior to becoming associated with the Company, Mr.
Gillingham and John Williams, a former director and stockholder of the Company,
entered into a license and management agreement (the "Management Agreement")
with Java Girl Coffee Ltd. ("J.G. Coffee") to acquire the rights from J.G.
Coffee to develop retail coffee houses worldwide using the Java Girl name and
logo. T.A.B.S. Enterprises Ltd., an unaffiliated third party ("TABS") and an
affiliate of J.G. Coffee, had the right to manage and operate the coffee houses.
Messrs. Gillingham and Williams had no affiliation with J.G. Coffee prior to
July 1993.
At the time they entered into the Management Agreement, Messrs.
Gillingham and Williams intended to develop a limited number of coffee house
locations on their own. However, upon further review of the existing Java Girl
locations and perceived business opportunities, Mr. Gillingham determined that
an expansion of the Java Girl coffee houses on a larger scale was possible and
he developed a business plan for the expansion of the coffee houses. Mr.
Gillingham believed that the implementation of the plan, and the financing
thereof, could be better achieved through an existing public company such as the
Company. As a result, in August 1993, Messrs. Gillingham and Williams
introduced the business plan to the Company for the development of the retail
coffee houses using the Java Girl name and logo pursuant to the Management
Agreement. The Company adopted Mr. Gillingham's plan and agreed to transfer
control of the Company to Mr. Gillingham in connection therewith. As a result,
the then present Board of Directors resigned and Mr. Gillingham caused a change
in control in the management and ownership of the Company. The Company then
further developed and commenced the implementation of the business plan.
<PAGE>
INITIAL JAVA GIRL COFFEE HOUSES
At the time the parties entered into the Management Agreement in July
1993, TABS already owned one profitable Java Girl coffee house located at the
Renaissance Hotel in Vancouver, British Columbia, Canada. The store was closed
in or about December 1993 in connection with a dispute with the landlord. At
approximately the same time, J.G. Coffee opened a Java Girl coffee house at
Lougheed Mall in Vancouver, Canada which operated for approximately eighteen
months. The store was closed due to a lack of consistent profits over the
course of the eighteen-month period of operation and a lower than expected rate
of return on investment. The Company had no ownership or other interest in this
location, other than an option to acquire a 50% interest, which option was not
exercised.
In December 1993, the Company and TABS opened a Java Girl coffee house
in the lobby of the Richmond Inn Hotel in Richmond, British Columbia, Canada.
The Company and TABS each have a 50% joint venture interest in this location.
LICENSE AND DEVELOPMENT AGREEMENT
In May 1994, Messrs. Gillingham and Williams assigned to the Company
all of their rights as owner under the Management Agreement pursuant to a
license and development agreement between the Company and TABS (the "License and
Development Agreement"). The Company paid no consideration to Messrs.
Gillingham and Williams in connection with the assignment. The Management
Agreement is no longer in effect and has been superseded by the License and
Development Agreement. Pursuant to the License and Development Agreement, TABS
granted to the Company an option to license the name "Java Girl" and a system
for the operation of Java Girl coffee houses utilizing certain standards,
specifications, methods and systems in connection with the distribution,
marketing and sale of coffee products (the "System").
Pursuant to the License and Development Agreement, TABS and the
Company jointly approve the location of the Java Girl coffee houses. TABS has
generally undertaken the responsibility for finding new proposed locations. As
a result, the Company does not anticipate investing any material time or effort
to locate sites for coffee houses. The Company leases the coffee house location
and simultaneously therewith, exercises the option to license the Java Girl name
and the System. The term of the license commences on the date of the exercise
of the option granted to the Company and is co-terminus with the term of the
lease of the coffee house location. The Company also has a right of first
refusal with respect to offers to develop coffee house
-2-
<PAGE>
locations received by TABS from third parties or locations proposed to be
developed by TABS. TABS, as the Company's agent, is responsible for the
construction and supervision of the development of the location, including any
leasehold improvements. The Company is responsible for the development and
associated costs and licensing fees of TABS. Furthermore, the Company reviews
the budgets, demographic studies and walk-by traffic counts for each location.
TABS is required to expend not less than five percent (5%) and not
more than twenty percent (20%) of the total development costs. The Company is
responsible for the balance of the development costs. The Company and TABS will
be joint venturers in the ownership of each coffee house, with respective
ownership interests equal to the percentage of each venturer's contribution to
the total development costs. TABS is obligated to use its best efforts to limit
the construction costs of each coffee house to US$65,000. The payment of any
development costs above US$65,000 shall be the responsibility of the Company,
unless TABS desires to increase its ownership interest in the coffee house. In
such case, TABS and the Company will be responsible for the percentage of the
excess costs equal to their respective joint venture interest. Under the
License and Development Agreement, the Company is obligated to pay TABS a
monthly licensing fee equal to five percent (5%) of the gross sales of each
coffee house. Furthermore, in lieu of the payment to TABS of a five percent
(5%) management fee under the Management Agreement, the Company granted to TABS
a five-year option to purchase 2,000,000 shares of the Company's capital stock
at a price of US $.10 per share until May 20, 1999. The grant of the option to
TABS under the Management Agreement has no effect on the Company's obligation to
pay the 5% licensing fee.
The Company has the option to renew the term of each license with
respect to a Java Girl coffee house for a renewal term equal to the renewal term
of the lease at the location, without payment of any renewal fee. The Company
must provide TABS with not less than six months' written notice prior to the
expiration of the initial term. If, during the term of the license period,
either the Company or TABS obtains a bona fide offer to sell the whole or any
part of its interest in a coffee house, the party receiving the offer
("Offeror") must give the other party ("Offeree") prompt written notice thereof,
together with a copy of the offer. The Offeree will have 30 working days to
exercise the option upon the same terms and conditions.
At any time during the term of the license period, either party may
offer to purchase the whole or any part of the other party's interest in the
coffee house, including, but not limited to, the leasehold interests.
-3-
<PAGE>
The License and Development Agreement does not contain a termination
date nor any requirement that a minimum number of locations must be developed.
As long as locations for coffee houses continue to be leased and developed by
the Company, the License and Development Agreement will remain in effect.
RELIANCE ON KLAUS HENCK
Mr. Klaus Henck, the President and a principal stockholder of TABS,
has extensive experience in the retail operations of the food and beverage
industry. Mr. Henck developed the concept for the Java Girl coffee houses and
he operated the first Java Girl coffee house. The Company relies on the
experience and services of Mr. Henck in the food and beverage industry to a
large degree. Mr. Henck develops most of the Company's operating strategies for
review with the Company's management.
Mr. Henck is 54 years old. In 1983, he formed, and presently owns,
Astor Hospitality Management ("Astor"), a hotel management and development
company. Astor directed the management and development of over 1100 hotel rooms
in St. Louis, Missouri; Washington, DC; Atlanta, Georgia; Florida and Colorado.
In 1990, Astor was restructured and diversified to provide asset management,
hospitality consulting and employee training through affiliated offices in
Washington, DC; Orlando, Florida; Dallas, Texas; and Los Angeles, California.
From 1979 to 1983, Mr. Henck served as Vice President of the Food and Beverage
Division at Ramada Inns, Inc. From 1977 to 1979, he served as Regional Director
of Food and Beverage with Holiday Inns of Canada in Western Canada.
In the event the expertise of Mr. Henck is no longer available to the
Company, the Company would need to retain the services of an experienced
individual from a large food and beverage company. The Company expects that it
would be required to pay a substantial salary to such person, as well as other
performance-based incentives. There is no assurance that the Company would be
able to retain the services of such an individual at a salary affordable to the
Company.
None of the executive officers and directors of the Company have any
significant experience in the food and beverage industry.
PRODUCTS
The Java Girl concept is based on using only 100% Arabica beans grown
at high altitudes and imported from locations in which the finest beans are
grown. Costa Rica, Guinea, Colombia, Kenya and Java are the primary coffee
producing regions
-4-
<PAGE>
which grow premium green beans that meet the Company's specifications. There
are approximately 60 Arabica bean types and 60 blends which are fresh roasted to
make up the Company's Supreme Blends and Espresso brands. The use of the
correct grind for each type of coffee and purified water assures superior and
consistent quality. The Company intends to roast and grind its coffee on the
premises at the store location or use small local roasters to maintain a proper
edge on the taste. The Company believes that it is more efficient to roast
coffee in smaller five-pound increments as the demand for some of the estate
blends is presently not at a high level. Traditionally, coffee beans were
roasted in 500 to 1,000 pound increments. The beans roasted in this manner were
allowed to settle in a separate tank for approximately two to three days to
enable gases to escape. As the time for the gas to escape increases, the
freshness of the coffee taste is significantly reduced. In order to maintain
the essential freshness, the ground product is now placed into the modern valve
bag. The one-way valve bag was designed approximately three years ago to permit
a more efficient escape of gases from the coffee bag. The use of large tanks is
no longer necessary for the gas removal process. The brewing process is
performed in state of the art equipment made from stainless steel and vacuum
containers with glass inserts to safeguard the coffee from breaking and losing
its flavor.
To distinguish its coffee products and coffee houses from other coffee
products and coffee houses, the Company exclusively uses Arabica beans. The
Company believes that Arabica beans are the only type of coffee bean to provide
quality, gourmet coffee. The Company intends to maintain a high profile for the
"Java Girl" name and believes that the association of the name with high quality
coffee products will be essential to the Company's success.
RETAIL STORES
Prior to approving a location for a coffee house, the Company conducts
a walk-by traffic count. In order for a location to be considered by the
Company, there must be walk-by traffic on a regular basis of at least 400
potential customers per day. The premises for the establishment of coffee
houses will be leased only if traffic volumes can be confirmed and there are
exclusivity clauses in the leases to prevent direct competition in the immediate
area. The Company believes that in markets that are intensely competitive,
business is not highly price sensitive. In the absence of an adjacent
competitor, customers will not walk any significant distance to take advantage
of a lower-priced product.
The Java Girl outlets that the Company intends to open will be located
in high traffic locations such as suburban malls
-5-
<PAGE>
and urban downtown areas. The overall design of the stores is intended to
create an ambiance that has become a part of the Java Girl mystique. The
ambiance emphasizes the aroma of the coffee, comfortable seating and relaxing
decor, which the Company believes creates an atmosphere that increases coffee
sales. The format of the individual store generally will not vary significantly
from location to location. The size of the locations will fluctuate from a
minimum of 500 sq. ft., to a maximum of 1,200 sq. ft. The furniture, fixtures
and equipment are similar at each store, and seating is available at tables and
countertops. The design will generally not change from location to location,
but will be customized to the size of the store. Coffee will be the focal point
of each site with the counter and back bar having a display of glass containers
filled with the top 20 Arabica blends built into the self-contained unit. This
configuration is believed to optimize potential gourmet coffee sales in spite of
the fact that the top six blends will historically account for the majority of
the sales. In addition, fresh baked muffins, sandwiches, cookies and Java Fruit
Coolers are available. The "Fruit Coolers" are iced drinks prepared from Torani
fruit syrups, blended with ice cubes, topped with purified soda water and
garnished with fresh fruit.
The decor of Java Girl coffee houses is modular, which enables the
Company to open quickly with a highly competitive product in areas that may
appear marginal to the competition. The interior finishes are black, oak,
white, orange, gold and racing green. The color selection is designed to
provide a modern setting and a strong, warm appeal to the casual customer. The
atmosphere is one of friendliness - a light and breezy place where one can enjoy
the world of coffee while unwinding from a grueling day, or just breathe in the
aroma while being transported to another place. Management believes that the
coffee shops of many other competitors do not provide such an atmosphere.
The first coffee house of the Company, located in North Vancouver,
Canada, opened in February 1995 and closed in June 1995. The Company owned a
49% limited partnership interest in the location and contributed approximately
$88,000 to the development costs of the location. The Company closed the coffee
house due to losses from operations which the Company believes were attributable
to the lack of sufficient pedestrian traffic in the area. The Company was
partly repaid from the value of removable furniture and equipment from this
store totalling $30,000.
In July 1995, the Company began operations at a new Java Girl coffee
house located at 500 West Broadway, Vancouver, British Columbia, Canada. The
Company owns an 80% joint venture
-6-
<PAGE>
interest in an unincorporated joint venture and TABS is the owner of the
remaining 20% interest.
The Company also owns a 50% joint venture interest in the coffee house
located at the Richmond Inn Hotel, with TABS owning the balance of the 50%
interest.
EXPANSION STRATEGY
GERMANY
The Company will seek to open Java Girl coffee houses in high-traffic
locations in suburban malls and downtown areas as well as other suburban
settings. The Company's current strategy is to open Java Girl coffee houses in
Germany. The headquarters for the German operation are in Chemnitz, Germany
where the Company opened its first German coffee house in July 1996. The
Company has entered into preliminary discussions with certain national and
regional breweries in Germany to finance the development costs of new sites
through loans having terms of 3-5 years which are secured by the furniture,
fixtures and equipment at the location. As a condition to the loan and in
accordance with standard practice by German breweries, the Company will be
obligated to sell the breweries' beer in the coffee house on an exclusive basis
and the breweries will have the right to approve each location. The breweries
will only enter into such arrangements on a location by location basis. Based
solely on oral expressions of interest by German breweries, the Company hopes to
operate up to ten new coffee houses in Germany over the next twelve months.
There is no assurance that any arrangements will be entered into between the
Company and one or more of the German breweries. Furthermore, although one
national brewery has orally indicated that it will finance up to 75% of the cost
of the furniture, fixtures and equipment at a certain new location, all of the
material terms have not been finalized and there can be no assurance an
arrangement with such brewery will be reached, or that any such arrangement will
be on terms favorable to the Company. The terms of the financing will vary
based on the brewery and the size and location of the coffee house.
In Germany, the Company believes that the Java Girl coffee houses that
are financed in part by the breweries will occupy approximately 1,200 to 1,800
square feet, depending upon location. The Company will attempt to develop five
stores at the same time, provided that adequate financing is available and the
stores operate on a profitable basis. The Company will target breakfast and
lunch as primary meal periods. Other coffee houses located outside of Germany
are anticipated to be smaller, ranging from 500 to 1,200 square feet. The site
in Chemnitz, Germany consists of approximately 500 square feet with 25 seats and
is
-7-
<PAGE>
located in a marketplace setting. Coffee will be the focal point of each site,
with the counter and back-bar having a designer display of glass containers
filled with a variety of Arabica blends built into the self-contained unit. The
configuration is believed to optimize potential gourmet coffee sales despite the
fact that the six most popular blends historically account for the majority of
sales. The ambiance will emphasize the aroma of the coffee, comfortable seating
and relaxing decor.
There is no assurance that the Company's expansion strategy into
Germany will be successful.
UNITED STATES AND CANADA
During the next three years, the Company will seek to develop coffee
house locations in key urban areas in the United States. The initial focus will
be in New York, Massachusetts, Texas, Florida and Atlanta, Georgia. The Company
intends to develop such locations pursuant to the organization of a limited
partnership entity in which the Company will be the general partner of the
limited partnership. The Company will be responsible for the overall management
and the day-to-day operations of the new locations. The urban areas to be
targeted must meet the following criteria: (i) a population above 400,000
persons to support a minimum of five locations with the potential for future
growth; (ii) a population familiar with gourmet coffee products; and (iii) a
market that is not saturated with coffee stores.
COMPETITION
The Company's coffee beverages compete directly against all restaurant
and beverage outlets that serve coffee and a growing number of coffee and
espresso stands, carts and stores. Many competitors have established
reputations and substantially greater resources than the Company. The Company
believes that its customers choose among retailers primarily on the basis of
quality and convenience. In addition, the Company competes for whole bean
coffee sales with franchise operators and locally-owned specialty coffee stores.
Since the gourmet segment of the industry is still in its infancy, the Company
believes there is substantial opportunity to develop the business on an
international basis. However, there is no assurance that the Company will be
successful in expanding its operations or that other companies with greater
financial, marketing, and/or other resources than the Company will not enter the
market in competition with the Company.
Although there is presently no significant competition in the coffee
house business in Germany, there are other important factors that must be
considered. The most significant
-8-
<PAGE>
is the lack of affordable locations to lease. In addition, the German consumer
has not yet embraced the gourmet coffee market. In order to reach the potential
consumers in this market, the Company's marketing effort to promote its identity
and product will include an Internet program throughout Europe.
In the United States, coffee houses are a relatively recent
development. Many major cities on the west coast and east coast are already
saturated by development. However, management believes that there are other
areas that are still available for market penetration. The Company will focus
its efforts on the cities with relatively insignificant coffee house
development.
EMPLOYEES
The Company currently employs 2 full-time salespersons at the coffee
houses, the President and 10 support staff. The President of the Company has
not drawn a salary to date and does not intend to do so until the Company is
profitable. None of the Company's employees are represented by a labor union.
The Company has experienced no work stoppages and believes that its employee
relations are good.
PRODUCT SUPPLY
Presently, the Company does not have any commitments, arrangements or
agreements for the purchase of its coffee requirements. The Company, therefore,
is subject to the risks associated with the increases in coffee prices.
Item 2. PLAN OF OPERATION
In February 1996, the Company raised net proceeds of approximately
$465,000 in an offering under Section 504 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The Company believes
that such proceeds are sufficient to implement its business plan of operating up
to 10 coffee houses in Germany during the next twelve months. Such belief,
however, is based on its ability to receive debt financing of up to 75% of the
cost of the furniture, fixtures and equipment per location from German
breweries. During the next two years the Company would also like to open coffee
houses outside of Germany, particularly in Atlanta, Georgia and in California,
where no such debt financing will be available. The opening of such coffee
houses is subject to the Company obtaining financing in either public offerings,
private placements or limited partnerships.
Currently, the Company's principal use of cash is for expenses related
to raising capital, marketing its program and opening coffee houses in Germany.
Although significant cash
-9-
<PAGE>
expenditures will be required for each new coffee house, the Company anticipates
that financing of not less than 75% of the cost of furniture, fixtures and
equipment will be provided by the German breweries. In the event such financing
is not obtained, the Company may be required to change its business plan and
either seek to establish lower cost units in the United States or Canada and/or
seek to raise capital through debt or equity financing.
During the fiscal years ended June 30, 1994 and 1995, the Company did
not have any revenues. Its 50% ownership interest in the Java Girl coffee house
located in the Richmond Inn and its 49% limited partnership interest in the
North Vancouver location, which was closed, are accounted for on the equity
method because control by the Company does not exist. In order for the Company
to recognize revenues, the ownership of the coffee houses must be in an entity
with the Company in control of more than a 50% interest. The Company did not
have any revenues during such two-year period from the Java Girl coffee house
located at 500 West Broadway, Vancouver, Canada (80% interest) because
operations at the store did not commence until July 1995.
The average monthly sales at the two operating coffee houses were
approximately $3,500 at each location during the fiscal year ended June 30,
1995.
During the fiscal year ended June 30, 1995, the Company incurred a
loss of approximately $213,000, of which approximately $187,000 was related to
administrative costs in establishing the business. During the fiscal year ended
June 30, 1994, the Company incurred a loss of approximately $104,000, of which
approximately $70,000 related to administrative expenses. The Company's
long-term objective is to develop coffee houses in North America and Europe.
The focus will be on the development of its business through the opening of new
outlets. Furthermore, the Company has in the past and will continue in the
future to pursue investment opportunities through the acquisition of existing
outlets.
During the nine-month period ended March 31, 1996, the Company
incurred a loss of approximately $215,000, of which approximately $190,000 was
related to administrative costs in establishing the business and approximately
$31,000 was due to losses in the Broadway store operation. During such period,
the Company raised approximately $815,000, $315,000 in connection with the
exercise of warrants, and $500,000 pursuant to an offering under Section 504 of
Regulation D promulgated under the Securities Act. The Company plans to use the
proceeds of the offering to open stores in Germany.
-10-
<PAGE>
The Company plans to organize a limited partnership entity, with the
Company as the general partner. The limited partnership will acquire the rights
to develop between 20 to 50 Java Girl coffee houses in the United States during
the next 12 months. No arrangements have been made with respect to the
capitalization of this limited partnership. The Company believes that it must
raise approximately $5,000,000 to $10,000,000 over the next twelve month period
to develop the locations in the United States.
In the event the Company develops new stores at a rate of
approximately five stores every six months, the Company believes that additional
financing will not be necessary to fund the expansion into Germany. However, if
the Company increases the number of stores to be opened in Germany over a
shorter period of time and sufficient cash flow is not generated from the new
stores, additional financing may be required by the end of the 1996 calendar
year.
The Company believes that in order to achieve profitable operations in
Germany, average annual sales of approximately US $315,000 are required. In the
United States, the average store is projected to break even at approximately
$140,000 per annum.
During the fiscal year ended June 30, 1995, unaffiliated third parties
loaned the Company approximately $320,000. The loan proceeds are being used for
working capital purposes. The loans are unsecured and non-interest bearing.
The Company has received an oral indication of interest to retire the
indebtedness upon the condition that the Company become a reporting company in
accordance with the requirements of the Securities Exchange Act of 1934, as
amended. There have been no discussions regarding the terms of the retirement
of such indebtedness.
The Company expects to increase the number of its employees as new
coffee houses commence operations.
Item 3. DESCRIPTION OF PROPERTY
The Company's executive offices occupy approximately 500 square feet
of office space in Vancouver, British Columbia, Canada, under a month-to-month
lease which provides for rent of approximately $1,600 per month (including
receptionist and secretarial services). These facilities are adequate for the
Company's purposes. In the event additional space is required, the Company
believes it will be readily available.
The Company presently operates two retail coffee houses in Vancouver,
British Columbia, Canada. The Java Girl stores are
-11-
<PAGE>
located in leased premises. In December 1993, the Company opened its first
store (in which the Company owns a fifty percent (50%) joint venture
interest) in the lobby at the Richmond Inn Hotel, 7551 Westminster Highway,
Richmond, British Columbia, Canada. The premises contains approximately 200
square feet. The lease term expires December 31, 1996 with an option to
renew by the Company for an additional three years. The rent payable under
the lease agreement is 50% of net sales of the business at the premises, but
not less than a guaranteed minimum of approximately $365 per month.
The second store (in which the Company owns an eighty percent (80%)
joint venture interest), located at 500 West Broadway, was opened in July 1995
and consists of approximately 840 square feet. The rental is approximately
$2,100 per month. The lease expires July 31, 1999, with an option to renew for
an additional five years.
The Company recently completed the negotiations for a lease in
Chemnitz, Germany. The coffee house opened in July 1996 and is located in the
central Chemnitz marketplace. The store consists of approximately 500 square
feet. The lease term is three years with a renewal option for an additional
five-year term, and the rental is approximately $2,100 per month.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of July 31, 1996, relating to the
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to be the beneficial owner of more than five percent of the
Company's outstanding Common Stock, (ii) each of the Company's directors, (iii)
the Company's Chief Executive Officer, and (iv) all officers and directors of
the Company as a group.
-12-
<PAGE>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
Robert P. Gillingham 1,750,000 26.6%
404-999 Canada Place
Vancouver, British Columbia,
Canada V6C 3E2
Ray Suutari 0 0
833 Edistel Crescent
Mississauga, Ontario,
Canada L5H 1P5
Greg Lampert 0 0
King International Group
West 7th St.
Los Angeles, California 90017
TABS Enterprises Ltd. 2,000,000(1) 23.3%
2754 Sylvan Place
Coquitlam, British Columbia
Canada
All directors and officers 1,750,000 26.6%
as a group (3 people)
- - -----------------------------------
(1) Comprised of currently exercisable warrants to purchase 2,000,000 shares
for $.10 per share, which shares are deemed to be outstanding for purposes
of calculating the percentage ownership of TABS, but not for purposes of
calculating any other person's percentage ownership.
Item 5. Directors, Executive Officers, Promoters
AND CONTROL PERSONS
NAME AGE POSITION WITH THE COMPANY
Robert P. Gillingham 49 President and Director
Ray Suutari 64 Secretary and Director
Greg Lampert 39 Director
ROBERT P. GILLINGHAM. President of the Company since 1993. From 1990 to
1993, Mr. Gillingham was a self-employed consultant. For five years prior
thereto he served as President of Golden Crown Resources Ltd., a mining
exploration company involved in the development of a garnet deposit. He is a
Chartered Accountant and he articled with Coopers & Lybrand, Vancouver, Canada.
-13-
<PAGE>
RAY SUUTARI. Secretary of the Company. For more than the past five years,
Mr. Suutari has served as a lecturer, consultant, and Assistant Professor,
Wilfrid Laurier University, Waterloo, Ontario School of Business and Economics.
GREG LAMPERT. For more than the past five years, Mr. Lampert has served as
Managing Partner of King International Asset Group, a company involved in the
identification and implementation of new business ventures in the Japanese
market.
Item 6. EXECUTIVE COMPENSATION
None of the executive officers or directors of the Company presently
receives or has received a salary or other compensation from the Company. None
of the executive officers of the Company is employed pursuant to an employment
agreement. Mr. Gillingham, the President and Chief Executive Officer of the
Company, does not intend to request any compensation unless and until the
Company is profitable. In the future, the Company intends to pay fees and grant
stock options to its non-employee directors.
The Company does not currently have any stock option plans or long-
term incentive compensation plans. In addition, the Company does not award
stock appreciation rights, restricted stock awards or long-term incentive plan
pay-outs.
Item 7. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
From time to time, Mr. Gillingham, the controlling shareholder and
President of the Company, has made unsecured, non-interest bearing loans to the
Company as needed for working capital purposes. As of June 30, 1996, Mr.
Gillingham has made loans of approximately $56,500. The repayment of such
amount has been postponed until additional working capital is available.
Item 8. DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 50,000,000 shares
of Common Stock, par value $.0001 per share, of which 6,390,000 are presently
issued and outstanding (excluding 140,000 treasury shares). Each share of
Common Stock is entitled to one vote on all matters to be voted on by
stockholders, including the election of directors. At each election for
directors, every stockholder entitled to vote at such election shall have the
right to vote, in person or by proxy, the number of shares owned by them for as
many persons as there are directors to be elected and for whose election they
have a right to vote.
-14-
<PAGE>
COMMON STOCK
Subject to preferential rights with respect to any outstanding
Preferred Stock, none of which is presently issued and outstanding, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. In the event
of a liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and satisfaction of preferential rights and have no rights to
convert their Common Stock into any other securities. All shares of Common
Stock have equal, non-cumulative voting rights, and have no preference,
exchange, preemptive or redemption rights. The outstanding shares of Common
Stock are fully paid and nonassessable.
There are no debt securities presently authorized, issued or
outstanding.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Until April 4, 1994, there was no established trading market for the
Company's Common Stock. On that date, the Company's Common Stock was cleared
for trading under the symbol JVGI, on the electronic bulletin board maintained
by NASDAQ. The high and low bid quotations per share published by The NASDAQ
Stock Market, Inc. for the quarterly periods indicated are set forth below:
FISCAL YEAR HIGH LOW
1994
Fourth Quarter............... No trading activity
1995
First Quarter................ No trading activity
Second Quarter............... 1.125 0.4375
Third Quarter................ 0.9375 0.50
Fourth Quarter............... 0.8125 0.1875
-15-
<PAGE>
1996
First Quarter................ 0.6875 0.1875
Second Quarter............... 0.6875 0.3125
Third Quarter................ 1.50 0.34375
Fourth Quarter............... 1.1563 0.65625
The over-the-counter market quotations set forth in the foregoing
table reflect inter-dealer prices, without retail markup, markdown or
commission, and may not necessarily represent actual transactions.
As of August 5, 1996, the Company had approximately 170 holders of
record of its shares of Common Stock.
The Company has not paid any cash dividends and does not anticipate
that it will pay any cash dividends on its Common Stock in the foreseeable
future. Payment of dividends is within the discretion of the Company's Board of
Directors and will depend, among other factors, upon the Company's earnings,
financial condition and capital requirements.
Item 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which could have a
material adverse effect on its business.
Item 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
Effective June 29, 1993, Avon Funding, Incorporated ("Avon"), a
Delaware corporation, merged with and into the Company, with the Company being
the surviving corporation. At the time of the merger, Avon was engaged in
discussions to acquire a direct mail company to sell multi-visional cassette
tapes and had no other business operations. In the merger, the stockholders of
Avon received 400,000 shares of the Company's Common Stock (250,000 shares of
which were issued to Patrick Brooks, the former President of the Company), which
represented approximately 14% of the Company's issued and outstanding Common
Stock, in exchange for all of their shares of Avon. Following consummation of
the merger, the Company contemplated raising funds through a rights offering.
However, due to the change in control of the Company and the adoption of a new
business plan discussed under the caption "Description of Business - General"
above, the Company elected not to commence the offering. The
-16-
<PAGE>
transactions were exempt from the registration requirements of the Securities
Act, by reason of Section 4(2) thereof.
Mr. Williams is no longer a shareholder of the Company.
On August 25, 1993, the Company sold 2,000,000 shares of its Common
Stock to a total of two persons at a price of $0.01 per share for an aggregate
cash consideration of $20,000. Of the 2,000,000 shares, Robert P. Gillingham,
President and principal stockholder of the Company, purchased 1,500,000 shares
for cash consideration of $15,000, and John Williams purchased 500,000 shares
for cash consideration of $5,000. The transactions were exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof.
On February 28, 1996, the Company sold 1,000,000 units (the "Units")
to a total of twelve non-affiliates, at a price of $0.50 per Unit, each Unit
consisting of one (1) share of the Company's Common Stock and one (1) Common
Stock purchase warrant (the "Warrants"), which entitles the holder to purchase
one (1) share of the Company's Common Stock at a price of $0.50 during the term
commencing on February 28, 1996 and expiring February 28, 1997. The aggregate
consideration to the Company for the securities sold was $500,000. The offering
was consummated pursuant to Section 504 of Regulation D under the Securities
Act.
The Company has not sold any debt securities within the past three
years.
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, subject to
various exceptions and limitations, the Company may indemnify its directors or
officers if such director or officer is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an action by
or in the right of the Company by reason of the fact that he is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation) against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except, in the case of an action by or in the right of the
Company to procure a judgment in its favor, as to any matter which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his
-17-
<PAGE>
duty. The Company shall indemnify its directors or officers to the extent that
they have been successful on the merits or otherwise in defense of any such
action, suit or proceeding, or in the defense of any claim, issue or matter
therein, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith. In addition, Delaware law permits a
corporation to limit or eliminate the liability of a director to the corporation
and its shareholders for negligent breaches of such directors' fiduciary duties
in certain circumstances.
Article Tenth of the Certificate of Incorporation of the Company
provides that the Company shall indemnify its directors and officers to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented, or by any
successor thereto, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section. Such
right to indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. The indemnification
provided for herein shall not be deemed exclusive of any other rights of which
those seeking indemnification may be entitled under any By-Law, agreement, vote
of stockholders or disinterested directors or otherwise.
-18-
<PAGE>
PART F/S
Please see the Consolidated Financial Statements appearing on F-1 to
F-25. The index to the Consolidated Financial Statements appears on page 21.
PART III
Item 1. INDEX TO EXHIBITS
See Index to Exhibits.
Item 2. DESCRIPTION OF EXHIBITS
Exhibit
NO. DESCRIPTION
2.(a) Registrant's Amended and Restated Certificate of
Incorporation
(b) Registrant's By-Laws
3. Specimen Common Stock Certificate
6.(a) Licensing and Development Agreement dated May 30, 1994
between T.A.B.S. Enterprises Ltd. and Java Group, Inc. and
464431 B.C. Ltd.
(b) Lease dated November 1, 1993 between Richmond Inn Hotel Ltd.
and Java Girl Coffee Ltd. and Klaus J. Henck
(c) Lease dated July 8, 1994 between Yorkson Investment Company
Ltd. and Java Group, Inc.
12. Additional Exhibits
(a) Consent of Elliot Tulk Pryce Anderson
21. Subsidiaries of the Registrant
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
JAVA GROUP, INC.
By: /S/ ROBERT P. GILLINGHAM
------------------------------
Robert P. Gillingham,
President
Dated: August 12, 1996
-20-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Public Accountants.................................................F-1
Consolidated Balance Sheet at June 30, 1995 and 1994.........................F-2
Consolidated Statement of Operations Accumulated from
May 25, 1989 (Inception) to June 30, 1995 and the years ended
June 30, 1995 and 1994...................................................F-3
Consolidated Statement of Stockholders' Equity Accumulated from
May 25, 1989 (Inception) to June 30, 1995................................F-4
Consolidated Statement of Cash Flows from May 25, 1989 (Inception)
to June 30, 1995 and the years ended June 30, 1995 and 1994..............F-5
Notes to the Consolidated Financial Statements...............................F-6
to
F-9
Consolidated Balance Sheet at March 31, 1996 and 1995 (unaudited)...........F-10
Consolidated Statement of Operations Accumulated from May 25, 1989
(Inception) to March 31, 1996 and the nine months ended
March 31, 1996 and 1995 (unaudited).....................................F-11
Consolidated Statement of Stockholders' Equity
Accumulated from May 25, 1989 (Inception) to
March 31, 1996 (unaudited)..............................................F-12
Consolidated Statement of Cash Flows Accumulated from
May 25, 1989 (Inception) to March 31, 1996 and the nine months
ended March 31, 1996 and 1995 (unaudited)...............................F-13
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF SIGNIFICANT EQUITY INVESTEES
A. Java Girl (Richmond Inn) Joint Venture
Report of Public Accountants...........................................F-14
Balance Sheet at June 30, 1995 and 1994 and unaudited Balance Sheet
at March 31, 1996.................................................F-15
Statement of Joint Venturers' Equity for the year ended
June 30, 1995 and the six months ended June 30, 1994 and
the unaudited nine months ended March 31, 1996....................F-16
Statement of Operations for the year ended June 30, 1995 and the
six months ended June 30, 1994 and the unaudited
nine months ended March 31, 1996..................................F-17
Statement of Cash Flows for the year ended June 30, 1995 and the
six months ended June 30, 1994 and the unaudited
nine months ended March 31, 1996..................................F-18
Notes to the Financial Statements for the year ended
June 30, 1995 and the six months ended June 30, 1994
and the unaudited nine months ended March 31, 1996................F-19
B. Java Girl (North Vancouver) Limited Partnership
Report of Public Accountants...........................................F-20
Balance Sheet at June 30, 1995 and 1994 and unaudited Balance Sheet
at March 31, 1996.................................................F-21
Statement of Partners' Equity for the year ended June 30, 1995
and the four months ended June 30, 1994 and the unaudited
nine months ended March 31, 1996..................................F-22
Statement of Operations for the year ended June 30, 1995
and the four months ended June 30, 1994 and the unaudited
nine months ended March 31, 1996..................................F-23
Statement of Cash Flows for the year ended June 30, 1995
and the four months ended June 30, 1994 and the unaudited
nine months ended March 31, 1996..................................F-24
Notes to the Financial Statements for the year ended
June 30, 1995 and the four months ended June 30, 1994
and the unaudited nine months ended March 31, 1996................F-25
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
We have audited the accompanying consolidated balance sheet of Java Group, Inc.
(A Development Stage Company) as of June 30, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 1995 and 1994. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Java Group, Inc. (A Development
Stage Company) as of June 30, 1995 and 1994 and the results of its operations
and its cash flows for the years ended June 30, 1995 and 1994 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has not generated profitable operations since inception.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plan in regard to these matters are also discussed
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Elliott Tulk
/s/ Pryce Anderson
----------------------
CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
November 3, 1995
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 1995 and 1994
(Expressed in U.S. Dollars)
1995 1994
$ $
ASSETS
Current Assets
Cash - 5,318
Accounts receivable 2,378 22
Loans receivable - 5,500
Prepaid expenses 5,423 7,400
-------- --------
7,801 18,240
Capital assets (Note 6) 67,283 318
Long Term Investments (Note 5)
Joint Venture (50%) 3,444 9,265
Limited Partnership (49%) - 4,586
-------- --------
78,528 32,409
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable 25,009 9,369
Loans payable - demand (Note 8) 316,690 42,003
-------- --------
341,699 51,372
Officer's Loan (Note 5) 1,412 34,182
Minority Interest 5,355 3,961
-------- --------
348,466 89,515
-------- --------
Stockholders' Deficit
Common Stock (Note 10), 50,000,000
common shares authorized, par value
$0.0001 per share, 4,900,000 shares
issued, 140,000 of which are owned
by the treasury and 4,760,000 shares
are outstanding 490 490
Paid in Capital, subscriptions for
stock paid for in excess of par value 46,800 46,800
Deficit Accumulated During the
Development Stage (317,228) (104,396)
-------- --------
(269,938) (57,106)
-------- --------
Commitments (Note 11) 78,528 32,409
-------- --------
-------- --------
F-2
(The accompanying notes are an intergral part of the financial statements)
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
Accumulated from May 25, 1989 (Inception) to June 30, 1995
and the years ended June 30, 1995 and 1994
(Expressed in U.S. Dollars)
Accumulated 1995 1994
$ $ $
Revenue - - -
-------- -------- --------
Expenses
Accounting and legal 50,786 37,369 13,417
Advertising 10,356 10,356 -
Amortization 750 - 120
Bank charges 1,123 925 198
Consulting 3,690 - 3,690
Foreign exchange 676 676 -
Interest 2,500 2,500 -
Investor relations 70,839 52,318 18,521
Office, rent and telephone 85,673 58,517 27,156
Transfer agent 4,346 4,346 -
Travel and promotion 27,860 20,500 7,360
-------- -------- --------
(258,599) (187,507) (70,462)
-------- -------- --------
Other Losses
Other assets written-off (26,540) - (26,540)
Loss from equity investments (78,696) (71,932) (6,764)
-------- -------- --------
(105,236) (71,932) (33,304)
-------- -------- --------
Net Loss Before Extraordinary Item (363,835) (259,439) (103,766)
Extinguishment of debt (Note 8) 46,607 46,607 -
-------- -------- --------
Net Loss (317,228) (212,832) (103,766)
-------- -------- --------
-------- -------- --------
Net Loss Per Share (0.05) (0.02)
-------- --------
-------- --------
Weighted Average Shares
Outstanding (Note 10) 4,760,000 4,900,000
-------- --------
-------- --------
F-3
(The accompanying notes are an integral part of the financial statements)
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
Accumulated from May 25, 1989 (Inception) to June 30, 1995
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Deficit Accumulated
Issued Common Paid-In During the
Shares Stock Capital Development Stage
# $ $ $
<S> <C> <C> <C> <C>
Issuance of common stock 2,250,000 225 2,025
Net loss for the period (105)
--------- --- ------ --------
Balance, December 31, 1989 2,250,000 225 2,025 (105)
Issuance of common stock 250,000 25 24,975
Net loss for the period (150)
--------- --- ------ --------
Balance, December 31, 1990 2,500,000 250 27,000 (255)
Net loss for the period (150)
--------- --- ------ --------
Balance, December 31, 1991 2,500,000 250 27,000 (405)
Net loss for the period (150)
--------- --- ------ --------
Balance, December 31, 1992 2,500,000 250 27,000 (555)
Merger with Avon Funding, Inc. 400,000 40
Net loss for the period (75)
--------- --- ------ --------
Balance, June 30, 1993 2,900,000 290 27,000 (630)
Issuance of common stock 2,000,000 200 19,800
Net loss for the period (103,766)
--------- --- ------ --------
Balance, June 30, 1994 4,900,000 490 46,800 (104,396)
Net loss for the period (212,832)
--------- --- ------ --------
Balance, June 30, 1995 *4,900,000 490 46,800 (317,228)
--------- --- ------ --------
--------- --- ------ --------
</TABLE>
* 140,000 shares previously issued are owned by the treasury and are not
outstanding (See Note 9).
F-4
(The accompanying notes are an integral part of the financial statements)
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
Accumulated from May 25, 1989 (Inception) to June 30, 1995
and the years ended June 30, 1995 and 1994
(Expressed in U.S. Dollars)
Accumulated 1995 1994
$ $ $
Cash Flows to Operating Activities
Net loss (317,228) (212,832) (103,766)
Adjustments to reconcile net
loss to cash
Amortization 750 - 120
Development costs written-off 26,540 - 26,540
Loss from equity investments 78,696 71,932 6,764
Extinguishment of debt (46,607) (46,607) -
Cash provided by (used in)
changes in operating assets
and liabilities
(Increase) in accounts receivable (2,378) (2,356) (22)
Decrease (increase) in prepaid
expenses (5,423) 1,977 (7,400)
Increase in accounts payable 25,009 15,640 9,369
-------- -------- --------
Net Cash Used by Operating Activities (240,641) (172,246) (68,395)
-------- -------- --------
Cash Flows to Investing Activities
Increase in other assets (27,290) - -
Increase in capital assets (67,283) (66,965) (315)
Increase in coffee house
investments (82,140) (61,525) (20,615)
-------- -------- --------
Net Cash Used by Investing Activities (176,713) (128,490) (20,933)
-------- -------- --------
Cash Flows to Financing Activities
Increase in minority interest 5,355 1,394 3,961
Increase in shares issued - cash 490 - 200
Increase in paid in capital - cash 46,800 - 19,800
Increase (decrease) in loans
from an officer 1,412 (32,770) 34,182
Increase in loans from others 363,297 321,294 42,003
Increase (decrease) in loans
to others - 5,500 (5,500)
-------- -------- --------
Net Cash Provided by Financing
Activities 417,354 295,418 94,646
-------- -------- --------
Increase (decrease) in cash - (5,318) 5,318
Cash - beginning of period - 5,318 -
-------- -------- --------
Cash - end of period - - 5,318
-------- -------- --------
-------- -------- --------
Non-cash Financing Activity
Extinguishment of debt for
no cost (Note 8) - - -
-------- -------- --------
-------- -------- --------
F-5
(The accompanying notes are an integral part of the financial statements)
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the years ended June 30, 1995 and 1994
(Expressed in U.S. Dollars)
1. Date of Incorporation
The Company is a development stage company which was incorporated under the
Laws of the State of Delaware on May 25, 1989.
2. Nature and Continuance of Business
Until August, 1993 the Company's business purpose was to create a publicly
held corporate vehicle suitable for merging with a privately held
corporation desirous of being publicly traded without affecting a
securities offering of its own. On August 25, 1993, a change of control
occurred in the company and a business plan was introduced to develop
coffee houses. The Company's name was changed to Java Group, Inc.
These consolidated financial statements have been prepared on the basis of
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has suffered start-up losses and has not generated profitable operations
since inception. The Company's activities are in the development stage and
additional costs for the development of coffee houses must be incurred.
There is substantial doubt as to the Company's ability to continue as a
going concern, as the continuation of the Company as a going concern is
dependent on its ability to obtain financing for the development of its
coffee houses and/or the attainment of profitable operations. Management
plans to raise capital through private placements.
3. Consolidated Financial Statements
These consolidated financial statements include the accounts of the Company
and its wholly owned Canadian subsidiary, 464431 B.C. Ltd. ("BC"). BC has
been consolidated with its 80% owned unincorporated joint venture which
commenced operations in July, 1995.
4. Summary of Significant Accounting Policies
a) Long term investments
Long term investments are in the form of a 50% unincorporated joint
venture and a 49% owned limited partnership and are accounted for
utilizing the equity method.
b) Foreign exchange
Gains or losses arising from transactions denominated in a currency
other than the U.S. are recognized in the statement of operations.
c) Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of issuance to be cash equivalents.
d) Tax accounting
The Company has adopted SFAS 109 as of its inception. The Company has
incurred net operating losses as scheduled below:
F-6
<PAGE>
..2..
4. Summary of Significant Accounting Policies
d) Tax accounting (continued)
Year of Loss Amount Expiration Date
$
June 30, 1994 78,000 2009
June 30, 1995 140,000 2010
Pursuant to SFAS 109 the Company is required to compute tax asset
benefits for net operating loss carryforwards. Potential benefit of
net income losses have not been recognized in the financial statements
because the Company cannot be assured that it is more likely than not
that it will utilize the net operating loss carryforwards in future
years.
The components of the net deferred tax asset at the end of June 30,
1995 and 1994, the statutory tax rate, the effective tax rate and the
elected amount of the valuation allowance are scheduled below:
June 30, 1995 June 30, 1994
$ $
Net Operating Loss 140,000 78,000
Statutory Tax Rate 22,250 + 39% 13,750 + 34%
in excess of in excess of
100,000 75,000
Effective Tax Rate - -
Deferred Tax Asset 37,850 14,770
Valuation Allowance (37,850) (14,770)
-------------- ---------------
Net Deferred Tax Asset - -
-------------- ---------------
-------------- ---------------
The Company has $26,540 in capital losses to carryover expiring in
2000.
The Company has Canadian non-capital tax losses expiring as follows:
2001 $ 7,500
2002 $ 80,500
F-7
<PAGE>
..3..
5. Long Term Investments
Long term investments represent a 50% owned unincorporated joint venture
and a 49% owned limited partnership in the coffee house business in British
Columbia, Canada (see Note 7 - Licensing Agreement).
1995 1994
$ $
Richmond (50% Joint Venture interest)
Contributions 25,007 16,029
Less accumulated share of loss (50%) (21,563) (6,764)
------- -------
3,444 9,265
------- -------
------- -------
North Vancouver Limited Partnership (49% interest)
Contributions 87,829 4,586
Loss from discontinued operations (46,417) -
Coffee house equipment received (30,696) -
Write-down to net realizable value (10,716) -
------- -------
- 4,586
------- -------
------- -------
6. Capital Assets
Capital assets are comprised of start-up costs, leasehold improvements and
coffee house equipment used in the Broadway coffee house (an 80% joint
venture). Amortization of capital assets will commence in July, 1995.
7. Licensing Agreement
By licensing and development agreement dated May 10, 1994, the Company, and
its wholly-owned subsidiary 464431 B.C. Ltd., entered into an agreement
with T.A.B.S. (Two) Enterprises Ltd. ("TABS") (pursuant to assignment of
rights under agreement dated July 27, 1993 between the president, a former
director and Java Girl Coffee Ltd.) Under the agreement, the Company has
the option to specify locations that it has secured, by lease or other
arrangement, for coffee houses for which TABS thereby grants a license to
use the Java Girl name and its systems for the operation of each such
coffee house. TABS agrees to supervise the development and operations of
the coffee house, and is required to fund not less than 5% and not more
than 20% of all development costs of such coffee house. Each coffee house
will represent a joint venture. Under the agreement, TABS receives a 5 year
stock option for 2 million shares in the capital stock of Java Group, Inc.
at a price of $0.10 per share expiring May 20, 1999 (in lieu of a 5% gross
sales management fee under the original agreement) and is entitled to a
licensing fee equal to 5% of gross sales from each such coffee house.
F-8
<PAGE>
..4..
8. Loans Payable/Extraordinary Item
Non-directors have advanced $316,690 by way of unsecured, non-interest
bearing loans payable on demand. Interest has not been imputed as the loans
were for cash without attached rights or restrictions.
During the year a loan for $46,607 was extinguished at no cost and included
as an extraordinary item in the determination of net income.
A 10% bonus was payable on a $25,000 loan on July 4, 1994. The loan and
bonus payment have been paid during the year.
9. Officer's Loan
The amount due to the controlling shareholder and President of the Company
is unsecured, non-interest bearing and has been postponed until after June
30, 1996, unless a major equity financing has been completed. Interest has
not been imputed as the loan was for cash without attached rights or
restrictions.
10. Common Stock
a) Stock option
A stock option was granted to TABS to acquire 2,000,000 shares
exercisable at $0.10 per share expiring May 20, 1999 (see Note 7).
b) Treasury shares
During fiscal 1995, the Company acquired 140,000 of its issued and
outstanding common stock at no cost. These shares are owned by the
treasury and issued, but not outstanding.
11. Commitments
a) The Company is jointly liable for royalty commitments pursuant to a
licensing agreement (See Note 7).
b) The Company is jointly liable for long term premises lease payments
for their 80% owned joint venture, to July 31, 1999. Future minimum
annual lease payments are $25,200 for fiscal 1996, 1997, 1998 and
1999.
F-9
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
March 31, 1996 and 1995
(Expressed in U.S. Dollars)
1996 1995
$ $
ASSETS
Current Assets
Cash 643,397 535
Inventory 1,942 -
Loans receivable - 4,000
Prepaid expenses 12,147 1,975
-------- --------
657,486 6,510
Capital assets 100,572 17,609
Long Term Investments - equity
Joint Venture (50%) 9,392 8,553
Limited Partnership (49%) - 66,681
-------- --------
767,450 99,353
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable 14,967 761
Loans payable - demand 373,607 315,598
-------- --------
388,574 316,359
Officer's Loan 49,148 (6,139)
-------- --------
437,722 310,220
-------- --------
Stockholders' Deficit
Common Stock, 50,000,000 common
shares authorized, par value
$0.0001 per share, 6,530,000
and 4,900,000 shares issued
respectively, 140,000 of which
are owned by the treasury and
6,390,000 shares are outstanding 653 490
Paid in Capital, subscriptions for
stock paid for in excess of par value 861,637 46,800
Deficit Accumulated During the
Development Stage (532,562) (258,157)
-------- --------
329,728 (210,867)
-------- --------
767,450 99,353
-------- --------
-------- --------
F-10
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
Accumulated from May 25, 1989 (Inception) to March 31, 1996
and the nine months ended March 31, 1996 and 1995
(Expressed in U.S. Dollars)
Accumulated 1996 1995
$ $ $
Coffee House Operations
Revenue 21,471 21,471 -
--------- --------- ---------
Expenses
Amortization 5,905 5,905 -
Bank charges 168 168 -
Coffee and supplies 16,755 16,755 -
Office 421 421 -
Rent 20,568 20,568 -
Royalties 1,013 1,013 -
Telephone 707 707 -
Travel and automobile 2,735 2,735 -
Wages 9,426 9,426 -
--------- --------- ---------
57,698 57,698 -
--------- --------- ---------
Net loss before adjustment for
minority interest (36,227) (36,227) -
Less minority interest 5,433 5,433 -
--------- --------- ---------
Net loss (30,794) (30,794) -
--------- --------- ---------
Head Office Expenses
Accounting and legal 81,018 30,232 23,088
Advertising 14,906 4,550 11,647
Amortization 750 - -
Bank charges and interest 4,147 524 3,285
Consulting 35,166 31,476 -
Foreign exchange 1,795 1,119 -
Investor relations 99,655 28,816 44,992
Office, rent and telephone 148,209 62,536 43,120
Transfer agent 7,135 2,789 1,521
Travel and promotion 56,271 28,411 10,846
--------- --------- ---------
(449,052) (190,453) (138,499)
--------- --------- ---------
Other Income and Losses
Other assets written-off (26,540) - -
Income (loss) from equity
investments (72,783) 5,913 (15,262)
--------- --------- ---------
(99,323) 5,913 (15,262)
--------- --------- ---------
Net loss from operations before
extraordinary item (579,169) (215,334) (153,761)
Extraordinary item - extinguishment
of debt 46,607 - -
--------- --------- ---------
Net loss (532,562) (215,334) (153,761)
--------- --------- ---------
--------- --------- ---------
Net Loss Per Share (.04) (.03)
--------- ---------
--------- ---------
Weighted Average Shares Outstanding 5,030,000 4,900,000
--------- ---------
--------- ---------
F-11
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
Accumulated from May 25, 1989 (Inception) to March 31, 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Deficit Accumulated
Issued Common Paid-In During the
Shares Stock Capital Development Stage
# $ $ $
<S> <C> <C> <C> <C>
Issuance of common stock at $.001 2,250,000 225 2,025
Net loss for the period (105)
--------- --- ------- --------
Balance, December 31, 1989 2,250,000 225 2,025 (105)
Issuance of common stock at $.10 250,000 25 24,975
Net loss for the year (150)
--------- --- ------- --------
Balance, December 31, 1990 2,500,000 250 27,000 (255)
Net loss for the year (150)
--------- --- ------- --------
Balance, December 31, 1991 2,500,000 250 27,000 (405)
Net loss for the year (150)
--------- --- ------- --------
Balance, December 31, 1992 2,500,000 250 27,000 (555)
Merger with Avon Funding,
Inc. at $.0001 400,000 40
Net loss for the period (75)
--------- --- ------- --------
Balance, June 30, 1993 2,900,000 290 27,000 (630)
Issuance of common stock at $.01 2,000,000 200 19,800
Net loss for the year (103,766)
--------- --- ------- --------
Balance, June 30, 1994 4,900,000 490 46,800 (104,396)
Net loss for the year (212,832)
--------- --- ------- --------
Balance, June 30, 1995 4,900,000 490 46,800 (317,228)
Regulation "D" financing at $0.50 1,000,000 100 499,900 -
Regulation "D" warrants exercised
at $0.50 630,000 63 314,937 -
Net loss for the period (215,334)
--------- --- ------- --------
Balance, March 31, 1996 *6,530,000 653 861,637 (532,562)
--------- --- ------- --------
--------- --- ------- --------
</TABLE>
* 140,000 shares previously issued are owned by the treasury and are not
outstanding.
F-12
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
Accumulated from May 25, 1989 (Inception) to March 31, 1996
and the nine months ended March 31, 1996 and 1995
(Expressed in U.S. Dollars)
Accumulated 1996 1995
$ $ $
Cash Flows to Operating Activities
Net loss (532,562) (215,334) (153,761)
Adjustments to reconcile net
loss to cash
Amortization 6,655 5,905 -
Development costs written-off 26,540 - -
Income (loss) from equity
investments 72,783 (5,913) 15,262
Minority interest - (5,433) -
Extinguishment of debt (46,607) - -
Cash provided by (used in) changes in
operating assets and liabilities
Increase in inventory (1,942) (1,942) -
Decrease in accounts receivable - 2,378 -
Increase in prepaid expenses (12,147) (6,724) -
Increase (decrease) in accounts
payable 14,967 (10,000) (8,268)
--------- -------- --------
Net Cash Used by Operating Activities (472,313) (237,063) (146,767)
--------- -------- --------
Cash Flows to Investing Activities
Increase in capital assets (106,477) (39,193) (17,609)
Increase in other assets (27,290) - -
Increase in coffee house investments (82,175) - (75,181)
--------- -------- --------
Net Cash Used by Investing Activities (215,942) (39,193) (92,790)
--------- -------- --------
Cash Flows to Financing Activities
Increase in shares issued - cash 653 163 -
Increase in paid in capital - cash 861,637 814,837 -
Increase (decrease) in loans from
an officer 49,148 47,736 (40,321)
Increase in loans from others 420,214 56,917 275,095
--------- -------- --------
Net Cash Provided by Financing
Activities 1,331,652 919,653 234,774
--------- -------- --------
Increase (decrease) in cash 643,397 643,397 (4,783)
Cash - beginning of period - - 5,318
--------- -------- --------
Cash - end of period 643,397 643,397 535
--------- -------- --------
--------- -------- --------
Non-cash Financing Activity
Extinguishment of debt, totalling
$46,607, for no cost - - -
--------- -------- --------
--------- -------- --------
F-13
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
We have audited the accompanying balance sheet of Java Girl (Richmond Inn) Joint
Venture as of June 30, 1995 and 1994 and the related statements of operations,
joint venturers' equity and cash flows for the periods ended June 30, 1995 and
1994. These financial statements are the responsibility of the Joint Venture'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, such financial statements present fairly, in all material
respects, the financial position of Java Girl (Richmond Inn) Joint Venture as of
June 30, 1995 and 1994 and the results of its operations and its cash flows for
the periods ended June 30, 1995 and 1994 in conformity with generally accepted
accounting principles.
/s/ Elliiott Tulk
/s/ Pryce Anderson
---------------------
CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
November 3, 1995
<PAGE>
Java Girl (Richmond Inn) Joint Venture
Balance Sheet
June 30, 1995 and 1994
(Expressed in U.S. Dollars)
March 31,
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
ASSETS
Current Assets
Cash 2,543 329 1,642
Inventory 1,566 1,494 3,744
Prepaid expenses 909 923 939
------- ------- -------
5,018 2,746 6,325
Capital Assets (Note 2) 15,718 17,161 19,058
------- ------- -------
20,736 19,907 25,383
------- ------- -------
------- ------- -------
LIABILITIES AND JOINT VENTURERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities 2,090 13,087 4,261
Joint Venturers' Equity 18,646 6,820 21,122
------- ------- -------
20,736 19,907 25,383
------- ------- -------
------- ------- -------
(Commitments - Note 3)
F-15
<PAGE>
Java Girl (Richmond Inn) Joint Venture
Statement of Joint Venturers' Equity
For the year ended June 30, 1995 and the
six months ended June 30, 1994
(Expressed in U.S. Dollars)
T.A.B.S. (Two)
Enterprises Ltd. 464431 B.C. Ltd. Total
$ $ $
Contributions during 1994 18,621 16,029 34,650
Share of loss for the six months
ended June 30, 1994 (6,764) (6,764) (13,528)
------- ------- -------
Net equity at June 30, 1994 11,857 9,265 21,122
Contributions during 1995 6,318 8,978 15,296
Share of loss for the year ended
June 30, 1995 (14,799) (14,799) (29,598)
------- ------- -------
Net equity at June 30, 1995 3,376 3,444 6,820
Contributions during 1996 (unaudited) - - -
Share of income for the nine months
ended March 31, 1996 (unaudited) 5,913 5,913 11,826
------- ------- -------
Net equity at March 31, 1996 (unaudited) 9,289 9,357 18,646
------- ------- -------
------- ------- -------
F-16
<PAGE>
Java Girl (Richmond Inn) Joint Venture
Statement of Operations
For the year ended June 30, 1995 and the
six months ended June 30, 1994
(Expressed in U.S. Dollars)
Nine months
ended Twelve months Six months
March 31, ended ended
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
Sales 35,936 41,356 20,722
------- ------- -------
Expenses
Accounting - 3,477 1,096
Amortization 1,443 1,897 787
Bank charges 31 1,375 456
Office 163 836 318
Purchases 5,752 22,196 6,671
Rent 2,205 4,477 1,805
Royalties 818 2,068 1,036
Telephone 626 741 331
Travel and automobile 579 - 94
Wages 12,493 33,887 21,656
------- ------- -------
24,110 70,954 34,250
------- ------- -------
Net Income (Loss) 11,826 (29,598) (13,528)
------- ------- -------
------- ------- -------
Allocated as Follows:
T.A.B.S. (Two) Enterprises Ltd. 5,913 (14,799) (6,764)
464431 B.C. Ltd. 5,913 (14,799) (6,764)
------- ------- -------
11,826 (29,598) (13,528)
------- ------- -------
------- ------- -------
F-17
<PAGE>
Java Girl (Richmond Inn) Joint Venture
Statement of Cash Flows
For the year ended June 30, 1995 and the
six months ended June 30, 1994
(Expressed in U.S. Dollars)
Nine months
ended Twelve months Six months
March 31, ended ended
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
Cash Flows to Operating Activities
Net (Income) Loss 11,826 (29,598) (13,528)
Adjustment to reconcile net
loss to cash
Amortization 1,443 1,897 787
Cash Provided by (Used in) Changes in
Operating Assets and Liabilities
(Increase) decrease in inventory (72) 2,250 (3,744)
(Increase) decrease in prepaid
expenses 14 16 (939)
(Increase) decrease in accounts
payable (10,997) 8,826 4,261
-------- ------- --------
Net Cash Provided By (Used in)
Operating Activities 2,214 (16,609) (13,163)
-------- ------- --------
Cash Flows to Investing Activities
(Increase) in capital assets - - (19,845)
-------- ------- --------
Net Cash Used by Investing Activities - - (19,845)
-------- ------- --------
Cash Flows from Financing Activities
Contributions by Joint Venturers - 15,296 34,650
-------- ------- --------
Net Cash Provided by Financing Activities - 15,296 34,650
-------- ------- --------
Increase (decrease) in cash 2,214 (1,313) 1,642
Cash - beginning of period 329 1,642 -
-------- ------- --------
Cash - end of period 2,543 329 1,642
-------- ------- --------
-------- ------- --------
F-18
<PAGE>
Java Girl (Richmond Inn) Joint Venture
Notes to the Financial Statements
For the year ended June 30, 1995 and the
six months ended June 30, 1994
(Expressed in U.S. Dollars)
1. Formation and Nature of Business
The joint venture is unincorporated and was formed on January 1, 1994 to
own and operate a coffee house business in The Richmond Inn, Richmond,
B.C., Canada. Business commenced on January 21, 1994. The assets and
liabilities are owned by the joint venture and do not include any assets or
liabilities of the joint venturers. Income taxes are the responsibility of
each joint venturer.
2. Capital Assets
Capital assets are stated at cost less accumulated amortization at the rate
of 10% per annum straight-line.
<TABLE>
<CAPTION>
March 31,
1996 June 30, June 30,
Net Carrying 1995 1994
Accumulated Value Net Carrying Net Carrying
Cost Amortization (unaudited) Value Value
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Equipment 9,211 1,915 7,296 7,966 8,846
Furniture and
fixtures 10,634 2,212 8,422 9,195 10,212
------ ------ ------ ------ ------
19,845 4,127 15,718 17,161 19,058
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
3. Commitments
a) A royalty of 5% of sales is payable.
b) Rent of premises is on a month to month basis at $368 per month.
F-19
<PAGE>
[LETTERHEAD]
Independent Auditor's Report
Board of Directors
We have audited the accompanying balance sheet of Java Girl (North Vancouver)
Limited Partnership as of June 30, 1995 and 1994 and the related statements of
operations, partners' equity and cash flows for the periods ended June 30, 1995
and 1994. These financial statements are the responsibility of the Partnership'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, such financial statements present fairly, in all material
respects, the financial position of Java Girl (North Vancouver) Limited
Partnership as of June 30, 1995 and 1994 and the results of its operations and
its cash flows for the periods ended June 30, 1995 and 1994 in conformity with
generally accepted accounting principles.
/S/ Elliot Tulk
/S/Pryce Anderson
---------------------
CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
November 3, 1995
F-20
<PAGE>
Java Girl (North Vancouver) Limited Partnership
Balance Sheet
June 30, 1995 and 1994
(Expressed in U.S. Dollars)
March 31,
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
ASSETS
Current Assets
Cash - 272 -
Accounts receivable - 3,197 9,842
Inventory - - 840
Prepaid expenses - - 10,161
------ ------ ------
- 3,469 20,843
Capital Assets - - 13,463
------ ------ ------
- 3,469 34,306
------ ------ ------
------ ------ ------
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities
Accounts payable 1,000 7,595 -
Partners' Equity (Deficit) (1,000) (4,126) 34,306
------ ------ ------
- 3,469 34,306
------ ------ ------
------ ------ ------
F-21
<PAGE>
Java Girl (North Vancouver) Limited Partnership
Statement of Partners' Equity (Deficit)
For the year ended June 30, 1995 and the
four months ended June 30, 1994
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Forward Key T.A.B.S. (Two)
General 464431 Investments Enterprises
Partners B.C. Ltd. Inc. Ltd.
(1%) (49%) (45%) (5%) Total
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Contributions during 1994 - 4,586 29,720 - 34,306
Share of loss for the four months
ended June 30, 1994 - - - - -
------ ------- ------- ------- -------
Net equity at June 30, 1994 - 4,586 29,720 - 34,306
Contributions during 1995 - 83,243 19,906 5,580 108,729
Repayments during 1995 - (30,696) - - (30,696)
Share of loss for the year ended
June 30, 1995 (1,165) (57,068) (52,409) (5,823) (116,465)
------ ------- ------- ------- -------
Net equity (deficit) at
June 30, 1995 (1,165) 65 (2,783) (243) (4,126)
Share of income for the nine months
ended March 31, 1996
(unaudited) 165 (65) 2,783 243 3,126
------ ------- ------- ------- -------
Net deficit at March 31, 1996
(unaudited) (1,000) - - - (1,000)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
</TABLE>
F-23
<PAGE>
Java Girl (North Vancouver) Limited Partnership
Statement of Operations
For the year ended June 30, 1995 and the
four months ended June 30, 1994
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Nine months
ended Twelve months Four months
March 31, ended ended
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
<S> <C> <C> <C>
Sales - 15,535 -
-------- -------- --------
Expenses
Accounting - 2,274 -
Advertising - 487 -
Bank charges - 163 -
Office - 393 -
Purchases - 12,297 -
Rent and utilities (3,126) 17,520 -
Royalties - 778 -
Telephone - 620 -
Wages - 15,775 -
-------- -------- --------
(3,126) 50,307 -
-------- -------- --------
Income (loss) from operations 3,126 (34,772) -
Capital assets and start-up costs written off - (81,693) -
-------- -------- --------
Net Income (Loss) 3,126 (116,465) -
-------- -------- --------
-------- -------- --------
</TABLE>
F-23
<PAGE>
Java Girl (North Vancouver) Limited Partnership
Statement of Cash Flows
For the year ended June 30, 1995 and the
four months ended June 30, 1994
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Nine months
ended Twelve months Four months
March 31, ended ended
1996 June 30, June 30,
(unaudited) 1995 1994
$ $ $
<S> <C> <C> <C>
Cash Flows to Operating Activities
Net (Income) Loss 3,126 (116,465) -
Adjustment to reconcile net income (loss) to cash
Capital assets and start-up costs written off - 81,693 -
Cash Provided by (Used in) Changes in
Operating Assets and Liabilities
(Increase) decrease in accounts receivable 3,197 6,645 (9,842)
(Increase) decrease in inventory - 840 (840)
(Increase) decrease in prepaid expenses - 10,161 (10,161)
Increase (decrease) in accounts payable (6,595) 7,595 -
-------- -------- --------
Net Cash Used in Operating Activities (272) (9,531) (20,843)
-------- -------- --------
Cash Flows to Investing Activities
(Increase) in capital assets - (98,926) (13,463)
-------- -------- --------
Net Cash to Investing Activities - (98,926) (13,463)
-------- -------- --------
Cash Flows from Financing Activities
Contributions by Partners - 108,729 34,306
-------- -------- --------
Net Cash Provided by Financing Activities - 108,729 34,306
-------- -------- --------
Increase (decrease) in cash (272) 272 -
Cash - beginning of period 272 - -
-------- -------- --------
Cash - end of period - 272 -
-------- -------- --------
-------- -------- --------
</TABLE>
F-24
<PAGE>
Java Girl (North Vancouver) Limited Partnership
Note to the Financial Statements
For the year ended June 30, 1995 and the
four months ended June 30, 1994
(Expressed in U.S. Dollars)
Formation and Nature of Business
The limited partnership was formed on March 7, 1994 to own and operate a coffee
house in North Vancouver, B.C., Canada. Business commenced on February 1, 1995
and closed on June 7, 1995.
F-25
<PAGE>
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
JAVA GROUP, INC.
The undersigned, being the President and Secretary of Java Group,
Inc., a corporation organized and existing under laws of the State of Delaware
(the "Corporation"), do hereby certify as follows:
FIRST: That, the name of the Corporation is Java Group, Inc. and
that the name under which the Corporation was originally incorporated is
Montrose Ventures, Inc., and the date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was May 25,
1989.
SECOND: That, the Corporation previously amended its Certificate of
Incorporation by filing a Certificate of Amendment with the Secretary of State
of Delaware on September 9, 1993.
THIRD: The Certificate of Incorporation is hereby amended by
striking out Articles 1, 2, 3, 4, 5, 6, 7 and 8, and by substituting in lieu
thereof new Articles 1, 2, 3, 4, 5, 6, 7, 8 and 9 which are set forth in the
Amended and Restated Certificate of Incorporation hereinafter provided for.
FOURTH: The provisions of the Certificate of Incorporation of the
Corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Amended and Restated Certificate of
Incorporation of Java Group, Inc. without any further amendments other than the
amendments herein certified and without any discrepancy between the provisions
of the Certificate of Incorporation as heretofore amended and supplemented and
the provisions of the said single instrument hereinafter set forth.
FIFTH: The amendments and the restatement of the Certificate of
Incorporation set forth herein have been duly adopted by unanimous written
consent of the Board of Directors and by vote of a majority of the outstanding
stock entitled to vote thereon at a meeting held in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
<PAGE>
That, the text of the Certificate of Incorporation is hereby amended
and restated to read as herein set forth in full:
FIRST: The name of the corporation is Java Group, Inc. (the
"Corporation").
SECOND: The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Delaware is 9 East
Loockerman Street, City of Dover, County of Kent, Zip Code 19901; and the name
of the registered agent of the Corporation in the State of Delaware at such
address is the National Corporate Research, Ltd.
THIRD: The nature of the business and of the purposes to be
conducted and promoted by the Corporation are to conduct any lawful business, to
promote any lawful purpose, and to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The aggregate number of shares of all classes of stock which
the Corporation shall have authority to issue is FIFTY-FIVE MILLION
(55,000,000), of which FIFTY MILLION (50,000,000) shares shall be Common Stock,
par value $.0001 per share ("Common Stock"), and FIVE MILLION (5,000,000) shares
shall be Preferred Stock, par value $.0001 per share.
No stockholder shall have any preemptive right to subscribe to or
purchase any issue of stock or other securities of the Corporation, or any
treasury stock or other treasury securities.
The power, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights are as follows:
A. COMMON STOCK. Subject to the provisions of any series of
Preferred Stock which may at the time be outstanding, the holders of shares of
Common Stock shall be entitled to receive, when and as declared by the Board of
Directors out of any funds legally available for the purpose, such dividends as
may be declared from time to time by the Board of Directors. In the event of
the liquidation of the Corporation, or upon distribution of its assets, after
the payment in full or the setting apart for payment of such preferential
amounts, if any, as the holders of shares of Preferred Stock at the time
outstanding shall be entitled, the remaining assets of the Corporation available
for payment and distribution to holders of shares of Common Stock shall, subject
to any participating or
-2-
<PAGE>
similar rights of shares of Preferred Stock at the time outstanding, be
distributed ratably among the holders of shares of Common Stock at the time
outstanding. All shares of Common Stock shall have equal, non-cumulative voting
rights, and shall have no preference, conversion, exchange, preemptive or
redemption rights.
B. PREFERRED STOCK
(a) The Preferred Stock may be issued from time to time in one
or more series, each of which shall be distinctively designated, shall rank
equally and shall be identical in all respects except as otherwise provided in
subsection (b) of this Article FOURTH.
(b) Authority is hereby vested in the Board of Directors to
issue from time to time the Preferred Stock of any series and to state in the
resolution or resolutions providing for the issuance of shares of any series the
voting powers, if any, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions of such series to the full extent now or hereafter permitted by the
law of the State of Delaware in respect of the matters set forth in the
following clauses (i) to (viii) inclusive:
(i) the number of shares to constitute such series, and
the distinctive designations thereof;
(ii) the voting powers, full or limited, if any, of such
series;
(iii) the rate of dividends payable on shares of such
series, the conditions on which and the times when such dividends are
payable, the preference to, or the relation to, the payment of the dividends
payable on any other class, classes or series of stock, whether cumulative or
non-cumulative and, if cumulative, the date from which dividends on shares of
such series shall be cumulative;
(iv) the redemption price or prices, if any, and the
terms and conditions on which shares of such series shall be redeemable;
(v) the requirement of any sinking fund or funds to be
applied to the purchase or redemption of shares of such series and, if so,
the amount of such fund or funds and the manner of application;
-3-
<PAGE>
(vi) the rights of shares of such series upon the
liquidation, dissolution or winding up of, or upon any distribution of the
assets of, the Corporation;
(vii) the rights, if any, of the holders of shares of
such series to convert such shares into, or to exchange such shares for,
shares of any other class, classes or series of stock and the price or prices
or the rates of exchange and the adjustments at which such shares shall be
convertible or exchangeable, and any other terms and conditions of such
conversion or exchange;
(viii) any other preferences and relative, participating,
optional or other special rights of shares of such series, and
qualifications, limitations or restrictions including, without limitation,
any restriction on an increase in the number of shares of any series
theretofore authorized and any qualifications, limitations or restrictions of
rights or powers to which shares of any future series shall be subject.
C. CERTIFICATES OF DESIGNATIONS. Before the Corporation shall issue
any shares of Preferred Stock of any series, a certificate setting forth the
resolution or resolutions of the Board of Directors, fixing the voting powers,
designations, preferences and rights of such series, the qualifications,
limitations or restrictions thereof, and the number of shares of Preferred Stock
of such series authorized by the Board of Directors, shall be signed, attested
to, filed, and recorded pursuant to Section 103 of the General Corporation Law
of Delaware. Unless otherwise provided in any such resolution or resolutions,
the holders of the series so authorized shall have no voting rights and shall
have no conversion, exchange, preemptive or redemption rights. Unless otherwise
provided in any such resolution or resolutions, the number of shares of
Preferred Stock of the series authorized by such resolutions may be increased
(but not above the total number of shares of Preferred Stock of such series) or
decreased (but not below the number of shares of Preferred Stock of such series
then outstanding) by a certificate setting forth a resolution or resolutions
adopted by the Board of Directors, authorizing such increase or decrease,
signed, attested to, filed, and recorded pursuant to Section 103 of the General
Corporation Law of Delaware. Unless otherwise provided in the resolution or
resolutions creating such series, the number of shares of Preferred Stock
specified in any such decrease shall be restored to the status of authorized but
unissued shares of Preferred Stock (without designation as to series).
-4-
<PAGE>
FIFTH: (a) The number of directors shall be not less than three
nor more than twelve, the exact number to be determined from time to time by the
Board of Directors.
(b) Directors shall be elected by a plurality of the votes
cast by the holders of shares entitled to vote in the election of the directors.
(c) Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities and Exchange Act of 1934, as amended
(including without limitation such persons' written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(b) as to the stockholder giving the notice (i) the name and address, as they
appear on the Corporation's books, of such stockholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section. The Chairman of
-5-
<PAGE>
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedures, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(d) Notwithstanding any other provision hereof or of the
By-Laws of the Corporation, and notwithstanding the fact that some lesser
percentage may be specified by law, any director or all the directors of the
Corporation may be removed at any time, but only for cause and only by (1) a
vote of the holders of 66-2/3% of the shares represented at a meeting of the
stockholders at which a quorum is present or (2) a vote of 66-2/3% of the
members of the Board of Directors. With respect to removal of any director by
action of the Board of Directors, the Board shall have the power, by a similar
vote, to suspend any director pending a final determination that cause exists
for removal.
(e) This Article FIFTH can be amended only by a vote of the
holders of 66-2/3% of the shares represented at a meeting of stockholders at
which a quorum is present and which was called, inter alia, for such purpose.
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(a) The Board of Directors shall have power without the
assent or vote of the stockholders:
(i) to fix and vary the number of shares to be
reserved for any proper purposes; to authorize and cause to be executed
mortgages and liens upon all or any part of the property of the Corporation; to
determine the use and disposition of any surplus or net profits; and to fix the
times for the declaration and payment of dividends; and
(ii) to determine from time to time whether, and
to what extent, and at what times and places, and under what conditions and
regulations, the accounts and books of the Corporation (other than the stock
ledger) or any of them, shall be open to the inspection of the stockholders.
(b) The directors in their discretion may submit any
contract or act for approval or ratification at any annual meeting of the
stockholders or any meeting of the stockholders called for the purpose of
considering any such act
-6-
<PAGE>
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and binding upon the Corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack, abuse of directors' interest, or for any other reason.
(c) In addition to the powers and authorities hereinbefore
or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation; subject, nevertheless, to the provisions of the
statutes of the State of Delaware, of this certificate, and to any by-laws from
time to time made by the stockholders; provided, however, that no by-laws so
made shall invalidate any prior act of the directors which would have been valid
if such by-law had not been made.
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
-7-
<PAGE>
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
NINTH: The power to make, alter or repeal the By-Laws of the
Corporation, and to adopt any new By-Law, shall be vested in the Board of
Directors.
TENTH: The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, or by any successor thereto, indemnify any
and all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters referred
to in or covered by said section. Such right to indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person. The indemnification provided for herein shall not be deemed exclusive
of any other rights of which those seeking indemnification may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise.
ELEVENTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
IN WITNESS WHEREOF, JAVA GROUP, INC. has caused its corporate seal to
be hereunto affixed and this Certificate to be signed by Rob Gillingham, its
President, and attested by Ray Suutari, its Secretary, this 18th day of April,
1996.
JAVA GROUP, INC.
By: /s/ Rob Gillingham
--------------------------
Rob Gillingham, President
[Seal]
ATTEST:
/s/ Ray Suutari
- - ----------------------
Ray Suutari, Secretary
-8-
<PAGE>
BY-LAWS
OF
JAVA GROUP, INC.
ARTICLE 1
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of National Corporate Research, Ltd.,
in the City of Dover, in the County of Kent, in the State of Delaware, and said
corporation shall be the registered agent of this corporation in charge thereof
unless and until a successor registered agent is appointed by the Board of
Directors.
SECTION 2. OTHER OFFICES. The corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of Directors and for such other business as may be stated in the notice
of the meeting, shall be held on such date as the Board of Directors, by
resolution, may designate, at such place, either within or without the State of
Delaware, as the Board of Directors, by resolution, shall determine and as set
forth in the notice of the meeting.
At each annual meeting, the stockholders entitled to vote shall elect
a Board of Directors and they may transact such other corporate business as
shall be stated in the notice of the meeting or as may properly come before the
meeting in accordance with these By-laws.
SECTION 2. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote in person or by proxy,
for each share of stock held by such stockholder which has voting power upon the
matter in question, but no proxy shall be voted after three years from its date
unless such proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is
<PAGE>
irrevocable and only as long as it is coupled with an interest sufficient in law
to support an irrevocable power. The vote for Directors and the vote upon any
question before the meeting, shall be by ballot. With respect to the election
of Directors, a plurality of the votes cast at a meeting shall be sufficient to
elect. All other matters or questions shall, unless otherwise provided by law,
by the Certificate of Incorporation or by these By-laws, be decided by the
affirmative vote of the holders of a majority of the outstanding shares of stock
present in person or by proxy at the meeting and entitled to vote on such matter
or question.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 3. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the holders, represented in
person or by proxy at any duly called meeting of shareholders, of shares
representing a majority of the total of the number of shares of stock issued and
outstanding and entitled to vote at such meeting shall constitute a quorum for
the transaction of business at such meeting. In case a quorum shall not be
present at any meeting, the holders of a majority of the shares entitled to vote
thereat, present in person or by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite number of shares entitled to vote shall be present. At any such
adjourned meeting at which the requisite number of shares entitled to vote shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 4. SPECIAL MEETINGS. Special meetings of the shareholders of
the corporation shall be called by the Secretary of the corporation (A) at the
request of the Chairman of the Board of Directors or the President of the
corporation or (B) at the request of a majority of the entire Board of
Directors. Special meetings may be held at such place within or without the
State of Delaware, as designated in the notice of meeting.
-2-
<PAGE>
SECTION 5. NOTICE OF MEETINGS. Written notice, stating the place,
date and time of any meeting of stockholders, and the general purpose or
purposes of the business to be considered, shall be given to each stockholder
entitled to vote thereat at his address as it appears on the records of the
corporation, not less than 10 nor more than 60 days before the date of the
meeting. No business other than that stated in the notice shall be transacted
at any special meeting without the unanimous consent of all the stockholders
entitled to vote thereat.
SECTION 6. ADVANCE NOTICE OF STOCKHOLDER BUSINESS. Notwithstanding
any other provision of these By-Laws, for business to be properly brought before
an annual or special meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation, not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at any meeting
except in accordance with the procedures set forth in this Article II, SECTION
6. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
SECTION 7. ORGANIZATION OF MEETINGS. Meetings of stockholders shall
be presided over by the Chairman of the Board, if any, or in his absence by the
President, or in his absence by a Vice President, or in the absence of the
foregoing persons by a chairman designated by the Board of Directors. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
-3-
<PAGE>
SECTION 8. ACTION WITHOUT MEETING. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, 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. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM; ADVANCE NOTIFICATION OF STOCKHOLDER
NOMINATIONS. The Board of Directors shall consist of one or more members.
Subject to any provision set forth in the corporation's Certificate of
Incorporation, the number of Directors shall be as designated by resolution
adopted by the Directors. The Directors shall be elected at the annual meeting
of the stockholders and each Director shall be elected to serve until his
successor shall be elected and shall qualify or until his earlier resignation or
removal. Directors need not be stockholders.
Only persons who are nominated in accordance with the procedures set
forth in this ARTICLE III, SECTION 1 shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
for the election of Directors at the meeting who complies with the notice
procedures set forth in this Section. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the 10th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director, (i) the name, age, business address
-4-
<PAGE>
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such persons' written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such stockholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a Director shall furnish to
the Secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the corporation unless nominated
in accordance with the procedures set forth in this Section. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
SECTION 2. RESIGNATIONS. Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Notwithstanding any other provision hereof or of
the Certificate of Incorporation, and notwithstanding the fact that some lesser
percentage may be specified by law, any director or all the directors of the
Corporation may be removed at any time, but only for cause and only by (1) a
vote of the holders of 66-2/3% of the shares represented at a meeting of the
stockholders at which a quorum is present or (2) a vote of 66-2/3% of the
members of the Board of Directors. With respect to the removal of any director
by action of the Board of Directors, the Board shall have the power, by a
similar vote, to suspend any director pending a final determination that cause
exists for removal.
SECTION 4. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and
newly created directorships occurring on the Board of Directors may be filled by
a vote of the remaining directors (although less than a quorum) and the
Directors thus chosen shall hold office until the next annual election and until
their
-5-
<PAGE>
successors are elected and qualify, or, if the Directors are divided into
classes, until the next election of the class for which such Directors shall
have been chosen and until their successors are elected and qualify.
SECTION 5. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders. If a quorum is present at any meeting, all action
permitted or required to be taken shall be taken by a vote of a majority of
those present, unless a different vote is specified by law, the Certificate of
Incorporation or these By-Laws.
SECTION 6. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the Directors of the
corporation. The board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and, unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 7. MEETINGS. The newly elected Directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, after their appointment by the incorporator(s) of the
corporation or after the annual meeting of the stockholders; or the time and
place of such meeting may be fixed by consent in writing of all the Directors.
-6-
<PAGE>
Regular meetings of the Directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
Directors.
Special meetings of the board may be called by the President or by the
Secretary on the written request of any two Directors on at least two day's
written notice or one days' notice by telephone, telecopy, telex or telegram to
each Director and shall be held at such place or places as may be determined by
the Directors, or as shall be stated in the call of the meeting. All notices
shall be given to the Directors at their business or home addresses.
Any waiver or notice of meeting need not specify the purposes of the
meeting.
Unless otherwise restricted by the Certificate of Incorporation or
these By-Laws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
SECTION 8. QUORUM. A majority of the Directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 9. COMPENSATION. Directors shall not receive any stated
salary for their services as Directors or as members of committees, except as
otherwise provided by a resolution adopted by the Board of Directors. Nothing
herein contained shall be construed to preclude any Director from serving the
corporation in any other capacity as an officer, agent or otherwise, and
receiving compensation therefor.
SECTION 10. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of the board, or of such committee as
the case may be, and such written consent is filed with the minutes of
proceedings of the board or committee.
-7-
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, a Secretary, and a Treasurer, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified or until their earlier resignation, death or removal. In
addition, the Board of Directors may elect a Chairman, one or more
Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they
may deem proper. None of the officers of the corporation need be Directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two offices may be held by the same
person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such term and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. ELECTION. The President, Treasurer and Secretary shall be
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
SECTION 4. RESIGNATION AND REMOVAL. Any officer may resign by
delivering his written resignation to the corporation at its principal office or
to the President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
The Board of Directors, or a committee duly authorized to do so, may
remove any officer with or without cause. Except as the Board of Directors may
otherwise determine, no officer who resigns or is removed shall have any right
to any compensation as an officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.
SECTION 5. VACANCIES. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
-8-
<PAGE>
SECTION 6. CHAIRMAN. The Chairman of the Board of Directors, if one
be elected, shall be the chief executive officer of the corporation and preside
at all meetings of the Board of Directors and the shareholders and he shall have
and perform such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 7. PRESIDENT. The President shall be the chief operating
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. In the absence or non-election of the Chairman of the Board of
Directors, and if the President is a member of the Board of Directors, he shall
preside at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts on behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 8. VICE-PRESIDENT. Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
Directors.
SECTION 9. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 10. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the Directors, or stockholders, upon
whose requisition the meeting is called as provided in these
-9-
<PAGE>
By-Laws. He shall record all the proceedings of the meetings of the corporation
and of the Directors in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him by the Directors or the President.
He shall have the custody of the seal of the corporation and shall affix the
same to all instruments requiring it, when authorized by the Directors or the
President, and attest the same.
SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the Directors.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by
the Chairman or Vice Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation. Any of or all
the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the Directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice
-10-
<PAGE>
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the Directors from time to time in their
discretion deem proper for working capital or as a reserve fund to need
contingencies or for equalizing dividends or for such other purposes as the
Directors shall deem conducive to the interests of the corporation.
ARTICLE VI
MISCELLANEOUS
SECTION 1. SEAL. The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE". An alternate corporate seal shall contain the
words "CORPORATE SEAL". Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 3. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer of officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 4. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing
-11-
<PAGE>
the same in the United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the corporation,
and such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meeting except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice or such person's duly
authorized attorney or by telegraph, cable or other available method, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws
adopted by the affirmative vote of the holders of a majority of the outstanding
stock at any regular meeting of the stockholders or special meeting called for
the purpose, or by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of the Board, provided, however,
that if any stockholder or Director, as the case may be, should object to the
consideration of any proposed amendment, the proposal may not be voted upon
unless notice of the proposed amendment was given at least ten (10) days prior
to the meeting at which such objecting stockholder or Director is entitled to
vote. Any amendment, modification, repeal or addition to these By-Laws adopted
by the Board of Directors may be amended or repealed by the stockholders. The
Board is without authority to amend this Article VI.
-12-
<PAGE>
NUMBER SHARES
JG
JAVA GROUP, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
BULLETIN BOARD: JVGI COMMON STOCK CUSIP 471888 10 7
THIS CERTIFIES THAT:
IS OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.0001 PAR VALUE EACH OF
------------- -------------
---------------- JAVA GROUP, INC. ----------------
------------- -------------
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED: COUNTERSIGNED:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
23 CLARIDGE DRIVE, MIDDLETOWN, NJ 07748
TRANSFER AGENT
BY:
JAVA GROUP, INC.
CORPORATE SEAL 1989 DELAWARE
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT ACT - _______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _______
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
__________________________________________________________________________Shares
of the stock represented by the within Certificate and do hereby irrevocably
constitute and appoint ________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_________________
_____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO
FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD
TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH
REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT
NAMED ON THIS CERTIFICATE.
________________________________________________________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
________________________________________________________________________________
<PAGE>
THIS AGREEMENT made the 30th day of May, 1994.
BETWEEN:
T.A.B.S ENTERPRISES LTD., a corporation incorporated under the laws of the
Province of British Columbia (No. 460010)
("T.A.B.S")
OF THE FIRST PART
AND:
JAVA GROUP, INC., an extra-provincial corporation registered under the laws
of the Province of British Columbia (No. A-37910)
and
464431 B.C. LTD., a corporation registered under the laws of the Province
of British Columbia. 464431 B.C. LTD. is a wholly owned subsidiary of the
Java Group, Inc.
(collectively and individually, the "Java Group")
OF THE SECOND PART
WHEREAS:
(A) T.A.B.S is the owner of various trade marks, service marks and trade names
including "T.A.B.S" and "Java Girl", and related names and marks (the
"Marks");
(B) T.A.B.S is presently engaged in the business of operating coffee retail
stores for the distribution and sale of coffee products and related
products under the names "T.A.B.S", "Java Girl" or related names
(collectively, the "Coffee Houses") and, in connection therewith, the use
of the Marks;
(C) T.A.B.S has developed a system for the operation of Coffee Houses utilizing
certain standards, specifications, methods, procedures, techniques,
processes, management systems, formats, identification schemes and
proprietary marks and information in the distribution, marketing and sale
of coffee products (the "System"), all of which may be changed, improved
and further developed from time to time by T.A.B.S;
(D) The distinguishing characteristics of the System include, without
limitation, the Marks together with such other trade marks, trade names,
service marks, logos, signs, slogans and copyrights as T.A.B.S now or may
hereafter adopt and designate
-1-
<PAGE>
for use in connection with the System;
(E) T.A.B.S has established an excellent reputation with the public as to the
quality of the products and services available at Coffee Houses, which
excellent reputation and goodwill has been and continues to be a unique
benefit to T.A.B.S and its licensees;
(F) The Java Group is a public company desirous of funding the development and
owning the Coffee Houses and wishes to rely upon the expertise of T.A.B.S
in sourcing, developing and operating the Coffee Houses.
(G) T.A.B.S and Java Group recognize an agreement between Java Girl Coffee
Ltd., John Williams and Rob Gillingham dated July 27, 1993 (the "Java Girl
Agreement"). Under Section 1.7 of the Agreement, Williams and Gillingham
have the right to reassign this Agreement once. The Agreement was
reassigned to the Java Group, Inc. The agreement called for a management
fee of 5% of gross sales and a licensing fee of 5% of gross sales payable
to Java Girl Coffee Ltd. In lieu of the 5% management fee, T.A.B.S. is
granted a stock option for 2,000,000 shares in the capital stock of Java
Group, Inc. which can be exercised at $0.10 per share.
NOW, THEREFORE, in consideration of one ($1.00) dollar, the premises
and of the mutual covenants and agreements herein contained (the receipt and
sufficiency of all of which is hereby acknowledged) the parties hereby mutually
agree as follows:
1. INTERPRETATION
In this Agreement and in any supplement or amendment hereto, the following
terms shall have the following meanings:
a. "Coffee Houses" - means the Coffee Houses to be licensed by
T.A.B.S and funded by the Java Group pursuant to the provisions of this
Agreement.
b. "Gross Sales" - means the entire amount of the actual sales
price, whether for cash, credit or otherwise, of all sales of goods and
services in respect of the Coffee Houses, and all other receipts whatsoever
from all business conducted upon or originating from the Coffee Houses.
2. OPTION AND RIGHT OF FIRST REFUSAL
a. GRANT AND TERM
(i) Subject to the provisions of this Agreement, T.A.B.S. hereby
grants to the Java Group an option (the "Option") to license
the Marks and
-2-
<PAGE>
the System from T.A.B.S. for use at any Coffee House
location which has been approved of by T.A.B.S. and the Java
Group. The term of the license shall end upon the
expiration of the term of the lease of the Coffee House
location for which a license of the Marks and System has
been sought and shall commence on the date of the exercise
of the option (the "Term").
(ii) T.A.B.S. also hereby grants to the Java Group a right of
first refusal (the "Right of First Refusal") to exercise the
Option.
b. EXERCISE OF OPTION
The Java Group may exercise the Option in respect of a Coffee location
at any time by giving written notification to T.A.B.S. Upon the receipt of such
notice and subject to the obligations of T.A.B.S set forth in this Agreement,
the Java Group shall be responsible for the development and associated costs and
licensing fees of T.A.B.S of the Coffee House location described in Paragraphs 3
and 4.
c. EXERCISE OF RIGHT OF FIRST REFUSAL
T.A.B.S. agrees that in the event it receives an offer with respect to
the licensing of the Marks and System for a particular Coffee House location or
on its own initiative decides to develop a particular location as a Coffee House
it shall transmit such information to the Java Group in writing. The Java Group
shall have a period of 30 working days thereafter in order to elect in writing
as to whether it wishes to exercise the Option. T.A.B.S. notification shall
contain reasonable details as to the terms of any offer which has been received
by T.A.B.S. The failure of the Java Group to notify within the following 30
business days shall be deemed to be a waiver of the Right of First Refusal. In
the event of an actual waiver or deemed waiver T.A.B.S. shall be free to enter
into an agreement on terms materially the same as those which were offered to
the Java Group.
3. DEVELOPMENT OF THE COFFEE HOUSES
The development of any given Coffee House shall proceed in the
following manner:
a. The Java Group shall secure a Coffee House location by lease
agreement or other arrangement in which the Java Group shall be
named as the lessee. Upon entering into the lease agreement, the
Java Group will exercise the option.
b. As agent for Java Group, T.A.B.S. shall be
-3-
<PAGE>
responsible for the contracting and supervision of the
development of the Coffee House location, including any leasehold
improvements.
c. T.A.B.S. shall be responsible for a minimum of 5% of the
development costs and may invest at T.A.B.S.' discretion up to a
maximum of 20% of the development costs. The Java Group shall be
responsible for the remainder of all development costs.
T.A.B.S. shall have a joint venture interest in the ownership,
profits and losses of the Coffee House in consideration of its
participation in the development costs, the percentage of which
shall equal the proportion of its contribution towards the
development costs out of the total development cost of the Coffee
House (the "Joint Venture Percentage"). The balance of the
ownership, profits and losses shall exclusively belong to the
Java Group.
d. T.A.B.S. shall use its best efforts to build the Coffee House in
the most efficient and cost-effective manner and shall endeavor
to limit the development costs to $65,000 USD.
e. The payment of any development costs exceeding $65,000 USD (the
"Excess Costs") shall be the responsibility of the Java Group,
except in the event that T.A.B.S. holds an ownership interest in
the Coffee House, in which case T.A.B.S. shall be responsible for
that percentage of the Excess Costs equal to its Joint Venture
Percentage and the Java Group shall be responsible for the
remainder of the Excess Costs.
f. The commencement of any work relating to the Excess Costs shall
require the prior written consent from the Java Group.
4. OPERATIONAL FEES
The Java Group shall pay T.A.B.S. the following monthly licensing fee
for each Coffee House the Java Group owns or joint ventures:
(a) a licensing fee of 5% of gross sales.
5. STOCK OPTION
In lieu of a 5% management fee which had been previously granted under
the Java Girl Agreement, T.A.B.S. is granted a 5 year
-4-
<PAGE>
stock option for 2,000,000 shares in the capital stock of the Java Group, Inc.,
the terms of which are set out in the form of the stock option agreement set out
in Schedule "A".
6. RENEWAL OF LICENSE
If the Java Group has complied with all of the terms and conditions of
this Agreement, the Java Group shall have the option to renew the term of any
license it holds for a renewal term equal to the renewal term of the lease of
the location for which the license is sought. Such renewal shall be without
payment of any renewal fee or development costs but shall be subject to the
following terms and conditions:
a. The Java Group shall give T.A.B.S. written notice of its desire
to renew its license to continue as a licensee of the System and
Marks not less than 6 months prior to the expiration of the Term.
b. The terms and conditions of this Agreement shall remain in force
during such renewal term or until this Agreement is otherwise
terminated or modified.
7. OPERATION OF COFFEE HOUSES
In the initial start-up phase, T.A.B.S. as agent for Java Group shall
coordinate:
(i) the compliance with all mandatory specifications, standards,
operating procedures and policy manuals from time to time
agreed upon between T.A.B.S. and Java Group relating to the
operation of the Coffee Houses, including, without
limitation
A. quality, quantity, type and selection of goods and
services offered,
B. safety, maintenance, cleanliness, function and
appearance of the Coffee Houses and its fixtures, equipment,
inventory and signs,
C. general appearance of employees of the Coffee Houses,
D. hours during which the Coffee Houses shall be open for
business,
E. use and retention of standard forms,
F. use and illumination of signs, posters,
-5-
<PAGE>
displays, standard formats and similar items,
G. use of the System and Marks,
provided that all such specifications, standards and operating procedures
are reasonable and consistent with the requirements of any lease and all
applicable laws, by-laws and regulations.
8. INFRINGEMENT OF MARKS
T.A.B.S. shall indemnify the Java Group against and reimburse the Java
Group for all damages for which the Java Group is held liable in any proceeding
arising out of the use of any of the Marks in compliance with this Agreement,
unless Java waives the privilege of collecting damages. In the case of a
successful defense for a damage claim against Java, the Java Group will absorb
legal costs.
9. OPTION TO PURCHASE
If during the Term, one party (the "Offeror") obtains a bona fide
offer to acquire the whole or any part of its interest in any Coffee House, (the
"Offer"), the Offeror shall promptly give written notice thereof to other party
(the "Offeree") together with a true copy of the Offer (the "Notice"). On
receipt of such Notice, the Offeree shall have 30 working days within which to
exercise the option of purchasing the property forming the subject matter
thereof upon the same terms and conditions as those set out in the Offer.
At any time during the Term, either party may offer to purchase the
whole or any part of the other party's interest in any Coffee House, including
but not limited to leasehold interests, on such terms and conditions as are
mutually acceptable to the parties of this Agreement, subject to the approval of
any applicable regulatory authorities.
10. GENERAL CONTRACT PROVISIONS
a. LAW APPLICABLE
This Agreement is and shall be deemed to be a contract made in and
pursuant to the laws of British Columbia and, except to the extent of
any inconsistency with any foreign laws applicable to a particular
Coffee House location, for all purposes shall be governed, construed
and enforced in accordance with the laws of British Columbia and the
applicable laws of the Federal Parliament of Canada. The parties
hereby irrevocably attorn to the jurisdiction of the Courts of British
Columbia.
-6-
<PAGE>
b. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
and supersedes all previous agreements and understandings between the
parties in any way relating to the subject matter hereof, including
but not limited to a certain agreement between Java Girl Coffee Ltd.,
John Williams and Rob Gillingham dated July 27, 1993, which agreement
is deemed to be void ab initio.
c. SEVERABILITY OF CLAUSES
If any covenant or other provision of this Agreement is invalid,
illegal or incapable of being enforced by reason of any rule or law or
public policy such covenant or other provision shall be severed; all
other conditions and provisions of this Agreement shall, nevertheless,
remain in full force and effect and no covenant or provision shall be
deemed dependent upon any other covenant or provision unless so
expressed herein.
d. TIME OF ESSENCE
Time shall be of the essence in the performance of this Agreement and
of each and every part hereof.
e. NOTICES
All notices, requests, demands or other communications (collectively
"Notices") by the terms hereof required or permitted to be given by one party to
another shall be given in writing by personal delivery, telecopied or by
registered mail, postage prepaid, addressed to the other parties or delivered to
such other party as follows:
(a) to the Java Group at: 409 - 999 Canada Place
Vancouver, BC
V6C 3E2
Facsimile: 604-641-1214
(b) to T.A.B.S. at: 205 - 2773 Barnet Highway
Coquitlam, BC
V3B 1C2
Facsimile: 604-941-3888
or at such other address as may be given by one of them to the other in writing
from time to time.
-7-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first above given.
THE CORPORATE SEAL OF )
T.A.B.S. ENTERPRISES )
LTD. was hereunto )
affixed in the ) C/S
presence of: )
)
)
/s/ Klaus Henck )
- - -------------------- )
Authorized Signatory )
Name: Klaus Henck, )
President
THE CORPORATE SEAL OF )
JAVA GROUP, INC. was )
hereunto affixed in )
the presence of: ) C/S
)
)
/s/ Rob Gillingham )
- - -------------------- )
Authorized Signatory )
Name: Rob Gillingham )
THE CORPORATE SEAL OF )
464431 B.C. LTD. was )
hereunto affixed in )
the presence of: ) C/S
)
)
/s/ Rob Gillingham )
- - -------------------- )
Authorized Signatory )
Name: Rob Gillingham )
-8-
<PAGE>
STOCK OPTION AGREEMENT
This Stock Option Agreement ("the Agreement") is made and entered into
as of the May 30, 1994 by and between T.A.B.S. ENTERPRISES LTD. ("Optionee") and
JAVA GROUP, INC. ("Java") for and in consideration of the mutual covenants and
agreements hereinafter set forth:
Whereas T.A.B.S. and Java Group recognize an agreement between Java Girl
Coffee Ltd., John Williams and Rob Gillingham dated July 27, 1993 under Section
1.7 of the Agreement, Williams and Gillingham have the right to reassign this
agreement once. The Agreement was reassigned to the Java Group, Inc. The
Agreement called for a management fee of 5 percent of gross sales and a
licensing fee of 5 percent of gross sales payable to Java Girl Coffee Ltd. In
lieu of the 5% management fee T.A.B.S. is granted a stock option for 2 million
shares which can be exercised at $.10 a share.
1. GRANT AND EXERCISE OF OPTION.
a. Subject to the terms and conditions of this Agreement, Java
hereby grants Optionee the option, from and after the date hereof until five
years from the date, to purchase 2,000,000 shares (the "Shares") of common
stock, no par value per share, ("Common Stock") of Java Group, Inc. (the
"Company") at an exercise price, subject to adjustment hereunder, (the "Exercise
Price") of $. 10 per Share (the "Option")
b. Upon receipt by Java Group, Inc. of a notice of exercise of the
Option by Optionee, together with certified funds in the amount of the Exercise
Price, The Transfer Agent shall cause (i) certificates representing the Shares
exercised to be delivered to Optionee and (ii) the Exercise Price to be
delivered to Java Group, Inc. The Option may be exercised in accordance with
this Section 1 as to all or any portion of the Shares subject to the Option from
time to time during the term of the Option, subject, however, to the provisions
of Section 8 hereof.
2. REPRESENTATIONS AND WARRANTIES OF OPTIONEE. Optionee hereby
represents and warrants to Java Group, Inc. as follows, each of which
representation and warranty is material and is being relied upon by Java Group,
Inc. and each of which is true at and as of the date hereof:
a. Optionee understands that the Option and the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), or under
applicable state securities laws.
-9-
<PAGE>
b. Optionee is acquiring the Option solely for its own account, for
investment purposes only and not with the intention of, or a view toward, the
resale, transfer or further distribution thereof in whole or in part.
3. RIGHTS OF OPTION HOLDER. Optionee shall not, by virtue hereof, be
entitled to any of the rights of a shareholder in the Company, either at law or
in equity; PROVIDED, HOWEVER, that in the event any certificate or certificates
representing Shares of Common Stock are issued to Optionee upon exercise of the
Option, then Optionee shall, for all purposes, be deemed to have become the
holder of record of such Shares of Common Stock on the date on which this Option
was exercised and payment of the Exercise Price was made, irrespective of the
date of delivery of such share certificate or certificates. The rights of
Optionee under this Option are limited to those expressed herein, and Optionee,
by its acceptance hereof, consents to and agrees to be bound by and comply with
all of the provisions of this Option, including, without limitation, all of the
obligations imposed upon Optionee by Section 6 hereof.
4. REPRESENTATIONS AND WARRANTIES OF JAVA GROUP, INC. Java hereby
represents and warrants to Optionee as follows, each of which representation and
warranty is material and is being relied upon by Optionee and each of which is
true at and as of the date hereof:
All Shares of Common Stock delivered into the Transfer Agent are duly
and validly issued, fully paid and non-assessable and free from all stamp taxes,
liens and charges with respect to the purchase thereof.
5. TAXES, FEES AND EXPENSES. Java Group, Inc. shall pay equally all
transfer taxes (but not income taxes, if any) with respect to the grant of the
Option and/or the issue and transfer of Shares of Common Stock pursuant to the
exercise of the Option, and all other fees and expenses necessarily incurred by
Java Group, Inc. in connection therewith, and will from time to time use its
best efforts to comply with all laws and regulations which, in the opinion of
counsel for Java Group, Inc. shall be applicable thereto.
6. TRANSFER OF OPTION OR OPTION STOCK.
a. Optionee and any transferee of the Option or Shares of Common
Stock issuable upon the exercise of the Option (such shares are hereinafter
referred to as "Option Stock") agree that if any distribution of the Option or
any of the Option Stock is proposed to be made by them otherwise than by
delivery of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1993, as amended, or the rules and regulations promulgated
thereunder (such Act and rules and regulations being hereinafter
-10-
<PAGE>
called the "Act"), such action shall be taken only after submission to Java
Group, Inc. of an opinion of counsel, reasonably satisfactory in form and
substance to Java Group, Inc.'s counsel, to the effect that the proposed
distribution will not be in violation of the Act or applicable state law.
b. It shall be a condition to the transfer of the Option or any part
thereof or Option Stock that any transferee deliver to Java Group, Inc. his or
its written agreement to accept and be bound by all of the terms and conditions
of this Agreement.
7. ADJUSTMENT TO EXERCISE PRICE AND NUMBER OF OPTION SHARES.
The number and kind of securities purchasable upon the exercise of the Option
and the Exercise Price shall be subject to adjustment from time to time upon
the happening of certain events, as hereinafter provided.
a. MECHANICAL ADJUSTMENTS. The number of Shares purchasable upon
the exercise of the Option and the Exercise Price shall be subject to adjustment
as follows:
(i) In case the Company shall (A) pay a dividend in shares
of Common Stock or make a distribution in shares of Common Stock, (B) subdivide
its outstanding shares of Common Stock, (C) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (D) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of the Option immediately prior
thereto shall be adjusted so that the Optionee shall be entitled to receive the
kind and number of Shares or other securities of the Company which it would have
owned or have been entitled to receive after the happening of any of the events
described above, had the Option been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (i) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(ii) No adjustment in the number of Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1 %) in the number of Shares purchasable upon
the exercise of the Option; PROVIDED, HOWEVER, that any adjustments which by
reason of this paragraph (ii) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth (1/1000) of a share.
(iii) Whenever the number of Shares purchasable upon the
exercise of the Option is adjusted pursuant to Section 7(a)(i) hereof, the
Exercise Price payable upon exercise of the
-11-
<PAGE>
Option shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
Shares purchasable upon the exercise of the Option immediately prior to such
adjustment, and of which the denominator shall be the number of Shares so
purchasable immediately thereafter.
(iv) For the purpose of this Section 7(a), the term "shares
of Common Stock" shall mean (A) the class of stock designated as the common
stock of the Company at the date of this Agreement or (B) any other class of
stock resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par value, or
no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to paragraph (i) above, Optionee shall become entitled
to purchase any securities of Company other than shares of Common Stock,
thereafter the number of such other shares so purchasable upon exercise of the
Option and the Exercise Price of such securities shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained herein respect to the Shares.
b. NOTICE OF ADJUSTMENT. Whenever the number of Shares purchasable
upon the exercise of the Option or the Exercise Price of such Shares is
adjusted, as herein provided, Java Group, Inc. shall promptly mail by first
class mail, postage prepaid, to the Optionee and Transfer Agent notice of such
adjustment or adjustments setting forth (A) the number of Shares purchasable
upon the exercise of the Option and the Exercise Price of such Option Shares
after such adjustment and (C) the computation by which such adjustment was made.
Such notice shall be conclusive evidence of the correctness of such adjustment.
c. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 8 (a)
hereof, no adjustment in respect of any dividends shall be made during the term
of an Option or upon the exercise of the Option.
8. FRACTIONAL SHARES. Java Group, Inc. shall not be required to issue
any fraction of a Share upon the exercise of the Option. If any fractional
interest in a Share shall be deliverable upon the exercise of the Option, Java
Group, Inc. shall make an adjustment therefor in cash equal to such fraction.
9. LEGENDS ON STOCK CERTIFICATE. Until the Company files an appropriate
registration statement pursuant to the Act with respect to the Shares of Option
Stock each certificate representing such Shares of Option Stock shall be
endorsed on its face with the following legends or their equivalent:
Neither the option pursuant to which the shares represented by this
certificate are issued nor said shares have
-12-
<PAGE>
been registered under the Securities Act of 1933, as amended (the "Act"). The
shares may not be transferred or sold unless there is a current registration
statement in effect covering the shares or Java Group, Inc. is furnished with an
opinion of counsel to the holder of the shares that an exemption from
registration under said Act is available.
A copy of this Agreement shall be delivered to the Secretary of the
Company, to be kept at the Company's principal office and shown by the Secretary
to any person inquiring about inquiring about in connection with the proposed
transfer of the shares covered by the Option.
10. NOTICES. All notices, requests, demands and other communications
called for or contemplated hereunder shall be in writing, and shall be addressed
to the Parties, their successors in interests or their assignees at the
following addresses or such other addresses as the Parties may designate:
If to Java Group, Inc. 404 - 999 Canada Place
Vancouver, B.C.
V6C 3E2
If to the Optionee: 205 - 2773 Barnet Highway
Coquitlam, B.C.
V3B 1C2
Any such notice shall be deemed duly given when enclosed in a properly
sealed envelope or wrapper addressed as aforesaid, certified, and deposited,
postage and registry or certification fees prepaid, in a post office or branch
post office regularly maintained by the United States Postal Service. It shall
be the obligation of Optionee and its transferee holding Option Stock to provide
the Secretary of Java Group, Inc., by letter mailed as provided hereinabove,
with written notice of its correct mailing address.
11. INVALID PROVISIONS. In the event that any provisions of this
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision were not contained herein.
12. APPLICABLE LAW This Agreement shall be governed by and construed in
accordance with the laws of British Columbia.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, oral and written, between
the Parties with respect to the subject matter hereof.
-13-
<PAGE>
14. HEADINGS. The section and other headings contained in this Agreement
are for reference purposes only and shall not be deemed to be part of this
Agreement or to affect the meaning or interpretation of this Agreement.
15. AMENDMENTS. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the Party or Parties against
whom enforcement of any such modification or amendment is sought.
16. SUCCESSORS AND ASSIGNS. This Agreement and the rights powers and
duties set forth herein shall, except as otherwise set forth herein, bind and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the Parties.
17. FURTHER ASSURANCES. Each party agrees to perform any further acts and
execute and deliver any documents which may be reasonably necessary to carry out
the provisions and effectuate the purpose of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective
as of___________________________________.
T.A.B.S. ENTERPRISES LTD.
By: /s/ Klaus Henck
----------------------
Klaus Henck, President
JAVA GROUP, INC.
By: /s/ Rob Gillingham
----------------------
Rob Gillingham,
President
-14-
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.01 Defined Terms
ARTICLE II STRUCTURE OF DOCUMENT AND INTERPRETATION
2.01 Schedules
2.02 Number and Gender
2.03 Headings and Captions
2.04 Obligations as Covenants
2.05 Entire Agreement
2.06 Governing Law
ARTICLE III PREMISES, TERM, RENT AND ADDITIONAL RENT
3.01 The Premises
3.02 Term
3.03 Rent
3.04 Deposit
ARTICLE IV ELECTRICAL COSTS
4.01 Allocation of Electrical Costs and Other Utilities and Services
ARTICLE V COVENANT TO PAY RENT
5.01 The Covenant
ARTICLE VI USE OF PREMISES
6.01 Purpose of Use
6.02 Conduct of Business
6.03 Monthly Sales Data
6.04 Landlord not Obligated to Purchase Goods and Services
6.05 Hours of Operation
ARTICLE VII USE OF COMMON AREAS AND FACILITIES
7.01 Non-exclusive Use
7.02 Management and Control by Landlord
<PAGE>
ARTICLE VIII REPAIR
8.01 Repair by the Landlord
8.02 Repair by the Tenant
8.03 Abatement of Rent
8.04 Termination in Event of Damage
8.05 Certificate of Architect
ARTICLE IX UTILITIES AND SERVICES - PREMISES
9.01 Responsibility for Utilities and Services
9.02 Tenant not to Overload Utility and Service Facilities
ARTICLE X SUBORDINATION, ATTORNMENT AND
STATUS STATEMENT BY TENANT
10.01 Subordination and Attornment
10.02 Status Statement
ARTICLE XI INSURANCE AND INDEMNITY
11.01 Insurance
11.02 Comprehensive General Liability Insurance
11.03 The Insureds
11.04 Landlord's Insurance
11.05 Increase in Landlord's Insurance Premiums
11.06 Cancellation of Insurance
11.07 Indemnification of the Landlord
11.08 Loss and Damage
ARTICLE XII ASSIGNMENT AND SUBLETTING
12.01 Consent Required
12.02 Conditions of Consent
ARTICLE XIII WASTE AND GOVERNMENTAL REGULATIONS
13.01 Waste or Nuisance
13.02 Governmental and Insurance Underwriter's Regulations
ARTICLE XIV ACCEPTANCE OF PREMISES
14.01 Acceptance of Premises
<PAGE>
ARTICLE XV SIGNS, FIXTURES AND ALTERATIONS
15.01 Installation and Changes by Tenant
15.02 Removal of Installations and Restoration by Tenant
15.03 Not to Overload Floors
15.04 Tenant to Discharge all Liens
15.05 Tenant's Signs, Awnings and Canopies
ARTICLE XVI DEFAULT OF TENANT
16.0-1 Right to Re-Enter
16.02 Bankruptcy of Tenant
16.03 Landlord may Perform Tenant's Obligations
16.04 Right to Relet
16.05 Legal Expenses
16.06 Interest on Overdue monies
16.07 Waiver of Distress
ARTICLE XVII REMEDIES OF LANDLORD AND WAIVER
17.01 Remedies of Landlord Cumulative
17-02 Waiver
ARTICLE XVIII ACCESS BY LANDLORD
18.01 Right to Entry
18.02 Excavation
ARTICLE XIX ASSIGNMENT BY LANDLORD
19.01 Assignment
19.01 Effect of Assignment
ARTICLE XX RULES AND REGULATIONS
20.01 Rules and Regulations
ARTICLE XXI LANDLORD'S COVENANTS AND OBLIGATIONS
21.01 Taxes
21.02 Quiet Enjoyment
<PAGE>
ARTICLE XXII OVERHOLDING
22.01 No Tacit Renewal
ARTICLE XXIII GUARANTEE
23.01 Guarantee
ARTICLE XXIV RENEWAL
24.01 Option to Renew
ARTICLE XXV MISCELLANEOUS
25.01 Accord and Satisfaction
25.02 No Partnership
25.03 Unavoidable Delay
25.04 Partial Invalidity
25.05 Joint and Several Liability
25.06 Demolition
25.07 Registration
25.08 Notice
25.09 Amendment in writing
25.10 Successors and Assigns
SCHEDULES
SCHEDULE "A" - DESCRIPTION OF LAND
SCHEDULE "B" - PLAN OF BUILDING AND OUTLINE OF PREMISES SCHEDULE
SCHEDULE "C" - CERTAIN RULES AND REGULATIONS OF THE LANDLORD
SCHEDULE "D" - RENT
<PAGE>
THIS IS A LEASE made in duplicate as of the first day of
November, Nineteen hundred and ninety-three
IN PURSUANCE OF THE LAND TRANSFER FORM ACT PART II
BETWEEN:
RICHMOND INN HOTEL LTD. a body corporate duly incorporated under the
laws of British Columbia, having an address at 7551 Westminster
Highway, Richmond, British Columbia (Incorporation No. 359288)
(hereinafter called the "Landlord")
OF THE FIRST PART;
AND:
JAVA GIRL COFFEE LTD., a body corporate duly incorporated under the
laws of British Columbia, having an address at 2773 Barnet Highway,
Coquitlam, British Columbia
(hereinafter called the "Tenant")
OF THE SECOND PART;
AND:
Klaus J. Henck, Astor Management, business person, of 6741 Baker Road,
Delta, British Columbia
(hereinafter called the "Guarantor")
OF THE THIRD PART;
ARTICLE I
DEFINITIONS
1.01 DEFINED TERMS
In this Lease:
"Architect" means the architect qualified to practice and practicing
in the Province of British Columbia from time to time named by the
Landlord;
"Building" means collectively the Land and all buildings, structures,
facilities and other improvements erected or to be erected on the
Land;
<PAGE>
"Common Area and Facilities" means those parts of the Building not
part of the premises set aside by the Landlord for leasing to tenants
of the Building including but not limited to exterior walls, roofs,
entrances to and exits from the Building, loading docks and areas,
storage rooms, delivery passages, elevators, retaining walls,
stairways, washrooms, and all general signs, improvements, fixtures,
facilities, equipment and installations which the Landlord reasonably
provides or designates from time to time for the general use by or for
the benefit of the Tenant, its officers, employees, agents and other
invitee in common with other tenants of the Landlord and others
designated by the Landlord in the manner and for the purposes
permitted by this Lease;
"Land" means the Land described in Schedule "A";
"Lease Year" means the calendar year excepting that:
(a) the first Lease Year during the Term begins on the first day
of the Term and ends on the last day of the calendar year in
which the first day of the Term occurs, and may be a period
less than twelve (12) consecutive calendar months,
(b) the last Lease Year during the Term begins on the first day of
the calendar year during which the last day of the Term occurs
and ends on the last day of the Term, and may be a period less
than twelve (12) consecutive calendar months;
"Mortgage" means a mortgage or charge (including a deed of trust and
mortgage securing bonds and all other indentures supplemental thereto)
of the reversion immediately expectant on the Term, and includes all
renewals, modifications, consolidations, replacements and extensions
thereof;
"Mortgagee" means the mortgagee or trustee for bondholders, as the
case may be, named in a Mortgage;
"Premises" means the premises leased to the Tenant by this Lease and
described in Section 3.01;
"Rentable Area" in the case of premises occupying a whole floor means
the area expressed in square feet, as determined and certified by the
Architect, or the floor, measured from the glass line of exterior
glazing and shall include corridors, elevator lobbies, washrooms,
electrical and telephone closets, janitor's closets and other closets
within and exclusively serving that floor, but shall not
-2-
<PAGE>
include mechanical equipment areas, the lobby and entrances on the
ground floor, stairs (unless installed for the exclusive benefit of a
tenant), elevator shafts, flues, stacks, pipe shafts or vertical ducts
or the wall enclosing them;
"Rentable Area" in the case of premises occupying less than a whole
floor means the area expressed in square feet, as determined and
certified by the Architect, of the Demised Premises, measured from the
glass line of exterior glazing to the Demised Premises side of
corridor walls and to the center line of partitions separating the
Demised Premises from adjoining premises, to which shall be added a
portion of the area of the corridors, elevator lobbies, washrooms,
electrical and telephone closets, janitor's closets and other closets
within and exclusively serving that floor, but shall not include
mechanical equipment areas, the lobby and entrances on the ground
floor, stairs (unless installed for the exclusive benefit of a
tenant), elevator shafts, flues, stacks, pipe shafts, or vertical
ducts, or the wall enclosing them;
"Term" means the term of this Lease as stipulated in Section 3.02.
ARTICLE II
STRUCTURE OF DOCUMENT AND INTERPRETATION
2.01 SCHEDULES
The Schedules to this document are a part of this Lease and consist
of:
SCHEDULE "A" - Description of Land,
SCHEDULE "B" - Plan of Building and Outline of Premises, and
SCHEDULE "C" - Certain Rules and Regulations of the Landlord
SCHEDULE "D" - Rent
2.02 NUMBER AND GENDER
The necessary grammatical changes required to make the provisions of
this Lease apply in the plural sense where the Tenant comprises more
than one entity and to corporations, associations, partnerships, or
individuals, males or females, in all cases will be assumed as though
in each case fully expressed.
2.03 HEADINGS AND CAPTIONS
The table of contents, article numbers, article headings,
-3-
<PAGE>
section numbers and section headings are inserted for convenience of
reference only and are not to be considered when interpreting this
Lease.
2.04 OBLIGATIONS AS COVENANTS
Each obligation of the Landlord or the Tenant expressed in this Lease,
even though not expressed as a covenant, is considered to be a
covenant for all purposes.
2.05 ENTIRE AGREEMENT
This Lease contains all the representations, warranties, covenants,
agreements, conditions and understandings between the Landlord and the
Tenant concerning the Premises or the subject matter of this Lease.
2.06 GOVERNING LAW
This Lease shall be interpreted under and is governed by the laws of
the Province of British Columbia.
ARTICLE III
PREMISES, TERM AND RENT
3.01 THE PREMISES
The Landlord hereby demises and leases to the Tenant for the Term the
premises containing approximately two hundred (200) square feet, the
boundaries and location of which are shown outlined in red on the plan
attached as Schedule "B", excepting the exterior faces of all
adjoining, corridor and outside walls and excepting the roof (the
"Premises").
3.02 TERM
The term of this Lease is three (3) years beginning on January 1, 1994
and terminating on December 31, 1996.
3.03 RENT
The Tenant will pay to the Landlord, at the office of the Landlord or
at such other place in Canada as the Landlord designates from time to
time in writing, in lawful money of Canada and without deduction or
set-off:
one half of the net sales of the business (projected financial
figures form Schedule "D"), but not less than a guaranteed
$500.00 minimum payment each and
-4-
<PAGE>
every month regardless of the net sales of the business
payable in advance on the first day of each and every month during the
Term.
3.04 DEPOSIT
The Landlord hereby acknowledges receipt from the Tenant of a deposit
in the amount of two thousand two hundred, thirty-five dollars and
sixty-six cents ($2,235.66) which shall be applied to the payment or
partial payment of the last two months of rent becoming due hereunder,
and may form one half of the last two month's net sales.
ARTICLE IV
ELECTRICAL COSTS
4.01 ALLOCATION OF ELECTRICAL COSTS
AND OTHER UTILITIES AND SERVICES
If the electrical consumption of the Tenant on the Premises is not
separately metered by British Columbia Hydro and Power Authority, or
if the consumption by the Tenant of any other utility or service, the
Landlord will cause a calculation of electrical or such other costs
attributable to the Premises to be made in accordance with good
engineering practices, which will be the basis of the Landlord's
invoices. In the event of a dispute as to the amount included in such
calculation, a certificate of an independent engineer chosen by the
mutual agreement of the Landlord and the Tenant (whose fees will be
borne equally by the Landlord and the Tenant) verifying the electrical
costs for the period covered by the certificate will be conclusive.
ARTICLE V
COVENANT TO PAY RENT
5.01 THE COVENANT
The Tenant covenants to pay rent and all other costs and charges as
herein provided.
-5-
<PAGE>
ARTICLE VI
USE OF PREMISES
6.01 PURPOSE OF USE
The Premises will be used for the limited purpose of operating a
Coffee Stand under the business name JAVA GIRL COFFEE LTD. and the
Tenant will not use the Premises or permit them to be used for any
other purpose. This use of the Premises is not exclusive and the
Landlord, or any affiliated or related company of the Landlord, may
sell any product or provide any service sold or provided by the
Tenant. The Tenant acknowledges that it will not operate, or utilize,
any vending machines in respect of the business carried out on the
Premises.
6.02 CONDUCT OF BUSINESS
The Tenant will conduct its business in and use the whole of the
Premises continuously throughout the Term in an up-to-date, first
class and reputable manner befitting the Building.
6.03 MONTHLY SALES DATA
On or prior to the fifteenth day of each calendar month during the
Term, the Tenant shall provide to the Landlord monthly sales data
concerning the prior calendar month setting out the sum (without
duplication) of the selling price of all goods sold, the rent received
or due and receivable for all goods leased, the charges for all
services rendered, and the receipts and receivables from all other
business conducted on or from the Premises by the Tenant.
6.04 LANDLORD NOT OBLIGATED TO PURCHASE GOODS AND SERVICES
The Tenant acknowledges that the Landlord is not obligated to purchase
any goods or services from the Tenant.
6.05 HOURS OF OPERATION
The Tenant covenants that the hours of operation in respect of the
business carried on in the Premises will be as follows:
(a) Monday - Saturday: 6:00 a.m. to 6:00 p.m.
(b) Sunday: 7:00 a.m. to 6:00 p.m.
-6-
<PAGE>
ARTICLE VII
USE OF COMMON AREAS AND FACILITIES
7.01 NON-EXCLUSIVE USE
The Tenant, its officers, employees, customers and other invitees, in
common with others designated by the Landlord or otherwise entitled,
have the use and benefit of the Common Areas and Facilities for the
purposes from time to time permitted, approved or designated by the
Landlord, subject to the management and control of the Common Areas
and Facilities by the Landlord.
7.02 MANAGEMENT AND CONTROL BY LANDLORD
The Landlord has the exclusive right to manage and control the
Building and from time to time to establish, modify and enforce
reasonable regulations regarding the use, maintenance and operation of
the Common Areas and Facilities, and the rules and regulations in all
respects will be Observed and performed by the Tenant, its officers,
employees, customers and other invitees.
ARTICLE VIII
REPAIR
8.01 REPAIR BY THE LANDLORD
The Landlord will keep in a good and substantial state of repair, to
the existing standards of the Premises, the structural elements of the
Premises, including but not limited to the foundations, roofs,
exterior wall (excluding the store front to the Premises) , structural
sub-floors, bearing walls, columns, beams and other structural
elements thereof, and the systems provided for bringing utilities to
the Premises. For greater certainty, the Landlord is not and will not
be obligated to provide, construct or pay for any improvements or
equipment required by the Tenant to carry out its business.
8.02 REPAIR BY THE TENANT
The Tenant will:
(a) keep in good and substantial state of repair to the standards
of a first class Building, but subject to Section 8.01 and
Section 8.03, the Premises including all leasehold
improvements, all equipment utilized by the Tenant in carrying
on its business,
-7-
<PAGE>
all utilities and all heating, air conditioning and
ventilating equipment and/or modifications installed by the
Tenant therein, but with the exception of structural elements
of the Premises,
(b) permit the Landlord to enter and view the state of repair upon
reasonable notice, and will repair as required by clause (a)
according to notice in writing and will leave the Premises in
a good and substantial state of repair to the standards of a
first class building,
subject only to the exceptions referred to in clause (a), and
(c) if part of the Building including the Common Areas and
Facilities becomes in disrepair, is damaged or destroyed
through the negligence of the Tenant or its officers,
employees, customers or other invitees, reimburse the Landlord
the cost of repairs or promptly upon demand except to the
extent that the Landlord is indemnified by insurance.
8.03 ABATEMENT OF RENT
If there is damage to the Premises or damage to the Building which
prevents access to the Premises or the supply of services essential to
the Premises and if the damage is such that the Premises or a
substantial part of the Premises is rendered not reasonably capable of
use by the Tenant for the conduct of its business for a period of time
commencing from the date of such damage and exceeding ten (10) days:
(a) unless the damage was caused by the negligence of the Tenant
or an assignee, subtenant, licensee or other person conducting
business on or from the Premises or an officer, employee,
customer or other invitee of any of them, the fixed minimum
rent payable under Section 3.03 for the period beginning upon
the occurrence of the damage until at least a substantial part
of the Premises is again reasonably capable of use and
occupancy for the purpose aforesaid will abate in the
proportion that the area of the part of the Premises rendered
not reasonably capable of use by the Tenant for the conduct of
its business bears to the Rentable Area of the Premises,
provided however that the abatement of rent provided herein
shall not exceed the amount of the rental income insurance
proceeds payable to the Landlord for the period; and
-8-
<PAGE>
(b) unless this Lease is terminated under Section 8.04, the
Landlord or the Tenant or both, as the case may be
(according.to the nature of the damage and their respective
obligations to repair under Sections 8.01 and 8.02), will
repair the damage with all reasonable diligence, but any
abatement of rent to which the Tenant is entitled under this
section will not extend beyond the date by which in the
reasonable opinion of the Landlord the Tenant should have
completed its repairs with all reasonable diligence.
8.04 TERMINATION IN EVENT OF DAMAGE
(1) The Landlord by written notice to the Tenant given within sixty (60)
days of the occurrence of damage to the Building, may terminate this
Lease if:
(a) the Building is damaged by any cause and in the reasonable
opinion of the Architect either cannot be repaired or rebuilt
with reasonable diligence within one hundred and eighty (180)
days after the occurrence of the damage or cost of repairing
or rebuilding it would exceed by more than one hundred
thousand dollars ($100,000.00) the proceeds of the Landlord is
insurance available for the purpose, or
(b) if the Premises are damaged by any cause and the damage is
such that the Premises or a substantial part of the Premises
is rendered not reasonably capable of use by the Tenant for
the conduct of its business and in the reasonable opinion of
the Architect cannot be repaired or rebuilt with reasonable
diligence by six (6) months before the end of the Term.
(2) If this Lease is terminated under subsection (1) , neither the
Landlord nor the Tenant will be bound to repair as provided in
Sections 8.01 and 8.02, and the Tenant will deliver up possession of
the Premises to the Landlord with reasonable speed but in any event
within thirty (30) days after the giving of the notice of termination,
and all rent will be apportioned and paid to the date upon which
possession is delivered up, subject to any abatement to which the
Tenant may be entitled under Section 8.03, but otherwise the Landlord
or the Tenant or both, as the case may be (according to the nature of
the damage and the respective obligations to repair) under Sections
8.01 and 8.02 will repair the damage with all reasonable diligence.
-9-
<PAGE>
8.05 CERTIFICATE OF ARCHITECT
If the Premises or the Building is damaged and there is a doubt as to
whether the Premises or the Building can be repaired or rebuilt within
one hundred and eighty (180) days or by six (6) months.before the end
of the Term or as to the cost of repairing or rebuilding the Building
or as to whether the Premises or a substantial part of the Premises is
rendered not reasonably capable of use by the Tenant for the conduct
of its business or once again has become capable of such use, the
doubt will be settled by the Architect and his certificate will be
conclusive.
ARTICLE IX
UTILITIES AND SERVICES - PREMISES
9.01 RESPONSIBILITY FOR UTILITIES AND SERVICES
The Tenant is solely responsible for and will promptly pay all charges
for water, gas, electricity, janitor service, window cleaning, and any
other utility or service used.on the Premises. The Landlord will not
be liable to the Tenant in damages or otherwise for any interruption
or failure in the supply of utilities or services to the Premises.
9.02 TENANT NOT TO OVERLOAD UTILITY AND SERVICE FACILITIES
The Tenant will not install equipment that will exceed or overload the
capacity of utility facilities and agrees that if equipment installed
by the Tenant requires additional facilities, they will be installed
at the Tenant's expense in accordance with plans and specifications
approved by the Landlord prior to installation.
ARTICLE X
SUBORDINATION, ATTORNMENT AND
STATUS STATEMENT BY TENANT
10.01 SUBORDINATION AND ATTORNMENT
This Lease is subordinate to every mortgage that now affects the Land.
The Tenant will subordinate this Lease to every mortgage that
hereafter affects the Land and execute promptly a document in
confirmation of the subordination if requested by the Landlord in
which the Tenant also will agree with the mortgagee that if the
mortgagee becomes a mortgagee in possession or takes
-10-
<PAGE>
action to realize the security of the mortgage the Tenant will attorn
to the mortgagee as a tenant upon all terms of this Lease, but only if
the mortgagee agrees in writing to accept the attornment and permit
the Tenant to continue in occupation of the Premises until this Lease
is terminated by the passage of time or by action taken because of a
default of the Tenant.
10.02 STATUS STATEMENT
At any time or times at reasonable intervals within fifteen (15) days
after a written request by the Landlord the Tenant will execute,
acknowledge and deliver to the Landlord or such assignee or mortgagee
as the Landlord designates, a certificate setting out:
(a) that this Lease is unmodified and in force and effect and in
accordance with its terms (or if there have been
modifications, that this Lease is in force and effect as
modified, and identifying the modification agreement, or if
this Lease is not in force and effect, that it is not),
(b) the date to which rental has been paid under this Lease,
(c) whether or not there is an existing default by the Tenant in
the payment of rent or any other sum of money under this
Lease, and whether or not the Tenant has knowledge of any
other existing default by either party under this Lease with
respect to which notice of default has been served, and if
there is such a default, specifying its nature and extent,
(d) whether or not there are any set-offs, defences or
counterclaims against the enforcement of the obligations to be
performed by the Tenant under this Lease; and
(e) such further facts, warranties, representations or statements
as are reasonably required by a prospective lender to or
purchaser from the Landlord.
-11-
<PAGE>
ARTICLE XI
INSURANCE AND INDEMNITY
11.01 INSURANCE
The Tenant will take out and keep in force throughout the Term and
during such other time as the Tenant occupies the Premises or part
thereof to fully protect the interest of both the Landlord and the
Tenant all risk direct damage insurance upon the Premises to its full
insurable value on a replacement cost basis and on its merchandise,
stock-in-trade, its furniture, plate glass fixtures and improvements
and all parts of the Premises which the Tenant is obligated to keep in
repair under Section 8.02 to the full replacement value thereof, and
broad boiler insurance on any boilers in the Premises. The Tenant
will take out and maintain other insurance in amounts and upon terms
reasonable for a prudent tenant to provide, as determined by the
Landlord and its insurance advisers or its Mortgagee. If the nature
of the Tenant's operation is such as to place all or any of its
employees under the coverage of local workmen's compensation or
similar statutes, the Tenant will also keep in force, at its expense,
so long as this Lease remains in effect, workmen's compensation or
similar insurance affording statutory coverage and containing
statutory limits.
11.02 COMPREHENSIVE GENERAL LIABILITY INSURANCE
The Tenant will take out and keep in force throughout the Term
comprehensive general liability insurance against claims for personal
injury, death or property damage or loss arising out of all operations
of the Tenant and subtenants and other persons conducting business on
or from the Premises, indemnifying and protecting the Landlord and the
Tenant to a limit of two million dollars ($2,000,000.00) inclusive, or
such additional amount as would be carried by a prudent owner.
11.03 THE INSUREDS
Each insurance policy referred to in Sections 11.01 and 11.02 will
name the Landlord and the persons, firms or corporations designated by
the Landlord as additional named insureds as their interest may
appear, will contain if available and as appropriate a waiver of
rights of subrogation against the Landlord and the Tenant or a cross-
liability clause protecting the Landlord and other insureds designated
by it against claims by the Tenant as if the Landlord and other
insureds designated by it were separately insured, and protecting the
Tenant against
-12-
<PAGE>
claims by the Landlord and other insureds designated by it as if the
Tenant were separately insured, and will contain a clause that the
insurer will not cancel or change or refuse to renew the insurance
without first giving the Landlord thirty (30) days' prior written
notice. All policies of insurance will be with insurers acceptable to
the Landlord and in a form satisfactory to the Landlord acting
reasonably, and the Tenant will see that there is delivered to the
Landlord copies or certificates of the policies. If the Tenant fails
to take out or keep in force any policy of insurance referred to in
Sections 11.01 and 11.02, the Landlord may do so and pay the premium,
and in that event the Tenant will pay to the Landlord the amount so
paid as premium plus ten per cent (10%) for overhead as additional
rent and it will be due and payable on the first day of the month
following the payment by the Landlord.
11.04 LANDLORD'S INSURANCE
The Landlord will take out and keep in force throughout the Term all
risks direct damage insurance on the buildings and improvements
comprised in the Building, but which may exclude foundations and the
improvements upon which the Tenant is obliged to take out insurance
under Section 11.01, with responsible insurance companies and in an
amount such as would be carried by a prudent owner, and the cost of
the insurance will be included in Operating Costs. Each insurance
policy ref erred to in this section will contain, if available, a
waiver of the right of subrogation against the Tenant to the extent
only of that part of a claim against the Tenant in excess of the
amount of comprehensive general liability insurance which the Tenant
is required to take out and keep in force.
11.05 INCREASE IN LANDLORD'S INSURANCE PREMIUMS
(1) The Tenant agrees that nothing will be done, omitted to be done, kept,
or used on or from the Premises that may contravene any of the
Landlord's policies insuring any part of the Building or which will
prevent the Landlord from procuring policies with companies acceptable
to the Landlord. The Tenant will pay all increases in premium s for
all risks direct damage insurance, and broad boiler insurance,
including repair or replacement and rental income coverages and such
other insurance as is customary for prudent owners of property similar
to the Building to carry against loss of or damage to the Building or
liability arising therefrom that may be charged during the Term for
insurance carried by the Landlord insuring any part of the Building,
resulting from the type of
-13-
<PAGE>
merchandise sold on or from the Premises or anything done or kept
thereon or any use to which they may be put, whether or not the
Landlord has consented to them. In determining whether increased
premiums are the result of the use of the Premises a schedule issued
by the organization making the insurance rate on the Premises showing
the various components of the rate will be conclusive evidence of the
several items and charges which make up the fire insurance rate on the
Premises. The Landlord's insurance must cover the Tenant's permitted
use.
(2) If the occupancy or use of the Premises causes an increase of premium
for any of the policies insuring the Premises or any part of the
Building above the rate for the least hazardous type of use or
occupancy legally permitted in the Premises, the Tenant will pay the
amount of the increase. The Tenant will also pay in that event any
additional premium for rental income insurance carried by the Landlord
for its protection against rent loss through an insured risk. Bills
for the increases and additional payments may be rendered by the
Landlord to the Tenant when the Landlord elects, and will be due and
payable by the Tenant within thirty (30) days, and the amount thereof
will be paid as additional rent.
11.06 CANCELLATION OF INSURANCE
If an insurance policy upon part of the Building is cancelled or
threatened by the insurer to be cancelled, or the coverage thereunder
reduced or threatened to be reduced by the insurer because of the use
and occupation of the Premises, and if the Tenant fails to remedy the
condition giving rise to cancellation, threatened cancellation,
reduction or threatened reduction of coverage within forty-eight (48)
hours after notice thereof by the Landlord, the Landlord may either:
(a) re-enter the Premises, whereupon Article XVII will apply, or
(b) enter the Premises and remedy the condition giving rise to the
cancellation or reduction or threatened cancellation or
reduction, and the Tenant will pay to the Landlord the cost
thereof on demand as additional rent, and the Landlord will
not be liable for damage or injury caused to property. of the
Tenant or others located on the Premises as a result of the
entry.
-14-
<PAGE>
11.07 INDEMNIFICATION OF THE LANDLORD
Except to the extent that the loss of life, personal injury or damage
to property referred to in this sentence is caused by the negligence
of the Landlord is another person for whose negligence the Landlord is
responsible in law, the Tenant will indemnify the Landlord and save it
harmless from and against any and all claims, actions, damages,
liability and expenses, in connection with loss of life, personal
injury or damage to property arising from any occurrence on the
Premises or the occupancy or use of the Premises or occasioned wholly
or in part by an act or omission of the Tenant, its officers,
employees, agents, customers, contractors or other invitees, licensees
or concessionaires or by anyone permitted by the Tenant to be on the
Premises. In case the Landlord, without actual fault on its part or
on the part of those for whom the Landlord is responsible at law, is
made a party to litigation begun by or against the Tenant, excepting a
bona fide action by the Tenant against the Landlord, the Tenant will
protect and hold the Landlord harmless and will pay all costs,
expenses and reasonable legal fees incurred or paid by the Landlord in
connection with the litigation.
11.08 LOSS AND DAMAGE
Unless caused by the negligence of the Landlord or another person f or
whose negligence the Landlord is responsible in law, the Landlord is
not liable for the death of or injury to the Tenant or others on the
Premises, or for the loss of or damage to property of the Tenant or
others by theft or otherwise. Without limiting the generality of the
foregoing, the Landlord is not liable for death, injury, loss or
damage of or to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain or snow or leaks
from any part of the Premises or from the pipes, appliances or
plumbing works or from the roof, street or sub-surface or from any
other place or by dampness or by other cause of any kind. The
Landlord is not liable for death, injury, loss or damage caused by
other tenants or occupants or other persons on the Premises or in any
other part of the Building, resulting from construction, alteration or
repair. The Tenant agrees that there is no promise, representation,
or undertaking by or binding upon the Landlord with respect to
alterations, remodelling or decoration of or installation of equipment
or fixtures in the Premises except such, if any, as is expressly
contained or referred to in this Lease, and that unless an express
provision provides for completion of the
-15-
<PAGE>
alteration, remodelling, decoration or installation after the Tenant's
taking occupancy of the Premises, the taking of occupancy, subject
always to the provisions of Section 15.01, constitutes conclusive
evidence as against the Tenant that the alterations, remodelling or
decoration or installation of equipment or fixtures has been
satisfactorily completed. The certificate of the Architect that the
Landlord has fulfilled its obligations in respect of the Premises binds
the parties in any event. All property of the Tenant kept or stored on
the Premises will be kept or stored at the risk of the Tenant only and
the Tenant will hold the Landlord harmless from all claims arising out
of damage to it, including subrogation claims by the Tenant's insurers,
except to the extent of negligence or omissions by the Landlord.
ARTICLE XII
ASSIGNMENT AND SUBLETTING
12.01 CONSENT REQUIRED
The Tenant will not, and will not permit a subtenant to, assign this
Lease in whole or in part, or sublet all or part of the Premises, or
mortgage or encumber this Lease or the Premises or part thereof, and
will not permit the occupation or use of all or any part thereof by
others without the prior written consent of the Landlord in each case,
which consent may be withheld by the Landlord in its absolute
discretion, provided however that the Landlord may, upon application
being made by the Tenant for the Landlord's approval of such an
assignment or subletting, terminate this Lease.
The consent by the Landlord to an assignment or subletting will not
constitute a waiver of its consent to a subsequent assignment or
subletting. This prohibition against assignment or subletting
includes a prohibition against an assignment or subletting by
operation of law. If this Lease is assigned, or if all or part of the
Premises is sublet or occupied by anybody other than the Tenant, in
any case without the consent of the Landlord when required, the
Landlord may collect rent from the assignee, subtenant or occupant,
and apply the net amount collected to the rent herein reserved, but no
such assignment, sublease, occupancy or collection will be considered
a waiver of this covenant, or the acceptance of the subtenant or
occupant as Tenant. Despite an assignment the Tenant remains fully
liable under this Lease. An assignment of this Lease if consented to
by the Landlord will be prepared by the Landlord or its
-16-
<PAGE>
solicitors, and all legal costs of its preparation will be paid by the
Tenant.
12.02 CONDITIONS OF CONSENT
If the Tenant requires or receives consent under Section 12.01, the
consent will be subject to the condition that the fixed rent payable
by the assignee, subtenant or occupant will be not less than the
average total annual rent paid by the Tenant for the three (3) Lease
Years immediately preceding the assignment, subletting or other grant
of a right to occupy or use (or since the first day of the Term if the
Tenant at the time of the assignment,, subletting or grant of a right
to occupy or use has occupied the Premises for less than three (3)
years), with all the other terms, covenants and conditions of this
Lease to remain the same. Where the sublease or the grant of a right
to occupy or use relates to a part only of the Premises the foregoing
references to rent will be adjusted in proportion to the area of the
part used in the calculation of Rentable Area of the Premises.
ARTICLE XIII
WASTE AND GOVERNMENTAL REGULATIONS
13.01 WASTE OR NUISANCE
The Tenant will not commit or permit to be committed waste upon the
Premises or a nuisance or other thing that may disturb the quiet
enjoyment of any other tenant in the Building or of any person within
five hundred feet (500') of the boundary of the Building, whether or
not the nuisance arises out of the use of the Premises by the Tenant
for a purpose permitted by this Lease.
13.02 GOVERNMENTAL AND INSURANCE UNDERWRITERS' REGULATIONS
The Tenant, at the Tenant's cost, will comply with the applicable
requirements of all municipal, provincial, federal and other
governmental authorities now in force or which may hereafter be in
force pertaining to the Tenant's occupancy or use of the Premises and
will observe with respect to occupancy and use of the Premises all
municipal by-laws and provincial and federal statutes and regulations
now in force or which may hereafter be in force, and will comply with
all regulations made by fire insurance underwriters. The Tenant
grants the Landlord the right to enter the Premises at any time or
times with as little interference with the conduct of the Tenant's
business as is reasonably possible, to enable the Landlord
-17-
<PAGE>
to comply with any municipal by-law or provincial statute now or in
the future applicable to the Premises, whether or not the application
of such by-law or statute to the Premises results from an act or
omission of the Landlord or another person for whose act or omission
the Landlord is responsible.
ARTICLE XIV
ACCEPTANCE OF PREMISES
14.01 ACCEPTANCE OF PREMISES
The Tenant will be considered for all purposes to have accepted the
Premises in their existing condition and the Landlord will not have
any obligation to the Tenant for defects or faults excepting:
(a) latent defects which cannot be discovered on a reasonable
examination, and
(b) defects or faults in structural elements relating to the
Premises not caused by the Tenant's acts or omissions.
If a dispute occurs as to whether or not a defect or fault exists, the
decision of the Architect will be final and binding upon both parties.
ARTICLE XV
SIGNS, FIXTURES AND ALTERATIONS
15.01 INSTALLATION AND CHANGES BY TENANT
All fixtures installed by the Tenant will be of first class quality.
The Tenant will not make or cause to be made any change, decoration,
addition or improvement or cut or drill into, nail or otherwise
attach, secure or install any floor covering, interior or exterior
lighting, or mechanical or electrical system or fixture, or plumbing
fixture to any part of the Premises or hang from or affix anything to
the ceiling without first obtaining the Landlord's written approval.
The Tenant will present to the Landlord plans and specifications for
the work at the time approval is sought and the work will be done by
contractors or other workers or tradesmen approved by the Landlord and
in good and workmanlike manner with first class materials. The Tenant
will not make any change to the structural elements of the Premises.
-18-
<PAGE>
15.02 REMOVAL OF INSTALLATIONS AND RESTORATION BY TENANT
All alterations, decorations, additions and improvements made by the
Tenant or made by the Landlord on the Tenant's behalf become on
affixation the property of the Landlord. No alteration, decoration,
addition or improvement will be removed from the Premises before the
end of the Term without prior consent in writing from the Landlord.
Upon termination of this Lease the alterations, decorations, additions
and fixed improvements will remain in the property of the Landlord as
part of the reversion, but the Tenant will remove all or some of the
alterations, decorations, additions and fixed improvements if and to
the extent requested by the Landlord, and restore the Premises as
provided in Section 8.02 (b) Every installation, removal or
restoration by the Tenant of its trade fixtures will be done at the
sole expense of the Tenant and the Tenant promptly will make good or
reimburse the Landlord the cost of making good all damage to
structural elements relating to the Premises or to the heating,
ventilating, air conditioning, plumbing, electrical or other
mechanical systems in the Building caused thereby.
15.03 NOT TO OVERLOAD FLOORS
The Tenant will not bring upon the Premises any machinery, equipment
or things that by reason of its weight, size or use in the opinion of
the Architect might damage the Premises and will not at any time
overload the floors of the Premises. If overloading occurs and damage
ensues the Tenant forthwith will repair the damage or pay to the
Landlord the cost of making it good.
15.04 TENANT TO DISCHARGE ALL LIENS
The Tenant promptly will pay all its contractors and material men and
do all things necessary to minimize the possibility of a lien
attaching to the Premises or to any other part of the Building and
should a claim for lien be registered, the Tenant will cause it to be
discharged at the Tenant's expense within seven (7) days after it is
brought to the attention of the Tenant.
15.05 TENANT'S SIGNS, AWNINGS AND CANOPIES
The Tenant will not place or permit to be placed or maintained on the
roof or ceiling or on any exterior or interior door, wall or window of
the sign, awning, canopy, declaration, lettering, advertising matter
or other thing of any kind and will not place or maintain any
decoration,
-19-
<PAGE>
lettering or advertising matter on the glass or any window or door of
the Premises without first obtaining the written consent, which such
consent may be unreasonably withheld.
ARTICLE XVI
DEFAULT OF TENANT
16.01 RIGHT TO RE-ENTER
If the Tenant fails to pay rent that is in arrears within five (5)
days after notice from the Landlord that it is in arrears, or to
observe or perform any other of the terms, conditions or covenants of
this Lease to be observed or performed by the Tenant, and such default
continues for a period of seven (7) days after notice thereof by the
Landlord, or if the Tenant or an agent of the Tenant falsifies a
report required to be furnished to the Landlord pursuant to this
Lease, or if re-entry is permitted under other terms of this Lease,
the Landlord in addition to any other right or remedy it may have will
have the right of immediate reentry and may remove all persons and
property from the Premises and the property may be removed and stored
in a public warehouse or elsewhere at the cost of and for the account
of the Tenant, all without service of further notice or resort to
legal process and without being considered guilty of trespass or
becoming liable for loss or damage occasioned thereby.
16.02 BANKRUPTCY
If:
(a) any of the goods and chattels of the Tenant on the Premises at
any time during the Term are seized or taken in execution or
attachment by a creditor of the Tenant,
(b) the Tenant or a guarantor or indemnifier of this Lease makes
an assignment for the benefit of creditors or a bulk sale from
the Premises other than a bulk sale to an assignee or
sublessee pursuant to an assignment or sublease which under
section 12.01 was consented to or did not require a consent,
(c) a receiver-manager is appointed to control the conduct of the
business on or from the Premises,
-20-
<PAGE>
(d) the Tenant becomes bankrupt or insolvent or takes the benefit
of an Act now or hereafter in force for bankrupt or insolvent
debtors,
(e) an order is made for the winding-up of the Tenant,
(f) the Premises, without the written consent of the Landlord,
become and remain vacant for a period of ten (10) days or are
used by any other persons than those entitled to use them
under the terms of this Lease, or
(g) the Tenant, without the written consent of the Landlord,
abandons or attempts to abandon the Premises or sells or
disposes of its goods or chattels or removes any of them from
the Premises so that there would not in the event of
abandonment, sale or disposal be sufficient goods on the
Premises subject to distress or satisfy all rentals due or
accruing due hereunder,
the then current month's rent and the next ensuing three (3) months'
rent immediately will become due and payable as accelerated rent and
the Landlord may reenter and take possession of the Premises as though
the Tenant or the servants of the Tenant or any other occupant of the
Premises were holding over after the expiration of the Term, and the
Lease, at the option of the Landlord, forthwith will become forfeited
and determined. In every one of the cases above mentioned the
accelerated rent may be recovered by the Landlord in the same manner
as rent reserved and in arrears and the option will be considered to
have been exercised if the Landlord or its agents give notice to that
effect to the Tenant.
16.03 LANDLORD MAY PERFORM TENANT'S OBLIGATIONS
If the Tenant fails to perform an obligation of Tenant under this
Lease the Landlord may perform the obligation and for that purpose may
enter upon not less than five (5) days prior notice without notice to
the Tenant or without notice in the case of an emergency and do such
things upon or in respect of the Premises as the Landlord considers
necessary. The Tenant will pay as additional rent all expenses
incurred by or on behalf of the Landlord under this section plus ten
per cent (10%) for overhead upon presentation of a bill therefor. The
Landlord will not be liable to the Tenant for loss or damage resulting
from such action by the Landlord unless caused by the negligence of
the Landlord or another person for whose negligence the Landlord is
responsible in law.
-21-
<PAGE>
16.04 RIGHT TO RELET
If the Landlord re-enters as herein provided, it may either terminate
this Lease or it may from time to time without terminating the
Tenant's obligations under this Lease, make alterations and repairs
considered by the Landlord necessary to facilitate a reletting, and
relet the Premises or any part thereof as agent of the Tenant for such
term or terms and at such rental or rentals and Upon such other terms
and conditions as the Landlord in its reasonable discretion considers
advisable. Upon each reletting all rent and other monies received by
the Landlord from the reletting will be applied, first to the payment
of indebtedness other than rent due hereunder from the Tenant to the
Landlord, secondly to the payment of costs and expenses Of the
reletting including brokerage fees and solicitor's fees and costs of
the alterations and repairs, and third to the payment of rent due and
unpaid hereunder. The residue, if any, will be held by the Landlord
and applied in payment of future rent as it becomes due and payable.
If the rent received from the reletting during a month is less than
the rent to be paid during that month by the Tenant, the Tenant will
pay the deficiency to the Landlord. The deficiency will be calculated
and paid monthly. No re-entry by the Landlord will be construed as an
election on its part to terminate this Lease unless a written notice
of that intention is given to the Tenant. Despite a reletting without
termination, the Landlord may elect at any time to terminate this
Lease for a previous breach. If the Landlord terminates this Lease
for any breach, in addition to other remedies it may recover from the
Tenant all damages it incurs by reason of the breach including the
cost of recovering the Premises, reasonable legal fees and the worth
at the time of termination of the excess, if any, of the amount of
rent and charges equivalent to rent reserved in this Lease for the
remainder of the Term over the then reasonable rental value of the
Premises for the remainder of the Term, all of which amounts
immediately will be due and payable by the Tenant to the Landlord. In
determining the rent which would be payable by the Tenant after
default, the annual rent for each year of unexpired Term will be equal
to the average fixed rent paid or payable by the Tenant from the
beginning of the Term to the time of default, or during the preceding
three (3) full calendar years, whichever period is shorter. In any of
the events referred to in Sections 16.01, 16.02 and 16.03, in addition
to all other rights, including the rights referred to in this section
and Section 16.01, the full amount of the current month's rent, and
all other payments required to be made monthly and the next three
-22-
<PAGE>
(3) months rent immediately will become due and payable, and the
Landlord may immediately distrain for it, together with arrears then
unpaid.
16.05 LEGAL EXPENSES
If the Landlord brings an action against the Tenant arising from an
alleged breach of a covenant or condition in the Lease to be complied
with by the Tenant and the court establishes that the Tenant is in
breach of the covenant or condition, the Tenant will pay to the
Landlord all expenses incurred by the Landlord in the action including
reasonable legal fees.
16.06 INTEREST ON OVERDUE MONIES
All overdue monies payable to the Landlord by the Tenant on any
account whatsoever shall bear interest at the rate of eighteen percent
(18%) per annum.
16.07 WAIVER OF DISTRESS
The Tenant covenants with the Landlord that in consideration of the
making of this Lease, none of the goods and chattels of the Tenant on
the Premises is exempt from levy by distress for rent in arrears, and
that upon a claim being made for exemption by the Tenant or on
distress being made by the Landlord, this section may be pleaded as an
estoppel against the Tenant in an action brought to test the right to
levy upon goods named as exempted.
ARTICLE XVII
REMEDIES OF LANDLORD AND WAIVER
17.01 REMEDIES OF LANDLORD CUMULATIVE
No exercise of a specific right or remedy by the Landlord or by the
Tenant preclude it from or prejudices it in exercising another right
or pursuing another remedy or maintaining an action to which it may
otherwise be entitled either at law or in equity.
17.02 WAIVER
The waiver by the Landlord or the Tenant of a breach of a term,
covenant or condition of this Lease will not be considered to be a
waiver of a subsequent breach of the term, covenant or condition or
another term, covenant or condition. The subsequent acceptance of
rent by the
-23-
<PAGE>
Landlord will not be considered to be a waiver of a preceding breach
by the Tenant of a term, covenant or condition of this Lease,
regardless of the Landlord's knowledge of the preceding breach at the
time of acceptance of the rent. No covenant, term or condition of
this Lease will be considered to have been waived by the Landlord or
by the Tenant unless the waiver is in writing signed by the Landlord
or by the Tenant, as the case may be.
ARTICLE XVIII
ACCESS BY LANDLORD
18.01 RIGHT OF ENTRY
The Landlord and its agents may enter the Premises at all reasonable
times to examine them and show them to a prospective purchaser, lessee
or mortgagee. The Landlord may make alterations, additions and
adjustments to and changes of location of the pipes, conduits, wiring,
ducts and other installations of any kind in the Premises where
necessary to serve another part of the Building, and the Landlord may
take all material required therefor onto the Premises without
constituting an eviction of the Tenant in whole or in part. During
the six (6) months prior to the expiration of the Term the Landlord
may place upon the Premises the usual notice "For Rent" which the
Tenant will permit to remain without interference. If the Tenant is
not present to open and permit entry into the Premises when for proper
reason entry is necessary or permissible, the Landlord or its agents
may enter by a master key. Nothing in this section, however, imposes
upon the Landlord an obligation, responsibility or liability for the
care, maintenance or repair of the Premises or any part thereof except
as specifically provided in this Lease.
18.02 EXCAVATION
If an excavation is made or is authorized to be made upon land
adjacent to the Premises, the Tenant will give to the person making
the excavation permission to enter the Premises for the purpose of
doing work that the Landlord considers necessary in order to preserve
from injury or damage the wall of the building of which the Tenant
forms a part, or to support the same by foundations, without any claim
for damages or indemnification against the Landlord or diminution or
abatement of rent unless the damages were Caused by the negligence of
the Landlord or another person for whose negligence the Landlord is
responsible in law.
-24-
<PAGE>
ARTICLE XIX
ASSIGNMENT BY LANDLORD
19.01 ASSIGNMENT
The Landlord may assign its interest in this Lease.
19.02 EFFECT OF ASSIGNMENT
If the Landlord sells an interest in the Building or in this Lease, to
the extent that the purchaser or assignee is responsible for
compliance with the covenants and obligations of the Landlord
hereunder, the Landlord without further written agreement will be
relieved of liability under its covenants and obligations.
ARTICLE XX
RULES AND REGULATIONS
20.01 RULES AND REGULATIONS
All rules and regulations and modifications made under Section 7.02
become a part of this Lease and bind the Tenant. The Tenant will
comply with the rules and regulations and modifications. Notice of
rules and regulations and modifications, if any, will be given to the
Tenant by the Landlord. No rule or regulation or modification will
contradict, any provisions of this Lease. The Tenant acknowledges
receipt of certain rules and regulations attached hereto as Schedule
"C".
ARTICLE XXI
LANDLORD'S COVENANTS AND OBLIGATIONS
21.01 TAXES
The Landlord will pay all real property taxes (including local
improvement taxes) that may be assessed by a lawful authority against
the Building and against the Common Areas and Facilities.
21.02 QUIET ENJOYMENT
Subject to the provisions of this Lease the Landlord covenants with
the Tenant for quiet enjoyment.
-25-
<PAGE>
ARTICLE XXII
OVERHOLDING
22.01 NO TACIT RENEWAL
If the Tenant remains in possession of the Premises after the end of
the Term and without the execution and delivery of a new lease or a
written renewal or extension of this Lease,, there is no tacit or
other renewal of this Lease, and the Tenant will be considered to be
occupying the Premises as a Tenant from month to month at a monthly
rental payable in advance on the first day of each month equal to the
sum of twice the monthly instalment of fixed minimum rent payable for
the last month of the Term and otherwise upon the terms and conditions
set forth in this Lease, so far as applicable.
ARTICLE XXIII
GUARANTEE
23.0l GUARANTEE
In consideration of the sum of TWO ($2.00) DOLLARS now paid by the
Landlord to the Guarantor (receipt whereof by the Guarantor being
hereby acknowledged), and to induce the Landlord to execute and
deliver this lease, the Guarantor hereby covenants with the Landlord
that the Tenant shall duly perform and observe each and every covenant
and obligation in this Lease on the part of the Tenant to be observed
and performed the payment of rent and all additional charges agreed to
be paid or payable by the Tenant under this Lease at the times and in
the manner herein specified, this guarantee and covenant of the
Guarantor being given upon the following terms:
(a) The liability of the Guarantor to the Landlord shall be for
all Purposes as if the Guarantor was primarily liable under
this Lease, and not liable as a surety for the obligations of
the Tenant, and the Landlord shall not be obliged to resort to
or exhaust any recourse which it may have against the Tenant
or any other person before being entitled to claim against the
Guarantor;
(b) no dealings between the Landlord and the Tenant of whatsoever
kind, whether with or without notice to the Guarantor, shall
exonerate or relieve the Guarantor in whole or in part from
the obligation hereinbefore set forth, and in particular,
without limiting the generality of the foregoing, the
-26-
<PAGE>
Landlord may modify or amend this Lease, grant any indulgence,
release, postponement or extension of time, waive any covenant
or provision of this Lease or any obligation of the Tenant,
take or release any securities or other guarantees for
performance by the Tenant, and otherwise deal with the Tenant,
this Lease, and any other person, firm or corporation as the
Landlord may see fit without affecting, lessening or limiting
in any way the liability of the Guarantor hereunder;
(c) upon demand therefor, the Guarantor shall make payment to the
Landlord of any sums properly payable by the Tenant to the
Landlord pursuant to the terms hereof, and shall upon demand
perform any other obligation of the Tenant which the Tenant
has failed to perform;
(d) no assignment of this Lease, no sub-lease of the demised
premises, and no other dealings with this Lease, the Tenant,
or the demised premises, whether with or without the consent
of the Landlord, shall in any way effect, lessen or limit the
liability of the Guarantor hereunder.
ARTICLE XXIV
OPTION TO RENEW
24.01 OPTION TO RENEW
Provided that:
(d) the Tenant pays the rental and other sums payable hereunder
and performs each and every one of the covenants, provisions
and agreements herein contained on the part of the Tenant to
be paid and performed punctually and in accordance with the
provisions of this Lease;
(e) The Tenant has not assigned this Lease or sublet or permitted
a change in occupancy of the Premises; and
then the Tenant shall have the option of renewing this Lease by notice
in writing given to the Landlord not later than ninety days prior to
the expiry of the Term for an additional term of three years on the
same terms and conditions set forth in this Lease, save and except:
(i) that any renewals of this Lease shall be limited to one in
number;
-27-
<PAGE>
(ii) the fixed rental to be paid during the renewal term shall not
be less than the fixed rent paid during the last twelve month
period of the Term and shall be settled by agreement between
the Landlord and the Tenant, or if they fail to agree within
three months prior to the expiration of the Term, then the
fixed rental shall be the then fair market rental value for
unimproved space of comparable size, quality and location to
that of the Premises, determined by an arbitrator appointed
under the Commercial Arbitration Act, S.B.C. 1986, c.3 (as
such legislation may be amended from time to time), whose
decision shall be final and binding upon the Landlord and the
Tenant. The cost of such arbitration shall be borne by the
Landlord and Tenant equally.
ARTICLE XXIV
MISCELLANEOUS
25.01 ACCORD AND SATISFACTION
No payment by the Tenant or receipt by the Landlord of a lesser amount
than rent herein stipulated will be considered to be other than on
account of the earliest stipulated rent, nor will an endorsement or
statement on a cheque or in a letter accompanying a cheque or payment
as rent be considered to be an accord or satisfaction, and the
Landlord may accept a cheque or payment without prejudice to the
Landlord's right to recover the balance of the rent or to pursue any
other remedy.
25.02 NO PARTNERSHIP
The Landlord does not in any way or for any purpose become a partner
of or joint venturer or a member of a joint enterprise with the
Tenant. The provisions of this Lease relating to percentage rent are
solely to provide a method of computing rent and neither the method of
computing rent nor any other provision of this Lease creates a
relationship between the parties other than that of Landlord or
Tenant.
25.03 UNAVOIDABLE DELAY
If there is an Unavoidable Delay in the performance of an act or
compliance with a covenant or condition, performance or compliance
during the period of the Unavoidable Delay will be excused and the
period for the performance or compliance will be extended for a period
-28-
<PAGE>
equal to the period of the Unavoidable Delay.
25.04 PARTIAL INVALIDITY
If a term, covenant or condition of this Lease or the application
thereof to any person or circumstance is held to any extent invalid or
unenforceable, the remainder of this Lease or the application of the
term, covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable will not be
affected.
25.05 JOINT AND SEVERAL LIABILITY
If two or more individuals, corporations, partnerships or other
business associations (or a combination of two or more) are the
Tenant, the liability of each individual, corporation, partnership or
other business association to pay rent and perform all other
obligations hereunder is joint and several. If the Tenant is a
partnership or other business association the members of which are by
virtue of statute or general law subject to personal liability, the
liability of each member is joint and several.
25.06 DEMOLITION
If the Landlord desires to demolish the improvements on the Land
comprising the Premises the Landlord can, on 6 months prior written
notice, require the Tenant to deliver up vacant possession of the
Premises to the Landlord on the expiration of such 6 month notice
period in which event rent and other changes payable hereunder shall
be adjusted up to the date on which the Tenant is required to and does
so deliver vacant possession of the Premises to the Landlord.
25.07 REGISTRATION
The Tenant shall not register this Lease.
25.08 NOTICE
A notice, demand, requests statement or other evidence required or
permitted to be given under this Lease must be written and will be
sufficiently given if delivered in person to the Landlord, the Tenant
or the Guarantor, or to an officer of the Landlord, the Tenant or of
the Guarantor, as the case may be, or mailed in the Province of
British Columbia by registered mail addressed:
-29-
<PAGE>
(a) if to the Landlord, as follows:
Richmond Inn Hotel Ltd.
7551 Westminster Highway
Richmond, B.C.
V6X 1A3
Attention: Mhedi Khimji
(b) if to the Tenant, as follows:
Java Girl Coffee Ltd.
2773 Barnet Highway
Coquitlam B.C.
V3B 1C2
Attention: Klaus J. Henck
(c) if to the Guarantor, as follows:
Mr. Klaus J. Henck
6741 Baker Road
Delta B.C. V4E 2T8
A notice, demand, request, statement or other instrument mailed as
aforesaid will be considered to have been given to the party to which
it is addressed on the fifth business day following the date of
mailing. In the event of interruptions in the normal postal service a
notice will be deemed received when actually received by the party to
whom it is addressed.
A party at any time may give notice to the other party of a change of
its address, and after the giving of the notice the address therein
specified will be considered to be the address of the party which gave
the notice.
25.09 AMENDMENT IN WRITING
No alteration, amendment, change or addition to this Lease will bind
the Landlord or the Tenant unless the same is in writing and signed by
the parties hereto.
25.10 SUCCESSORS AND ASSIGNS
This Lease binds and benefits the parties and their respective heirs,
executors, administrators' successors and assigns. No rights,
however, benefit an assignee of the Tenant unless under Section 12.01
the Assignment was consented to or did not require a consent.
-30-
<PAGE>
IN WITNESS WHEREOF the parties have executed these presents on the day
and year first above written.
LANDLORD:
The Corporate Seal of RICHMOND )
INN HOTEL LTD. was hereunto )
affixed in the presence of: )
)
)
)
- - ------------------------------ )
Authorized Signatory ) c/s
)
)
- - ------------------------------ )
Authorized Signatory )
TENANT:
The Corporate Seal of JAVA GIRL )
COFFEE, LTD. was hereto )
affixed in the presence of: )
)
)
- - ------------------------------ )
Authorized Signatory ) c/s
)
- - ------------------------------ )
Authorized Signatory )
GUARANTOR:
SIGNED, SEALED AND DELIVERED by )
KLAUS J. HENCK in the presence of:)
)
)
- - ------------------------------ )
Name )
)
)
- - ------------------------------ ) -----------------------
Address )
)
)
- - ------------------------------ )
)
)
- - ------------------------------ )
Occupation )
-31-
<PAGE>
SCHEDULE "A"
DESCRIPTION OF LAND
Municipality of Richmond
Parcel Identifier: 015-676-692
Lot I
Section 5
Block 4 North
Range 6 West
New Westminster District
Plan 84515
-32-
<PAGE>
SCHEDULE "C"
CERTAIN RULES AND REGULATIONS OF THE LANDLORD
No Tenant, nor its officers, employees, customers or invitees, may go into
restricted areas of the hotel (eg. kitchens, behind bars, front desk, etc.).
Employees of the Tenant will follow all hotel employee rules and regulations.
All employees of the Tenant will conduct themselves in a professional manner.
All garbage and waste being the result of the Tenant carrying on business in the
Premises shall not be put in view of the public (hotel corridors) and sidewalks
adjacent to the Premises are to be kept clean at all times. Garbage and waste
will be properly disposed of as per Landlord's instructions from time to time.
-33-
<PAGE>
SCHEDULE "D"
JAVA GIRL F/C = 12 MONTH 1993/94
LOCATION: RICHMOND INN
DATE: SEP. 1993 KH
F/C F/C FORCAST AVERAGE
3 MONTH RATIO % 12 MONTH DAY
SALES LIQ. COFFEE 28,250 83.33% 117,000 $325.00
SALES BAKED GOODS 5,850 16.67% 23,400 $65.00
TOTAL SALES 35,100 100.00% 140,400 $390.00
------ ------- ------- -------
COST OF SALES
LIQUIT COFFEE 6,523 22.30% 26,091 $72.47
BAKED GOODS 2,048 35.00% 8,190 $22.75
TOTAL COST SALES 8,570 24.42% 34,281 $95.23
------ ------- ------- -------
LABOR/BFTS 12,960 36.92% 51,840 $144.00
G.O.P. 13,570 38.66% 54,279 $150.78
------ ------- ------- -------
------ ------- ------- -------
OPERATING EXP.
ROYALTIES 1,755 5.00% 7,020 $19.50
ACCOUNTING 900 2.56% 3,600 $10.00
MANAGEMENT FEE 1,755 5.00% 7,020 $19.50
OCCUPANCY COST 0 0.00% 0 $0.00
MISCELLANEOUS 1,053 3.00% 4,212 $11.70
TOTAL OPERATING EXP 5,463 15.56% 21,852 $60.70
------ ------- ------- -------
EARNINGS BEFORE 8,107 23.10% 32,427 $90.08
------ ------- ------- -------
------ ------- ------- -------
INVESTMENT YEAR # 1 YEAR # 2 YEAR # 3 TOTAL
$15,000 3 YEARS
RETURN ON INVESTMENT
CAPITAL 5,000 5,000 5,000 15,000
INTEREST CAPITAL 12% 1,800 1,200 600 3,600
-34-
<PAGE>
PROFIT BEFORE DISTRIB. 25,627 26,227 26,827 78,681
FRANCHISEE 50% 12,814 13,114 13,414 39,341
LANDLORD 50% 12,814 13,114 13,414 39,341
YEAR # 4 YEAR # 5 TOTAL
5 YEARS
PROFIT BEFORE DISTRIB. 32,427 32,427 143,535
FRANCHISEE 50% 16,214 16,214 71,768
LANDLORD 16,214 16,214 71,768
PROJECTIONS ARE BASED ON 1993 DOLLARS/NO INFLATION.
-35-
<PAGE>
THIS AGREEMENT made this 8th day of July, 1994
BETWEEN: YORKSON INVESTMENT COMPANY LTD., a company duly incorporated
under the Laws of the Province of British Columbia, and having an
office c/o
#15 - 5763 OAK STREET, VANCOUVER, B.C., V6M 2V7
(hereinafter called the "Landlord")
OF THE FIRST PART
AND: JAVA GROUP INC.
#404 - 999 Canada Place, Vancouver, B.C.,
Canada. V6E 3E2
(hereinafter called the "Tenant")
OF THE SECOND PART
W H E R E A S :
A. The Landlord is the registered owner of that certain parcel or tract of
land and premises situate, lying and being in the City of Vancouver, in the
province of British Columbia, and known and described as:
CITY OF VANCOUVER
PARCEL IDENTIFIER 005-324-084
LOT A, BLOCK 360
DISTRICT LOT 526, PLAN 21010
upon which is situate the building (as hereinafter defined);
B. The Landlord and Tenant are desirous of entering into
a lease of the Demised Premises (as hereinafter defined);
NOW THEREFORE WITNESSETH THIS AGREEMENT that in consideration of the
mutual covenants, agreements, representations and warranties and further in
consideration of the payment by the Tenant to the Landlord of the rents
hereinafter provided, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 The terms defined in this Article shall for all purposes of this
Lease or other instruments supplemental hereto, have the meanings herein
specified, unless the context expressly or by necessary implication otherwise
requires:
<PAGE>
- 2 -
(a) "Basic Rent" means the rent described in paragraph 5.01
hereof;
(b) "Building" means the building situate on the Land, and
includes any additions, alterations, or extensions
thereto;
(c) "Building Equipment" means all machinery, boiler,
plumbing, wiring, heating, air-conditioning and lighting
and other equipment which is an integral part of the
Building, if any, other than Tenant's Equipment;
(d) "Common Areas" means those areas that are designated by
the Landlord as Common Areas (which designation may be
changed from time to time) including, without limitation
the roof, exterior weather walls, exterior and interior
structural elements and bearing walls in the buildings
and improvements comprising the building, pedestrian
sidewalks, exterior landscaped areas, parking areas,
roadways, sidewalks, all enclosed malls, courts and
arcades, public hallways, open malls, service corridors,
stairways, escalators, ramps, moving sidewalks and
elevators and other transportation equipment and
systems, interior landscaped areas, public washrooms,
electrical, telephone, meter, valve, mechanical, mail,
storage and janitor rooms and galleries, fire
prevention, security and communications systems, general
signs, columns, pipes, electrical, plumbing, drainage,
mechanical and all other installations or services
located therein or related thereto as well as the
structures housing the same, truck courts, common
loading areas and driveways.
(e) "Common Area Maintenance Cost" means the total, without
duplication of the expenses incurred by,the Landlord for
operating, maintaining, repairing and replacing the
common facilities and common areas of the building and
shall, without limiting the generality of the foregoing
include the aggregate of:
(i) the costs of repairs, maintenance and such
replacements to the Common Areas and the Common
Facilities as are properly chargeable in
accordance with sound accounting practice to
operating expenses as distinguished from capital
replacement or improvement;
<PAGE>
- 3 -
(ii) depreciation, at rates determined by the
Landlord, but not to exceed the maximum
permitted to the Landlord under the provisions
of the INCOME TAX ACT, CANADA, from time to
time, or any legislation substituted therefor,
on equipment and machinery employed in
operating, maintaining, repairing and replacing
the Common facilities or Common areas;
(iii) premiums paid by the Landlord for public
liability insurance and for insurance against
insurable hazards in respect of the Common areas
and Common facilities of the building;
(iv) the expense for gardening and landscaping, line
painting, rental of signs and equipment,
lighting, sanitary control, the removal of snow,
and parking areas cleaning;
(v) wages paid for maintenance and operating
personnel, including payments for workers
compensation, unemployment insurance, vacation
pay, Canada Pension Plan contributions and
fringe benefits whether statutory or otherwise;
(vi) the cost of uniforms and equipment furnished to
such personnel;
(vii) the portion of municipal tax costs which may be
reasonably allocated to the Common Areas and
Common Facilities;
(viii) the cost of electrical power furnished to the
Common Areas and Common Facilities;
(ix) that portion of the cost of heating, ventilating
and air-conditioning which may be reasonably
allocated to the Common areas and Common
facilities; and
(x) an administrative fee equal to fifteen (15%) per
cent of the total expenses incurred by the
Landlord under this clause.
(f) "Common Facilities" means the electrical, music and
public address systems, heating, ventilating, air-
conditioning, plumbing and drainage equipment
<PAGE>
- 4 -
and installations and any enclosures constructed
therefor, fountains, customer service stairways,
escalators, ramps, moving sidewalks, elevators, signs,
lamp standards, public washroom facilities and parking
deck and all other facilities which are provided or
designated (which designation may be-changed from time
to time by the Landlord and which are located within the
building.)
(g) "Cost of Heating, Ventilating and Air-Conditioning"
means the total, without duplication of the expenses
incurred by the Landlord for operating, maintaining,
repairing and replacing the heating plant, and shall
without limiting the generality of the foregoing
including the aggregate of:
(i) the amount expended by the Landlord for fuel,
water, electricity and additives for the heating
plant;
(ii) the telephone expense with respect to the
telephone installation in the heating plant;
(iii) the total annual costs to boiler and pressure
vessels, insurance coverage paid by the Landlord
for insurance;
(iv) wages paid to maintenance and operating
personnel in the heating plant, including
payments for Workers Compensation, Unemployment
Insurance, vacation pay, Canada Pension Plan
contributions and other fringe benefits whether
statutory or otherwise;
(v) the costs of uniforms and equipment furnished to
such personnel;
(vi) the costs of repairs, maintenance and such
replacements to the heating plant as are
properly chargeable, in accordance with sound
accounting practice to operating expenses, as
distinguished to capital replacements or
improvements;
(vii) depreciation, at rates determined by the
Landlord but not in excess of the maximum
permitted to the Landlord under the provisions
of the INCOME TAX ACT, CANADA,
<PAGE>
- 5 -
from time to time, or any legislation
substituted therefor on the capital cost of
facilities in the heating plant, and any capital
replacements thereto;
(viii) the portion of municipal tax costs from
municipal taxes which may be reasonably
allocated to the heating plan;
(ix) an administrative fee equal to fifteen (15%) per
cent of the total expenses incurred by the
Landlord under this clause.
(h) "Costs of Insurance" means the annual cost to the
Landlord to take out public liability insurance and
rental insurance in respect of the Building and building
comprising the Building and to insure the improvements
comprising the Building against damages from Insurable
Hazards to such limits as the Landlord may from time to
time determine but not in excess of the replacement cost
of the buildings comprising the Building.
(i) "Demised Premises" means all that Portion of the
Building which is outlined in red on Schedule "A"
attached hereto and more particularly referred to as
#102 - 500 WEST BROADWAY, VANCOUVER, B.C. consisting of
approximately 839 square feet;
(j) "Land" means that parcel or tract of land and premises
legally described in Recital "A" hereof;
(k) "Lease" means this instrument as originally executed and
delivered or, if amended, or supplemented or renewed, as
so amended, or supplemented or renewed;
(l) "Tenant's Equipment" means all personal property,
fixtures, apparatus, machinery and equipment, other than
Building Equipment, owned by the Tenant and used or
intended for use in connection with the operation of the
business of the Tenant and whether installed prior to
the commencement of the Term of the Lease or at any time
and from time to time during the Term of the Lease;
(m) "Tenant's Proportionate Share" with respect to any
amount means the ratio that the net rentable area of the
Demised Premises bears to the net rentable commercial
area of the whole of the building of which the Demised
Premises form a part;
<PAGE>
- 6 -
(n) "Term of Lease" means the term of years described in
paragraph 3.01 hereof;
(o) "Realty Taxes" means all real estate taxes, assessments,
rates and charges and other governmental impositions
general or special, ordinary or extraordinary, foreseen
or unforeseen, of every kind, including, without
limitation, assessments for local or public improvements
and school taxes which may at any time during the term
of the Lease be imposed, assessed or levied in respect
of the Land and/or in respect of the improvements from
time to time thereon, including any cost or expense by
way of legal fees, appraiser's fees or fees of a similar
nature incurred by the Landlord in conducting any appeal
in respect of any such taxes, rates, charges or
impositions, all such amounts to be adjusted to exclude
any portion thereof payable for periods outside the Term
of Lease;
(p) "Structural Repairs" means repairs necessary from time
to time to the foundations, supports, beams, exterior
roof and bearing walls of the Building, painting
exterior walls, landscaping and replacement of Common
Area fixtures, provided that if any dispute shall arise
between the Landlord and Tenant as to whether any given
repairs are or are not Structural Repairs then the
matter shall be resolved by binding arbitration under
the ARBITRATION ACT (British Columbia) decided by a
single arbitrator who shall be a duly qualified Civil
Engineer named by the Landlord and the Tenant and the
decision of such arbitrator shall be conclusive and
binding upon the parties hereto;
(q) "Term" means five years and 24 days.
(r) "Commencement Date" means July 8th 1994.
(s) "Termination Date" means July 31st, 1999.
ARTICLE 2 - GRANT OF LEASE
2.1 The Landlord hereby demises and leases upon the Tenant and the
Tenant hereby takes and rents the Demised Premises all on the terms and
conditions herein contained;
2.2 In addition to the lease herein of the Demised Premises, the
Landlord hereby grants to the Tenant and the Tenant's invitees, agents and
servants, in common with the
<PAGE>
- 7 -
Landlord and all other persons authorized by the Landlord from time to time, a
license to use the Common Areas for the purpose of gaining access to the Demised
Premises and better using the same, provided that nothing herein shall in any
way restrict the Landlord from entering, maintaining, altering or changing the
Common Areas, or from altering or adding to the Building as long as the Tenant
is able to gain access to the Demised Premises;
ARTICLE 3 - TERM OF LEASE
3.1 This Lease shall be for a term of five years and 24 days (the
"term") commencing on the 8th day of July ___, 1994 (the "Commencement Date")
and ending on the 31st of July ___, 1999 (the "termination date");
ARTICLE 4 - TO OPERATE DURING THE TERM
4.1 The Tenant will not during the term vacate the leased premises
either in whole or in part (whether actually or constructively) but will:
(a) conduct its business in the entire Demised Premises;
(b) remain open for business during customary business days
and hours for such business, and for such further days
or additional hours as required by the landlord (unless
prevented by federal, provincial or municipal or any
other governmental authority);
(c) remain closed for business at the expiration of business
hours in each and every day of the week, unless in the
Tenant's opinion for reasons of medical need, it is
necessary that the same be open;
(d) actively carry on in the Demised Premises, the type of
business for which the Demised Premises are leased to
the tenant;
ARTICLE 5 - RENT
5.1 The Tenant shall pay during the term of this Lease the total
Basic Rent of ONE HUNDRED AND SIX THOUSAND TWO HUNDRED FIFTY-FOUR DOLLARS AND
EIGHTEEN CENTS ($106,254.18), payable as follows:
(a) First month from JULY 8th, 1994 TO JULY 31st, 1994; ONE
THOUSAND THREE HUNDRED SEVENTY-NINE DOLLARS AND EIGHTEEN
CENTS ($1,379.18)
<PAGE>
- 8 -
(b) Basic Rent of ONE HUNDRED AND FOUR THOUSAND EIGHT
HUNDRED AND SEVENTY FIVE DOLLARS ($104,875.00) in equal
monthly installments of ONE THOUSAND SEVEN HUNDRED
FORTY-SEVEN DOLLARS AND CENTS NINETY TWO ($1,747.92)
each on the first day of each and every month
thereafter.
and the first of such monthly installments, or a pro-rated portion thereof in
the event this Lease is effective other than on the 1st day of a month, shall be
paid on the Commencement Date of this Lease, and subsequent installments shall
be paid on the 1st day of each and every month during the Term hereby demised;
5.2 (a) The Landlord acknowledges receipt of a deposit of
$5,480.64, which is to be applied to payment of Gross
Rent plus G.S.T. for the First and Last month's of the
Term of this Lease.
(b) The Landlord hereby agrees that there will be no Basic
Rent payable by the Tenant for the period from April
21st, 1994 to July 7th, 1994, provided however that
during the aforesaid period the Tenant shall be liable
for payment of Additional Rent as set forth hereunder;
5.3 The rent reserved hereunto shall be paid in Canadian funds to
the Landlord at its address for notice herein unless another place of payment is
designated by the Landlord to the Tenant in writing, and the Tenant shall
deliver postdated checks to the Landlord on the first day of each quarter year
of the Term of Lease for the payments of rental to fall due in the months in
such quarter year;
5.4 This Lease shall be a net lease, and the rental 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 full term of this Lease without
abatement, deduction or set-off of any nature whatsoever and all costs,
expenses, rates, taxes, charges and obligations of every kind and nature
whatsoever relating to the Demised 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 excepting only any Landlord's
Corporation Capital Tax, income tax or taxes other than business tax imposed or
levied by any authority whatever on the income received by the Landlord from the
Demised Premises;
<PAGE>
- 9 -
5.5 Any money payable by the Tenant to the Landlord in addition to
the Basic Rent shall be deemed to be rent. All monies payable by the Tenant to
the Landlord pursuant to this Lease shall bear interest at the rate of 2% per
month from the date of default.
ARTICLE 6 - ADDITIONAL RENT
6.1 The Tenant shall pay to the Landlord as additional rent to the
Landlord in each year of the Term of Lease, within ten (10) days after demand
the Tenant's Proportionate Share of:
(a) Realty Taxes and Goods and Services Tax (GST), if
applicable, imposed or levied on the Basic Rent and
Additional Rent.
(b) all taxes, license fees, duties, rates assessments or
imposts of whatsoever nature levied by any authority
whatsoever in respect of the Land and Building as shall
be attributable to the business or property of the
Tenant, or to any thing or things erected or placed in,
upon or under, or fixed to, the Demised Premises by or
with the consent or permission of the Tenant during the
term of this Lease, including all fixtures, machines,
equipment and other things of any nature or description
not the property of the Landlord or which may be
lawfully removed by the Tenant;
(c) the total cost of all local improvement and utility
charges, if any, and all charges for water, gas,
electric light, heat and power, ventilating and air-
conditioning, telephone, or other similar service used,
rendered or supplied upon or in connection with the
Demised Premises throughout the Term of Lease and all
charges or costs in respect of removal of garbage from
the Demised Premises or incineration thereof, or other
disposal thereof, and the Tenant will indemnify and save
the Landlord harmless against and from any liability or
damages on any such account;
(d) All actual out of pocket operating costs and expenses
incurred by the Landlord in connection with the
operation, maintenance or repair (except Structural
Repairs) of the Land, Building and Demised Premises
during the Term of Lease and in accord with general
commercial standards for a building of the age, locale
and character of the Building, including, without
limiting the
<PAGE>
- 10 -
generality of the foregoing, Tenant's Proportionate
Share of the cost of:
(i) any and all fuel for heating, ventilating and
air-conditioning purposes and any and all
electricity used throughout the Building;
(ii) any and all water and sewer charges;
(iii) any and all labor and wages, including employee
benefits and Workers' Compensation, and other
payments, whether required by law or made
voluntarily, made to janitors, caretakers,
supervisory personnel and other employees of the
Landlord for the care, security, maintenance,
cleaning or operation of the Building and Land
and the total charges of any independent service
contractors employed in the care, security,
maintenance, cleaning or operation of the
Building and Land;
(iv) any and all supplies used in connection with the
Building and Land, including without limitation
those supplies the necessity of which is
occasioned by everyday wear and tear;
(v) gardening and landscaping, maintenance of
parking areas and driveways, removal of snow and
garbage removal and scavenging charges;
(vi) cost of insurance obtained pursuant to paragraph
8.01 of this Lease;
(vii) rental of equipment and common signs;
(viii) the cost of repairs and maintenance of or to the
Common Areas and Common facilities;
(ix) any management fees paid by the Landlord;
(x) the addition of fixtures, equipment, etc.; which
by their nature require periodic repair or
replacement;
(xi) the cost of improvements intended primarily to
reduce other operating costs;
<PAGE>
- 11 -
(xii) the cost of heating ventilating and air-
conditioning;
6.2 The Tenant covenants to pay the Tenant's taxes and any and all
fees or amounts payable by the Tenant other than to the Landlord, in connection
with the Tenant's business in or occupation of the Demised Premises;
6.3 The Tenant may take advantage of any provisions of law whereby
Realty Taxes or any other amounts payable by the Tenant including amounts
payable other than to or through the Landlord may be paid by installments or
deferred for some portion of the fiscal period to which they relate, provided
that no fine, penalty or cost is thereby incurred and the Tenant shall pay any
fine, penalty, interest and expense arising from any failure by the Tenant to
pay any such amount when due and further provided that the Landlord shall be at
liberty to pay any such amount (after 10 days written notice to the Tenant of
its intention so to do) and may add to the next ensuing instalment of rent the
amounts so paid including penalties, charges and interest in
connection therewith;
6.4 The Tenant shall have the right to contest at the Tenant's sole
expense the amount of validity of any Realty Taxes or other amounts imposed in
respect of the Demised Premises but nothing herein contained shall be deemed to
relieve the Tenant of its obligation to pay such Realty Taxes or other amounts
or to authorize the Tenant to defer payment of such Realty Taxes, unless such
deferment is lawful and the Landlord consents in writing to such deferment;
6.5 If the Tenant is contesting in good faith the amount or validity
or any Realty Taxes or any other assessment or impost and has complied with the
provisions of this Article and if it becomes necessary for the Landlord to join
in or consent to such proceedings the Landlord shall join or consent as required
but the Tenant shall indemnify the Landlord against all expense arising
therefrom;
6.6 Notwithstanding the provisions of this Article, at any time
during the Term of Lease the Landlord may by notice in writing require the
Tenant to pay and the Tenant shall pay to the Landlord, on each date following
such notice upon which installments on account of Basic Rent are payable, such
amount or amounts, which shall not bear interest, as the Landlord may from time
to time estimate as being necessary to provide to the Landlord sufficient funds
to pay Realty Taxes, and all insurance premiums or other amounts next to become
due and payable, and if the Realty Taxes, insurance premiums or other amounts
actually charged or payable in any fiscal period shall exceed the amount or
amounts paid by the Tenant for such fiscal period, the Tenant
<PAGE>
- 12 -
shall pay to the Landlord forthwith on demand the amount required to make up the
deficiency, and any overpayment made by the Tenant in such fiscal period shall
forthwith upon determination be returned without interest by the Landlord to the
Tenant;
6.7 The Tenant shall upon demand by the Landlord provide to the
Landlord proof, in such form as the Landlord may reasonably require, that the
Tenant has paid when due any and all payments required hereunder to be made by
the Tenant other than to the Landlord;
6.8 The Landlord shall upon demand by the Tenant provide to the
Tenant proof, in such form as the Tenant may reasonably require, of the amount
and payment of any of the items set out in paragraph 6.01;
ARTICLE 7 - TENANT'S EQUIPMENT
7.1 At any time and from time to time during the Term of Lease, the
Tenant may install, maintain and replace in the Demised Premises, any Tenant's
Equipment as the Tenant, in its sole discretion, may desire and, notwithstanding
the fact that the Tenant's Equipment shall nevertheless be and remain at all
times the property of the Tenant;
7.2 The Tenant may not permanently remove any material part of the
Tenant's Equipment at any time during the Term of Lease without the written
consent of the Landlord which shall not be unreasonably withheld;
7.3 The Tenant shall be responsible for and will repair all or any
damage to any part of the Demised Premises, including structural portions
thereof, caused by installation or removal of any of the Tenant's Equipment,
fixtures, alterations, or improvements, and shall restore the Demised Premises
to the same condition as they were in at the commencement of Term of Lease;
7.4 Any of the Tenant's Equipment remaining in the Demised Premises
at the termination of this Lease may be removed and stored by the Landlord, who
shall thereupon have the first and paramount lien against the said Tenant's
Equipment and the Landlord shall not be required to release possession thereof
until payment to the Landlord of the cost of removal and storage of the Tenant's
Equipment and if the Tenant fails to pay such cost within 10 days of demand in
writing by the Landlord, the Landlord shall have the right to sell the same and
may apply the proceeds firstly in payment of the costs of such removal, storage
and sale and secondly to the Tenant's account;
<PAGE>
- 13 -
7.5 The Landlord shall not be responsible for any loss or damage
occurring to the Tenant's Equipment, save and except for loss or damage caused
by the wilful neglect of the Landlord or persons for whom in law the Landlord is
responsible;
ARTICLE 8 - INSURANCE
8.1 The Landlord, acting reasonably and as a prudent owner of the
Land and Building may obtain at the expense of the Tenant to the extent of the
Tenant's Proportionate Share such insurance for the benefit of the Landlord as
the Landlord from time to time considers useful, expedient or beneficial,
including, without limitation, any or all of the following:
(a) a broad form of insurance against all risks of loss or
damage to all property owned by the Landlord relative to
the Land and Building, including coverage for fire,
flood and earthquake, or any other form of loss;
(b) insurance against all explosion, rupture or failure of
boilers, pressure vessels, air-conditioning equipment
and miscellaneous electrical apparatus on blanket basis
with broad form cover, including repair and replacement;
(c) insurance against loss of insurable gross rentals
attributable to all perils insured against by prudent
landlords, including loss of all rents receivable from
tenants in the Building in accordance with the
provisions of their leases including all rents
thereunder and all other charges payable as additional
rent thereunder, in such amount or amounts as the
Landlord or its mortgagees from time to time requires;
(d) insurance against third party liability hazards
including exposure to personal injury, bodily injury and
property damage on an occurrence basis, including
insurance of all contractual obligations, and covering
also actions of all employees, other persons, sub-
contractors and agents while working on behalf the
Landlord;
(e) insurance against any other form or forms of loss that
the Landlord or its mortgagees reasonably requires from
time to time for like properties similarly situated and
for amounts against which a prudent landlord would
insure itself; and
<PAGE>
- 14 -
notwithstanding any contribution by the Tenant to insurance premiums as provided
for on this Lease, no insurable interest is conferred upon the Tenant under
policies carried by the Landlord, the Landlord shall in no way be accountable to
the Tenant regarding the use of any insurance proceeds arising from any claim,
and the Landlord shall not be obliged on account of such contributions to apply
such proceeds to the repair or restoration of that which was insured and it is
hereby declared and agreed that if the Tenant may desire to receive indemnity
by-way of insurance for any property, work or thing whatever, the Tenant shall
insure same for its own account and shall not look to the Landlord for
reimbursement or recovery in the event of loss or damage from any case, whether
or not the Landlord has insured same and recovered therefor;
8.2 The Tenant shall, during the Term of Lease, at its sole cost and
expense, take out and keep in full force and effect, in the name of and with
losses payable to the Tenant, the Landlord and if required by the Landlord, the
Landlord's mortgagees, the following:
(a) PROPERTY INSURANCE, which shall include coverage on
property of every description and kind owned by the
Tenant or for which the Tenant is responsible or legally
liable pursuant to the terms of this Lease, or which is
installed by or on behalf of the Tenant, including
Tenant's Equipment, in an amount at least equal in the
opinion of the Landlord to the full insurable value
thereof calculated on a replacement cost basis without
deduction for depreciation and without co-insurance
requirements and the perils insured against shall
include fire and water damage and a form of broad all-
risk coverage and such additional perils as are normally
insured against in the circumstances by prudent tenants,
and as any mortgagee having a security interest in the
Building reasonably requires, or as the Landlord, from
time to time, demands;
(b) PLATE GLASS INSURANCE, which shall include coverage for
plate glass or other glass that has been broken or
removed during the Term of Lease, such insurance to be
placed in an amount at least equal in the opinion of the
Landlord to the full insurable value thereof calculated
on a replacement cost basis, without deduction for
depreciation and without co-insurance requirements;
<PAGE>
- 15 -
(c) PUBLIC LIABILITY INSURANCE applying to all operations of
the Tenant and which shall include bodily injury
liability, products liability, contractual liability,
contingent liability, non-owned automobile liability and
Tenants' legal liability with respect to the occupancy
by the Tenant of the Demised Premises, such policy to be
written on a comprehensive basis with limits of not less
than $1,000,000.00 per occurrence (or such higher limits
as the Landlord or its mortgagees require from time to
time) and with a cross liability clause;
(d) ANY OTHER FORM OR FORMS of insurance in such amounts and
against such perils as the Landlord or the Landlord's
mortgagees reasonably require from time to time;
and all policies shall contain an undertaking by the insurers to notify the
Landlord and its mortgagees in writing not less than thirty (30) days prior to
any material change in terms, cancellation or other termination thereof;
8.3 All property damage policies written on behalf of the Tenant
shall contain a waiver of any subrogation rights which the Tenant's insurers may
have against the Landlord and against those for whom the Landlord is, in law,
responsible, whether any such damage is caused by the act, omission or
negligence of the Landlord or by those for whom the Landlord is in law
responsible and the Tenant hereby releases and agrees to hold harmless the
Landlord from all liability for any loss or damage to or suffered by the Tenant
or its property or improvements, by oversight, fault or any other cause
whatsoever;
8.4 All policies shall be taken out with insurers acceptable to the
Landlord and on policies in form satisfactory from time to time to the Landlord
and the Tenant shall deliver certificates of insurance or, if required by the
Landlord or its mortgagees, certified copies of each such insurance policy to
the Landlord as soon as practicable after the placing of the same;
8.5 If the Tenant fails to take out or to keep in force any such
insurance referred to in this Article 8, or should any such insurance be
reasonably disapproved by either the Landlord or its mortgagees and the Tenant
does not obtain, reinstate or replace insurance, as the case may be, within
forty-eight (48) hours after written notice by the Landlord or its mortgagees do
not approve of such insurance, (such notice of disapproval to include the
reasons therefor), the Landlord shall have the right, but not the obligation, to
effect such insurance at the sole cost of the Tenant and all outlays by the
Landlord
<PAGE>
- 16 -
shall be immediately payable by the Tenant to the Landlord as additional rent
hereunder and shall be due on the first day of the next month following payment
thereof by the Landlord, in addition to without prejudice to any other rights
and remedies of the Landlord under this Lease;
8.6 The Tenant will not keep, use, sell or offer for sale in or upon
the Demised Premises any article which may be prohibited by the fire insurance
policy in force from time to time covering the Land and Building, and further if
the Tenant's occupancy of, or conduct of business in, the Demised Premises,
whether or not the Landlord has consented to the same, causes any increase in
premiums for the insurance carried from time to time by the Landlord with
respect to the Land and Building, the Tenant shall pay the full amount of any
such increase in premiums as additional rent within ten (10) days after bills
for such additional premiums are rendered by the Landlord;
ARTICLE 9 - REPAIRS
9.1 The Tenant covenants with the Landlord that:
(a) The Tenant shall at all times during the Term at its own
cost and expense:
(i) repair, maintain and keep the Demised Premises
in good order and repairs, as a careful owner
would do; and
(ii) repair, maintain and keep all equipment and
fixtures in the Demised Premises in good order
and repair and replace the same when necessary,
as a careful owner would do, including, without
limitations, the floor, exterior and interior
door, exterior store fronts, windows, plate
glass, glass partitions, heating, ventilating,
air-conditioning, plumbing, sprinkler,
mechanical and electrical equipment and fixtures
(including all the parts, wiring and pipes
thereof) within the Demised Premises, and any
improvements now or hereafter made to the
Demised Premises, reasonable wear and tear and
repairs for which the Landlord is responsible
only excepted provided however that if such
repairs by the Landlord are required as a result
of the act or omission of the Tenant, its
servants, agents or employees, the Tenant shall
pay to the Landlord, on demand, the costs of
such repairs or
<PAGE>
- 17 -
Additional Rental) and the Tenant covenants to
perform such maintenance, to effect such repairs
and replacements and to decorate at its own cost
and expense as and when necessary or reasonably
required so to do by the Landlord;
9.2 The Tenant shall, when necessary and, whether upon receipt of
notice from the Landlord or not, effect and pay for such maintenance, repairs,
replacements or decoration as may be the responsibility of the Tenant under the
foregoing paragraph provided that no maintenance, repairs, or replacements to
the structure, any perimeter wall, the store front, the sprinkler system system,
the heating, ventilating, air-conditioning, plumbing, electrical or mechanical
equipment or the concrete floor shall be made without the prior written consent
of the Landlord, and in so doing shall use contractors or other workmen
designated or approved by the Landlord in writing, such approval not to be
unreasonably withheld or delayed.
ARTICLE 10 - STRUCTURAL DEFECTS
10.1 The Landlord shall be responsible to make good and repair any
damage caused to the Demised Premises by reason of a structural defect in the
building in which the Demised Premises are located, or damage caused by
negligence of the Landlord, its servants or agents.
10.2 The Landlord shall cause proper maintenance of all Common Areas,
at the Tenant's cost to the extent of the Tenant's Proportionate Share;
ARTICLE 11 - CHANGES, ALTERATIONS AND ADDITIONS
11.1 Hereafter and at any time and from time to
the Term of Lease, the Tenant shall have the right, expense, to make such
changes and alterations in or Demised Premises as the Tenant shall deem
necessary in connection with the requirements of its business structural change
or alteration shall be undertaken until detailed plans and specifications
therefor and a list of the contractors or tradesmen who the Tenant proposes to
hire for the work have first been furnished to and approved by and consented to
in writing by the Landlord, which approval and consent shall not be unreasonably
withheld;
11.2 The Tenant shall be responsible for procuring and paying for all
required municipal and other governmental permits and authorizations of the
various municipal departments and government divisions having jurisdiction
necessary or advisable in connection with any changes made pursuant to this
Article provided that the Landlord will, at the Tenant's expense, join in
<PAGE>
- 18 -
application for such permits and authorizations whenever such action is
necessary;
11.3 All work done in connection with any change or alteration shall
be done promptly and in good and workmanlike manner, and in compliance with the
valid and applicable building and zoning laws and with all other valid laws,
ordinances, orders, rules, regulations and requirements of all federal,
provincial and municipal governments, and the appropriate departments,
commissions, boards and officers thereof, and in accordance with the orders,
rules and regulations of the Canadian Fire Underwriters Association, or any
other body hereafter constituted exercising similar functions; the cost of any
such change or alteration shall be paid or secured so that the Demised Premises
shall at all times be free of liens for labor and materials supplied, or claimed
to have been supplied to the Demised Premises;
11.4 All alterations or additions to the existing improvements, other
than Tenant's Equipment, shall upon attachment to the Demised Premises, be
deemed a part thereof, and title thereto shall immediately vest in the Landlord
without any liability on its part to pay for the same provided that the Landlord
may elect to require the Tenant to remove at the expiration of this Lease all or
any part of any improvement installed by or on behalf of the Tenant, in which
case such removal shall be done by the Tenant forthwith, at the Tenant's
expense, as well as all other repairs necessitated by such removal, failing
which the Landlord may carry out the same at the Tenant's expense and without
liability for damage to the improvement so removed;
ARTICLE 12 - DAMAGE OR DESTRUCTION
12.1 In case the Demised Premises are damaged or destroyed by any
peril or hazard covered by or recoverable from insurance maintained by the
Landlord under Article 8 then the Landlord shall immediately select a reputable
contractor and if such contractor:
(a) is of the opinion that the damage or destruction is
capable of repair with reasonable diligence within
ninety (90) days of the date of the damage then the
Landlord shall deliver notice of its intention to
rebuild or repair and shall repair the damage with
reasonable diligence, or
(b) is of the opinion that the damage or destruction is not
capable of repair with reasonable diligence within
ninety (90) days of the date of the damage, then the
Landlord shall either elect to repair
<PAGE>
- 19 -
such damage or destruction and shall then repair the
same with reasonable diligence, or either the Landlord
or Tenant may elect to terminate this Lease;
12.2 If this Lease is not terminated by reason of such damage or
destruction and if such damage or destruction is such as to render the Demised
Premises wholly unfit for occupancy then the rent to be paid by the Tenant
hereunder shall abate in whole, or in proportion to the unoccupiable portion of
the Demised Premises, as the case may be, until the Landlord delivers a notice
to the Tenant that the repairs have been substantially completed at which time
all rent payable by the Tenant hereunder shall recommence;
12.3 If the Landlord herein does not give the Tenant notice of its
intention to either repair such damage or destruction or to terminate this Lease
within thirty (30) days of the damage or destruction then the Tenant may by
notice in writing delivered to the Landlord terminate this Lease or require the
Landlord to repair the damage or destruction;
12.4 In case the Demised Premises are damaged or destroyed by any
peril or hazard not covered by or recoverable from insurance maintained by the
Landlord under Article 8 then the Landlord shall either elect to repair such
damage or destruction and shall then repair the same with reasonable diligence
or shall elect to terminate this Lease;
12.5 If the Landlord shall elect under any provision of the Article
not to repair and as a result this Lease determines, the Tenant shall cause all
insurance proceeds payable in respect of damages to the Demised Premises to be
paid in accordance with the provisions of the policy of insurance;
ARTICLE 13 - USE OF DEMISED PREMISES
13.1 The Tenant shall use the Demised Premises only for the operation
as a Retail Coffee House under the name of JAVA GIRL and for no other purposes
without the written consent of the Landlord;
13.2 During the Term of Lease, the Tenant in the use, occupation,
alteration or repair of the Demised Premises, or any property used in connection
therewith, shall comply with the requirements of every applicable valid law,
ordinance, rule or regulation and with the orders, rules and regulations of The
Canadian Fire Underwriters Association, or any other body hereafter constituted
exercising similar functions, and with the requirements of all policies of
public liability, fire and the
<PAGE>
- 20 -
kinds of insurance at the time in force with respect to the Demised Premises or
any part thereof;
13.3 The Tenant covenants and agrees that it will carry on its
business on the Demised Premises continuously during the Term of Lease;
ARTICLE 14 - CERTAIN RIGHTS AND DUTIES OF LANDLORD
14.1 The Tenant will permit the Landlord and authorized
representatives of the Landlord to enter into the Demised Premises at any time
in case of emergency and at all reasonable times upon reasonable notice during
usual business hours for the purpose of inspecting the same and of ascertaining
whether the Tenant has failed or neglected to perform any act which it is
required to perform under the provisions of this Lease, and also the Landlord
shall be permitted to enter as aforesaid for the purpose of making any necessary
repairs to the Demised Premises and performing any work therein, which the
Tenant has failed to do, that may be necessary to comply with any valid law,
ordinance, rules or regulations of The Canadian Fire Underwriters, or of any
public authority, or any similar body, or to comply with the requirements of
insurance policies then in force with respect to the Demised Premises, provided
that nothing herein shall imply with any duty upon the part of the Landlord to
do or to pay for any work which under any provision of this Lease the Tenant may
be required to perform, and the performance thereof by the Landlord in the event
the Tenant does not perform the same after demand shall not constitute a waiver
of the Tenant's default in failing to perform the same.
14.2 The Tenant upon paying the Basic Rent and all other charges here
in provided for, and observing and keeping the
covenants, agreements and conditions of this lease on its part to be kept, shall
lawfully and quietly enjoy, hold, occupy, control and manage the Demised
Premises during the Term of Lease without hindrance or molestation of the
Landlord, or any person or persons claiming under the Landlord, save as
expressly provided by this Lease;
ARTICLE 15 - CONDITIONAL LIMITATIONS, DEFAULT PROVISIONS
15.1 In case the Term of this Lease or any of the goods and chattels
of the Tenant shall be at any time seized in execution or attachment by a
creditor of the Tenant or the Tenant shall make any assignment for the benefit
of creditors or any bulk sale or become bankrupt or insolvent or take the
benefit of any Act now or hereafter in force for bankrupt or insolvent debtors,
or, if the Tenant is a corporation and any order shall be made for the winding-
up of the Tenant, or other termination of the corporate existence of Tenant or a
Receiver or Receiver-Manager
<PAGE>
- 21 -
is appointed for the Tenant under any Debenture or other security or by Court
Order or otherwise, then in any such case this Lease shall at the option of the
Landlord immediately cease and terminate and the Term of Lease shall immediately
become forfeited and void and the then current month's rent and the next ensuing
three (3) month's rent shall immediately become due and be paid and the Landlord
may, without notice, re-enter and take possession of the Demised Premises as
though the tenant or other occupant or occupants of the Demised Premises was or
were holding over after the expiration of the Term of Lease without any
whatsoever;
15.2 If, during the Term of Lease, or any renewal thereof, the Tenant
shall make default in the payment of any rent due under this Lease, and such
default shall continue for ten (10) days after notice thereof by the Landlord,
this Lease shall cease and come to an end on the date specified in the said
notice, which date shall not be less than ten (10) days after the delivery of
such notice, and Tenant will then quit and surrender the Demised Premises to the
Landlord;
15.3 If, during the Term of Lease or any renewal thereof the Tenant
shall not observe, perform or keep any of the other covenants in this Lease and
such default shall continue for ten (10) days after written notice thereof by
the Landlord to the Tenant, or if the Tenant fails to proceed promptly and with
all due diligence to cure such default after the service of notice by the
Landlord of such default, then and in any such case, unless the default upon
which said notice was based has been cured in the meantime this Lease shall
cease and come to an end on the day specified in the said notice, which date
shall not be less that ten (10) days after delivery of such notice, and the
Tenant will then quit and surrender the Demised Premises to the Landlord,
provided that in the event of a default which is capable of being cured but
which cannot with due diligence be cured within a period of ten (10) days, the
ten (10) day period shall be extended for such time as shall allow the Tenant
proceeding promptly and with all due diligence a reasonable opportunity to cure
such default;
15.4 All costs, charges and expenses incurred by the Landlord in
recovering or enforcing payment of monies owing hereunder or in enforcing the
terms and conditions of this Lease, whether or not any default be cured within
the time allowed, including the costs of the Landlord as between solicitor and
own client on a lump sum basis, expenses of taking possession of the Demised
Premises and realizing upon goods and chattels of the Tenant, shall be paid by
the Tenant and such sums shall be deemed to be rent payable under this Lease;
<PAGE>
- 22 -
15.5 No remedy conferred upon or reserved to the Landlord herein or
by law or otherwise shall be considered exclusive of any other remedy, but the
same shall be cumulative with and in addition to every other remedy available to
the Landlord, and all such remedies may be exercised concurrently as well as
individually from time to time, and as often as the Landlord shall deem fit;
ARTICLE 16 - DISTRESS
16.1 The Tenant waives and renounces the benefit of any present or
future statute taking away or limiting the Landlord's right of distress, and
covenants and agrees that notwithstanding any such statute none of the goods and
chattels of the Tenant on the Demised Premises at any time during the Term of
Lease shall be exempt from levy by distress for rent in arrears;
ARTICLE 17 - VOIDANCE OF LEASE, VACANT OR IMPROPER USE
17.1 It is hereby further declared and agreed between the Landlord
and Tenant that in the case the said Premises or any part thereof become and
remain vacant and unoccupied for the period of fifteen (15) days, or be used by
any other person or persons, or for any other purpose than as above provided,
without the written consent of the Landlord, this Lease shall, at the option of
the Landlord, cease and be void and the Term of Lease shall expire and be at an
end, anything hereinbefore to the contrary notwithstanding, and the then current
month's rent and an additional one month's rent shall thereupon become
immediately due and payable and the Landlord may re-enter and take possession of
the Demised Premises as though the Tenant or other occupant or occupants of the
Demised Premises, was or were holding over after the expiration of the Term of
Lease, and the balance of the Term of Lease shall be forfeit; or in such case
instead of determining this Lease as aforesaid and re-entering upon the Demised
Premises, the Landlord may take possession of the Demised Premises or any part
or parts thereof, and let and manage the same and grant any lease or leases
thereof upon such terms as to the Landlord may appear to be reasonable, and
demand, collect, receive and distrain for all rental which shall become payable
in respect thereof, and apply the said rental after deducting all expenses
incurred in connection with the Demised Premises and in the collection of the
said rent, including reasonable commission for the collection thereof and the
management of the Demised Premises, upon the rent hereby reserved, and the
Landlord, and every agent acting for the Landlord from time to time shall, in so
acting, be the agent of the Tenant who alone shall be responsible for their acts
and the Landlord shall not be accountable for any monies except those actually
received, notwithstanding any act, neglect, omission or default, of any such
agent acting as aforesaid;
<PAGE>
- 23 -
ARTICLE 18 - WATER AND GAS DAMAGE
18.1 The Landlord shall not be liable for any damage to any property
at any time upon the Demised Premises arising from gas, steam, water, rain or
snow, which may leak into, issue or flow from any part of the said Building, or
from the gas, water, steam or drainage pipes or plumbing works of the same, or
from any other place or quarter, or for any damage caused by or attributable to
the condition or arrangement of,any electric or other wires in the Building;
ARTICLE 19 - WATER
19.1 The Landlord agrees to supply normal water consumed on the
Demised Premises and the cost of such supply will be borne by the Tenant in its
Proportionate Share, but in the event of any abnormal consumption of water,
either by reason of the character of the business carried on by the Tenant, or
by the use of mechanical or other contrivances, the Tenant consents to the
installation of a water meter at his own expense, if necessary, and further
agrees to pay for the excess water consumption on the Demised Premises over and
above his Proportionate Share;
ARTICLE 20 - SIGNS
20.1 It is further agreed by and between the Landlord and the Tenant
that no sign, advertisement or notice shall be inscribed, painted or affixed by
the Tenant on any part of the outside or inside of the Building whatever, unless
of such manner, color, size and style and in such places upon or in the building
as shall be consented to in writing by the Landlord and furthermore, the Tenant,
on ceasing to be the Tenant of the Demised Premises, will, before removing his
goods and fixtures from the Demised Premises, cause any sign as aforesaid to be
removed or obliterated at his own expense and in a workmanlike manner to the
satisfaction of the Landlord;
ARTICLE 21 - ILLUMINATION OF DISPLAY WINDOWS
21.1 The Tenant shall keep the display windows of the Demised
Premises suitably illuminated during the business hours of the Building as such
hours may be determined from time to time by the Landlord and during such other
reasonable hours as the Landlord may determine;
21.2 The Tenant will not carry on or perform or suffer or permit to
be carried on, performed or suffered on the Demised Premises any business
practice of act or engage in any activity which may be deemed a nuisance or a
menace or which in any way may injure the Building.
<PAGE>
- 24 -
ARTICLE 22 - NO ABATEMENT OF RENT
22.1 There shall be no abatement from or reduction of the rent due
hereunder, nor shall the Tenant be entitled to damages, losses, costs or
disbursements from the Landlord during the term hereby created on, caused by or
on account of fire (except pursuant to Article 12 where total damage or
destruction shall occur), water, sprinkler systems, partial or temporary failure
or stoppage of heat, light, elevator, live steam or plumbing service in or to
the Demised Premises or in or to the Building, whether due to acts of God,
strikes, accidents, the making of alterations, repairs, renewals, improvements,
structural changes to the Demised Premises or to the Buildings, or the equipment
or systems supplying the said services, or from any cause whatsoever; provided
that the said failure or stoppage shall be remedied within a reasonable time;
ARTICLE 23 - RIGHT TO SHOW PREMISES
23.1 The Tenant will permit the Landlord to exhibit the Demised
Premises during the last six (6) months of the term to any prospective tenant
and will permit all persons having written authority from the Landlord to view
the Demised Premises at all reasonable hours;
ARTICLE 24 - ASSIGNMENT, SUBLETTING, PARTING WITH POSSESSION
24.1 The Tenant shall not assign this Lease or sublet or part with
possession of all or part of the Demised Premises without the prior written
consent of the Landlord, provided however, such consent to any assignment or
subletting shall not relieve the Tenant from its obligations for the payment of
rent and for the full and faithful observance and performance of the covenants,
terms and conditions herein contained;
ARTICLE 25 - LANDLORD'S RIGHTS
25.1 Provided further and notwithstanding anything hereinbefore set
forth:
(a) If at the time of any proposed assignment or subletting,
and from time to time, the Tenant proposes to assign
this Lease or sublet the Demised Premises, the Tenant
shall send to the Landlord a notice setting forth the
name and address of the proposed assignee or subtenant
and such information as to the nature of its business
and its financial responsibility and standing as the
Landlord may reasonably require, and all the terms and
conditions of the proposed assignment or sublease.
Within fourteen (14) days from the
<PAGE>
- 25 -
submission of such notice by the Tenant, the Landlord
may elect to terminate this Lease by giving to the
Tenant a notice of intention to do so, fixing a date of
termination not sooner than the date the subtenant or
assignee proposes to occupy the Demised Premises or if
such date is less than three (3) months next following
the giving of such notice of termination by the
Landlord, not later than three (3) months next following
the giving of such notice of termination by the
Landlord, and the Tenant shall deliver up vacant
possession of the Demised Premises on such date of
termination and the Lease shall terminate and come to an
end and adjustments shall be made in rent, taxes and
other charges payable by any party under this Lease. If
the Landlord shall have failed to elect to terminate
this Lease pursuant to the foregoing, the provisions of
Article 24 shall apply to such assignment or subletting;
(b) The Tenant shall have the right without the consent of
the Landlord to assign this Lease to a company
incorporated or to be incorporated by the Tenant,
provided that the Tenant owns or beneficially controls
all of the issued and outstanding shares in the capital
of the company. Such assignment shall, however, not
relieve the Tenant from its obligations for the payment
of rent and for the full and faithful observance and
performance of the covenants, terms and conditions
herein contained;
(c) No assignment of this Lease shall be valid unless within
the (10) days after the execution hereof, the Tenant
shall deliver to the Landlord:
(i) a duplicate original of such assignment duly
executed by the Tenant, and
(ii) an instrument duly executed by the assignee, in
form satisfactory to the Landlord wherein such
assignee shall assume the Tenant's obligations
for the payment of rent and for the full and
faithful observance and performance of the
covenants, terms and conditions herein
contained.
<PAGE>
- 26 -
ARTICLE 26 - PAYMENT OF LANDLORD'S EXPENSES
26.1 If at any time an action is brought for recovery of possession
of the Demised Premises, or the recovery of Rental or any part thereof, or
because of a breach by act or omission of any other covenant herein contained on
the part of the Tenant, and a breach is established, the Tenant shall pay to the
Landlord all expenses incurred by the Landlord in the enforcement of its rights
and remedies hereunder.
ARTICLE 27 - LANDLORD'S RIGHT TO RELET
IN CASE OF VACANCY
27.1 In case the Demised Premises shall be deserted or vacated, the
Landlord shall have the right, if it thinks fit, to enter the same, as the agent
of the Tenant either by force or otherwise without being liable to any
prosecution therefor, and to relet the Demised Premises as the agent and at the
risk of the said Tenant and to receive the Rental therefor.
ARTICLE 28 - TRANSFERS OF SHARES OF TENANT
28.1 If the Tenant is a corporation or if this lease is assigned as
aforesaid with or without the consent of the Landlord to a corporation, and if
any time during the Term of Lease any part or all of the corporate shares or
voting rights of shareholders shall be transferred by sale, assignment, bequest,
inheritance, trust, operation of law or other disposition, or treasury shares by
issued so as to result in a change in the control of said corporation by reason
of ownership of greater than fifty (50%) percent of the voting shares of the
corporation or otherwise, then and so often as such a change of control shall
occur, the Tenant shall notify the Landlord in writing of such changes and the
Landlord shall have the right to terminate this Lease and the Term of Lease at
any time after such change of control by giving the Tenant sixty (60) days prior
written notice of such termination. This Article 28.01 shall not apply to the
Tenant if on and from the date of this Lease the control of the Tenant is
represented by shares listed on a recognized security
exchange.
ARTICLE 29 - SHARE RECORDS
29.1 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 Article 28.01. If any shareholder of the
Tenant shall, upon request of the Landlord, fail or refuse to furnish to the
Landlord any data verified by the Affidavit of such shareholder or other
credible person, which data alone or with other data
<PAGE>
- 27 -
show the applicability or inapplicability of Article 28.01, then the Landlord
may terminate this lease on sixty (60) days notice as aforesaid.
ARTICLE 30 - RULES AND REGULATIONS
30.1 The Tenant and its clerks, servants and agents will at all times
during the occupancy of the Demised Premises observe and conform to such
reasonable rules and regulations as shall and may be made from time to time by
the Landlord and any such rules and regulations so made shall be deemed to be
incorporated in and form part of this Lease;
ARTICLE 31 - INDEMNIFICATION OF LANDLORD
31.1 The Tenant shall indemnify the Landlord and save it harmless
from and against any and all loss (including loss of rentals payable by the
Tenant pursuant to this Lease), claims, actions, damages, liability and expense
in connection with loss of life, personal injury or damage to property arising
from any occurrence in, upon or at the Demised Premises, or the occupancy or use
by the Tenant of the Demised Premises or any part thereof, or occasioned wholly
or in part by any act or omission of the Tenant, its agents, contractors,
employees, servants, licensees, concessionaires or invitees, or by anyone
permitted to be on the Demised Premises by the Tenant. In case the Landlord
shall, without fault on its part, be made a party to any litigation commenced by
or against the Tenant, or by reason of any act or omission of the Tenant, its
agents, contractors, employees, servants, licensees, concessionaires or
invitees, or by anyone permitted to be on the premises by the Tenant, then the
Tenant shall protect and hold the Landlord harmless and shall pay all costs,
expenses and reasonable legal fees incurred or paid by the Landlord in
connection with such litigation.
ARTICLE 32 - NAME OF BUILDING
32.1 The Tenant shall not refer to the Building by any name other
than that designated from time to time by the Landlord nor use such name for any
purpose other than that of the business address of the Tenant, provided that the
Tenant may use the municipal number of the Building assigned to it by the
Landlord instead of the name of the Building;
ARTICLE 33 - ACCEPTANCE OF PREMISES
33.1 The Tenant shall examine the Demised Premises before taking
possession hereunder and unless the Tenant furnishes the Landlord with a notice
in writing specifying any defect in the construction of the Demised Premises or
otherwise within ten (10) days after such taking of possession, the Tenant shall
<PAGE>
- 28 -
conclusively be deemed to have examined the Demised Premises and to have found
them in order, and such taking of possession without giving the notice aforesaid
within such ten (10) days shall be conclusive evidence as against the Tenant
that at the commencement date the Demised Premises were in good order and
satisfactory condition, subject only to latent defects, if any. The Tenant
agrees that there is no promise, representation or undertaking by or binding
upon the Landlord with respect to any alteration, remodelling or redecoration of
or installation of equipment or fixtures in the Demised Premises, except such,
if any as are expressly set forth in this Lease.
ARTICLE 34 - RIGHT OF TERMINATION
34.1 The Tenant further covenants and agrees that on the Landlord's
becoming entitled to re-enter upon the Demised
Premises under any of the provisions of this Lease, the Landlord
in addition to all other rights shall have the right to determine
forthwith this Lease and the Term of Lease by giving notice in writing addressed
to the Tenant of its intention to do so and thereupon rent shall be computed
apportioned and paid in full to the date of such determination of this Lease,
and any other payment for which the Tenant is liable under this Lease shall be
paid and the Tenant shall forthwith deliver up possession of the Demised
Premises to the Landlord and the Landlord may re-enter and take possession of
the same;
ARTICLE 35 - OVERHOLDING
35.1 If the Tenant shall continue to occupy the Demised Premises
after the expiration of this Lease or without the consent of the Landlord and
without any further written agreement, the Tenant shall be a monthly tenant at
double the rent herein reserved, pro rated in relation to the periods of time
during which the Tenant is an overholding tenant, and on the terms and
conditions herein set out except as to length of
tenancy;
ARTICLE 36 - DIRECTORY BOARD
36.1 INTENTIANALLY OMITTED.
ARTICLE 37 - ACCRUAL OF RENT
37.1 Rent shall be considered as annual and accruing from day to day,
and where it becomes necessary for any reason to calculate such rent for an
irregular period of less than one year, an appropriate apportionment and
adjustment shall be made. Where the calculation of any additional rental is not
made until after the termination of this Lease, the obligation of the Tenant to
pay such additional rental shall survive the termination of
<PAGE>
- 29 -
this Lease and such amounts shall be payable by the Tenant upon demand by the
Landlord;
ARTICLE 38 - TRANSFER BY LANDLORD
38.1 In the event of a sale, transfer or lease by the Landlord of the
Building or a portion thereof containing the Demised Premises or the assignment
by the Landlord of this Lease or any interest of the Landlord hereunder, the
Landlord shall, without further written agreement, to the extent that such
purchaser, transferee or lessee has become bound by the covenants and
obligations of the Landlord hereunder, be freed, released and relieved of all
liability or obligations under this Lease;
ARTICLE 39 - LAWS OF PROVINCE APPLY
39.1 This Lease shall be deemed to have been made in and shall be
construed in accordance with the laws of the Province of British Columbia;
ARTICLE 40 - LEASE ENTIRE AGREEMENT
40.1 The Tenant acknowledges that there are no covenants,
representations, warranties, agreements or conditions, expressed or implied,
collateral or otherwise, forming part of or in any way affecting or relating to
this lease or the Demised Premises, save as expressly set out in this Lease and
that this Lease, including the Schedules attached and the Rules and Regulations,
constitutes the entire agreement between the Landlord and the Tenant and may not
be modified except as herein explicitly provided or except by subsequent
agreement in writing of equal formality hereto executed by the Landlord and the
Tenant and the Covenantor, if any. Notwithstanding the foregoing the Tenant
shall remain liable to pay for those improvements in the Demised Premises which
have been made by the Landlord for or on behalf of the Tenant and which are in
excess of the work otherwise required to be done by the Landlord, and the
Landlord's fee for supervision and overhead;
ARTICLE 41 - REGISTRATION
41.1 The Tenant covenants and agrees that the Landlord shall not be
obliged to execute or deliver this Lease in form registerable under the Land
Title Act or any other statute in pari materia therewith and that any
requirement to produce plans acceptable to the Vancouver Land Title Office shall
be at the cost and the sole responsibility of the Tenant;
<PAGE>
- 30 -
ARTICLE 42 - INTERPRETATION
42.1 Unless the context otherwise requires, the word "Landlord"
wherever it is used herein shall be construed to include and shall mean the
Landlord, its successors and/or assigns, and the word "Tenant" shall be
construed to include and shall mean the Tenant, and the executors,
administrators successors and/or assigns of the Tenant and when there are two or
more tenants, or two or more persons bound by the Tenant's covenants herein
contained, their obligations hereunder shall be joint and several; the word
"Tenant" and the personal pronoun "it" relating thereto and used therewith shall
be read and construed as "Tenants", and "his", "her", "its" or "their"
respectively, as the number and gender of the party or parties referred to each
require and the number of the verb agreeing therewith shall be construed and
agree with the said word or pronoun so substituted. Time shall be of the
essence in respect hereunder;
ARTICLE 43 - SEVERABLE
43.1 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
hereof. 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 though the said provision or provisions had never been
included;
ARTICLE 44 - CAPTIONS
44.1 The captions appearing within the body of this- Lease have been
inserted as a matter of convenience and for reference only and in no way define,
limit or enlarge the scope or meaning of this Lease or of any provision hereof;
ARTICLE 45 - MISCELLANEOUS COVENANTS
45.1 During the Term of Lease, or any renewal thereof, the Tenant
shall not suffer or permit any builders' or other liens or encumbrances for
work, labor, services or material to be filed against or attached to the Demised
Premises or any portion thereof, and if any such lien or encumbrance be filed or
registered, the Tenant shall procure discharge of the same within twenty (20)
days after the same has come to its notice or attention; provided that if the
Tenant in good faith desires to contest the amount or validity of any claim for
which a lien is registered and so notified the Landlord, and if the Tenant shall
have deposited with the Landlord or paid into Court in any action
<PAGE>
- 31 -
with respect to such lien the amount claimed plus a reasonable amount for costs,
the Tenant may thereupon defer payment of such claim or discharge of such lien
for such period as is reasonably necessary to determine the claim, provided that
neither the Demised Premises nor the Tenant's leasehold interest hereunder may
be allowed to become liable to forfeiture or sale by reason or such deferment;
45.2 Subject to the provisions of Article 15 hereof, upon termination
of this Lease for any reason whatever, except upon the sale of the said Lands
and the Buildings by the Landlord to the Tenant, the Tenant shall surrender to
the Landlord the Demised Premises and all Building Equipment upon the Demised
Premises, together with all alteration and replacements and additions thereof
(except the Tenant's Equipment) in good order, condition and repair;
45.3 The Landlord shall have the right to transfer Title to the
Demised Premises at any time or assign its interest under this Lease Agreement;
45.4 In the event the Tenant enters into any sublease the Tenant
shall not collect rental from the sublessee more than one month in advance of
the due date thereof;
45.5
45.6 It is agreed by and between the parties hereto that the Landlord
may mortgage the Demised Premises, the said mortgage to be registered in
priority to this Lease, and the Tenant covenants and agrees to execute
postponements of any encumbrances it may place upon the Title to the Demised
Premises to protect its interest under the Lease for the purpose of allowing any
such mortgagee to have priority over any encumbrance the Tenant may register as
aforesaid and it is further agreed that the Landlord may assign the rents
hereunder to such mortgagee and notice to that effect, signed by the Landlord,
shall be sufficient authority for the Tenant to pay the rent, or such portion
thereof as is assigned to the mortgagee and the receipt of the mortgagee shall
be a full and adequate discharge to the Tenant for such payment;
45.7 The failure of either party to insist upon strict performance of
any covenant or condition contained in this Lease or to exercise any right or
option hereunder shall not be construed as a waiver or relinquishment for the
future of any such covenant, condition, right or option; the acceptance of any
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 or such
<PAGE>
- 32 -
person as a sublessee, assignee, transferee or otherwise in the place and stead
of the Tenant;
45.8 Any notice required or permitted to be given shall be in writing
and shall be deemed to have been duly given if delivered by hand or mailed by
prepaid mail as follows:
TO THE LANDLORD: c/o P.F.C. MANAGEMENT CO. LTD.,
#15 - 5763 OAK STREET,
VANCOUVER, B.C., V6M 2V7
TO THE TENANT: JAVA GROUP INC.
#404 - 999 Canada Place
Vancouver, B.C., V6E 3E2
TO THE COVENANTOR:
or to such other address as the respective parties may in writing advise and any
such notice shall be deemed to have been given and received, if delivered when
delivered, and if mailed, forty-eight (48) hours following the mailing thereof
in British Columbia, Saturdays, Sundays, holidays and days during interruption
of ordinary mail services excepted;
45.9 The Tenant hereby accepts this Lease subject to the conditions,
restrictions and covenants herein set forth and
implied;
45.10 This Lease may be executed in several counterparts, each of
which shall be deemed an original and which together shall constitute one and
the same instrument;
45.11 Wherever the singular or masculine or neuter are used in this
Lease, the same shall be construed to include the plural, neuter, feminine or
body corporate where the context so requires, or where necessary to have
application to a party hereto and this Lease shall be read with all necessary
grammatical and terminological changes thereby rendered necessary;
45.12 This Lease and the covenants and agreements herein contained
shall enure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, legal personal representatives, successors and
permitted assignees and sublessees;
45.13 Time shall be of the essence of this Lease and each provision
hereof;
45.14 INTENTIONALLY OMITTED.
<PAGE>
- 33 -
45.15 Nothing herein contained shall be construed as creating the
relationship of principal and agent, or of partners or joint venturers between
the parties hereto, the only relationship being that of Landlord and Tenant;
45.16 No debris, garbage, trash or refuse shall be placed or left or
be permitted to be placed or left in, on or upon any part of the Common Areas
outside of the Demised Premises, but shall be deposited by the Tenant in areas
and at times in a manner specifically designated by the Landlord from time to
time; should any of the items herein mentioned be of a perishable nature, the
same shall be kept in a properly refrigerated area provided at its cost by the
Tenant; should there be costs for removal of said items additional to the
removal service provided by the City of Vancouver or any independent disposal
services should the City of Vancouver or such independent disposal service
charge additional costs for such service, then the Tenant shall pay those costs;
ARTICLE 45A LETTER OF CREDIT
The Tenant agrees to provide an unconditional and irrevocable
bank letter of credit for Six Thousand Dollars ($6,000.00) to the Landlord for
the Full Term of the Lease. In the event the Tenant defaults with respect to
any of the terms and conditions of this Lease, the Landlord may terminate this
Lease Agreement and draw against such Letter of Credit on account of damages and
not penalty without prejudice to any other remedy.
ARTICLE 46 - OPTION TO RENEW
46.1 The "Tenant", provided it is not in default hereunder shall have
the option of renewing this-Lease for ONE (1) further term of FIVE (5) years,
all terms of the renewal lease to be the same as this Lease with the exception
of this option to renew which shall be deleted, and with the further exception
of the amount of rent to be paid. This option to renew shall be exercised by
the Tenant serving written notice exercising the option upon the Landlord in the
manner for serving written notice provided in this Lease. Notice of intention
to exercise such option shall be given by the Tenant to the Landlord six (6)
months prior to the expiration of the term hereunder.
46.2 Should the Tenant serve written notice exercising the option in
the previous sub-clause, the Landlord- and Tenant shall negotiate with the aim
of agreeing on the amount of rent to be paid during the FIRST (1st) FIVE (5)
year option term. Should the Landlord and Tenant be unable to reach an
agreement, either party may submit the question of what would be a proper market
value for the rent to be paid during the FIVE (5) option years of the Lease to
arbitration pursuant to the Arbitration Act of British Columbia. Until such
time as the parties agree to a
<PAGE>
- 34 -
renewal rental amount or until an arbitrator renders a decision following an
arbitration, the Tenant shall pay rent equal to the rent payable during the last
year of the Lease prior to renewal plus fifteen (15%) percent.
* INDEMNITY CLAUSE COMES OUT IF NO COVENANTOR
ARTICLE 47 - INDEMNITY
47.1 In consideration of the Landlord entering into this Lease and of
other good and valuable consideration (the receipt and sufficiency of which are
acknowledged by the Covenantor), the Covenantor covenants and agrees with the
Landlord as follows:
(a) the Covenantor will at all times and from time to time
indemnify and keep indemnified and save harmless from
any and all losses, costs, damages and expenses and
costs of all distresses, actions, proceedings, claims
and demands incurred or made by the Landlord if, during
the Term of Lease, the Landlord does not receive rent
and all other moneys from time to time payable by the
Tenant pursuant to any provision of the Lease for such
period which, if the Lease were in full force and effect
and good standing, would be payable under the Lease;
(b) if the Tenant makes any default, whether in payment when
due of any rent or other moneys payable under the Lease
or in duly performing, observing or fulfilling any other
obligation of the Tenant under the Lease, the Covenantor
will forthwith upon the demand of the Landlord pay to
the Landlord any rent or other moneys due and all
damages that may arise consequent upon the default by
the Tenant in payment thereof or in the due performing,
observing and fulfilling of any such obligation;
(c) the Covenantor will be bound with the Tenant to the
Landlord for the performance of the Tenant's obligations
under the Lease, and the liability of each will be that
of a direct and primary obligor and as an indemnifier
and not merely that of a surety;
(d) if the Tenant makes default under the Lease, the
Landlord may proceed against the Covenantor as if it
were the Tenant, without waiving any of its rights
against the Tenant, and without any requirement that the
Landlord shall first have
<PAGE>
- 35 -
proceeded against the Tenant or had recourse to or any
security, guarantee or other indemnity or covenant or
any other recourse of remedy of the Landlord in respect
of such default by the Tenant;
(e) the obligations of the Covenantor and rights of the
Landlord hereunder will not be affected or in any way
prejudiced or impaired by any neglect or forbearance of
the Landlord in enforcing performance by the Tenant of
any of its obligations under the Lease, or by any delays
by the Landlord in enforcing any of such obligations, or
by granting by the Landlord to the Tenant of any
extension or extensions of time, or by any waivers by
the Landlord of any of the Tenant's obligations (except
insofar as any particular default shall have been
expressly waived), or by any assigning or subletting or
other dealings by the Tenant with the Lease or the
premises whether with or without the consent or privity
of the Landlord, or by any want of notice to the
Covenantor or by any dealings between the Landlord and
the Tenant with or without notice to the Covenantor
whereby the obligations and rights respectively of
either or both of the Landlord and the Tenant under the
Lease are amended or modified, or by any other act or
failure to act by the Landlord which would release,
discharge or affect the obligations of the Covenantor if
they were mere sureties, and with the intent that this
indemnity given by the Covenantor will not be released,
discharged or affected or the rights of the Landlord
hereunder in any way impaired until such time as all of
the obligations of the Tenant under the Lease, now
existing or to arise at any time in the future, have
been fully performed and satisfied;
(f) the obligations of the Covenantor hereunder will not be
released, discharged or affected by the bankruptcy or
insolvency of the Tenant or of any other Covenantor or
guarantor or any disclaimer by any trustee in bankruptcy
of the Tenant, or by the Tenant ceasing to exist
(whether by winding-up, forfeiture, cancellation or
surrender of charter, or any other circumstance) or by
any event terminating the Lease including a termination
effected by the Landlord under any provision of Article
15 of of the Lease (except a termination occurring
pursuant to Article 12) and if a termination shall occur
under any provision of
<PAGE>
- 36 -
Article 15 of the Lease the Landlord shall have the
option to require the Covenantor to enter into a lease
of the premises as a tenant upon the same terms as the
Lease for the then unexpired residue of the expressed
term of the Lease;
(g) the Covenantor's obligations hereunder may be assigned
by the Landlord, and will benefit and be enforceable by
the successors and assigns of the Landlord;
ARTICLE 48 - EXPROPRIATION
48.1 In the event the Demised Premises or any part thereof shall be
expropriated or otherwise taken by virtue of any like power, the rights, duties
and obligations of the Landlord and Tenant arising from the apportionment
between the Landlord and the Tenant of the compensation or damages which may be
awarded shall be determined, if they cannot agree, by arbitration under the
provisions of the COMMERCIAL ARBITRATION ACT of the Province of British
Columbia, or such similar statute as may be enforced if the said COMMERCIAL
ARBITRATION ACT shall have been repealed, taking into consideration the quantity
and value of the Land or Lands and Buildings taken, the extent of the injury
thereby caused to the Buildings, the cost of restoring the Buildings and the
value of the Buildings restored, the unexpired portion of the Term of Lease and
all other facts and circumstances which the arbitrator may deem material, and
with full power and authority to determine amongst other things as they deem
just and equitable, any one or more of the following matters:
(a) that the Landlord on any such partial taking shall at
its own expense repair, restore, rebuild or reconstruct
the Building;
(b) that such damage or compensation shall be apportioned
between the Landlord and the Tenant or be paid to either
one of them;
(c) that the whole or any part of the rent shall be abated
from the time of the taking thenceforth or for any
lesser time;
(d) that the Lease shall be otherwise modified; or
(e) that the Lease shall determine;
and to award and direct specific performance of any one or more of the said or
other matters, which they shall determine to the end that the right, duties and
obligations of the Parties having due regard to their respective interests as
set forth in this
<PAGE>
- 37 -
Lease shall be fully, justly, equitably and finally determined upon all facts
and circumstances as they shall then exist;
ARTICLE 49 - ESTOPPEL CERTIFICATE
49.1 The Tenant covenants with the Landlord to provide upon the
request of the Landlord an estoppel certificate binding upon the Tenant,
confirming:
(a) that the Tenant has accepted possession of the Demised
Premises and that installments of rent hereunder are
then due and payable from month to month;
(b) whether or not the Landlord has carried out its
obligations hereunder;
(c) that the Lease constitutes the entire agreement in
relation to use and occupation of the Demised premises
between the Tenant and the Landlord, and;
(d) such other matters as the Landlord may reasonably
require;
IN WITNESS WHEREOF that parties hereto have hereunto
set their hands and seals and affixed their respective corporate seals, duly
attested by their proper officers authorized in that behalf, all as of the day
and year first above written.
SIGNED, SEALED AND DELIVERED
by the Landlord in the
presence of:
/S/
- - -------------------------------- ----------------------------
YORKSON INVESTMENT CO.
Authorized Signatory
SIGNED, SEALED AND DELIVERED
by the Tenant in the presence of:
/S/
- - -------------------------------- ----------------------------
JAVA GROUP INC.
Authorized Signatory
SIGNED, SEALED & DELIVERED
by the Covenantor in the
presence of:
- - -------------------------------- ----------------------------
<PAGE>
- 38 -
MAP OF PREMISES
SCHEDULE A
<PAGE>
NET LEASE
----------
INDEX
-----
ARTICLE PAGE
------- ----
Preamble
1. Definitions 1
2. Grant of Lease 6
3. Term of Lease 7
4. To Operate during the term 7
5. Rent 7
6. Additional Rent 9
7. Tenant's Equipment 12
8. Insurance 13
9. Repairs 16
10. Structural Defects 17
11. Changes, Alterations and Additions 17
12. Damage or Destruction 18
13. Use of the Demised Premises 19
14. Certain Rights and Duties of 20
the Landlord
15. Conditional Limitations, 20
Default Provisions
16. Distress 22
17. Voidance of Lease 22
Vacant or Improper Use
18. Water and Gas Damage 23
19. Water 23
20. Signs 23
21. Illumination of Display Windows 23
22. No Abatement of Rent 24
<PAGE>
23. Right to Show Premises 24
24. Assignment, Subletting,
Parting with Possession 24
25. Landlord's Rights 24
26. Payment of Landlord's Expenses 26
27. Landlord's Right to Let in Case 26
of Vacancy
28. Transfer of Shares of Tenant 26
29. Share Records 26
30. Rules and Regulations 27
31. Indemnification of Landlord 27
32. Name of Building 27
33. Acceptance of Premises 27
34. Right of Termination 28
35. Overholding 28
36. Directory Board 28
37. Accrual of Rent 28
38. Transfer by Landlord 29
39. Laws of Province Apply 29
40. Lease Entire Agreement 29
41. Registration 29
42. Interpretation 30
43. Severable 30
44. Captions 30
45. Miscellaneous Covenants 30
45A. Letter of Credit 33
46. Option to Renew 33
47. Indemnity 34
<PAGE>
48. Expropriation 36
49. Estoppel Certificate 37
Signatures 37
Schedule "A" Demised Premises 38
<PAGE>
[LETTERHEAD]
August 12, 1996
Board of Directors
Java Group, Inc.
404-999 Canada Place
Vancouver, B.C. V6C 3E2
Dear Ladies and Gentlemen:
RE: JAVA GROUP, INC.
We consent to the use of our reports dated November 3, 1995 on the financial
statements of Java Group, Inc., Java Girl (Richmond Inn) Joint Venture, and Java
Girl (North Vancouver) Limited Partnership all as of June 30, 1995 and 1994 in
the Form 10-SB filing.
Yours truly,
ELLIOTT, TULK, PRYCE, ANDERSON
Don M. Prest, C.A.
Partner
Encl.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
- - ------------------ -----------------------------
464431 B.C. Ltd. British Columbia, Canada
