<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1998
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IT STAFFING LTD.
(Name of small business issuer as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
ONTARIO 7370 52-209027
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer I.D. No.)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------
55 UNIVERSITY AVENUE
TORONTO, ONTARIO, CANADA M5J 2H7
(416) 364-8800
(Address and telephone number of principal executive offices and principal place
of business)
------------------------------
<TABLE>
<S> <C>
JAY M. KAPLOWITZ, ESQ. DECLAN A. FRENCH, PRESIDENT
ARTHUR S. MARCUS, ESQ. IT STAFFING LTD.
GERSTEN, SAVAGE, KAPLOWITZ & FREDERICKS, 55 UNIVERSITY AVENUE
LLP TORONTO, ONTARIO, CANADA M5J 2H7
101 EAST 52ND STREET, 9TH FLOOR (416) 364-8800
NEW YORK, NEW YORK 10022
(212) 752-9700
(212) 752-9713 (FAX)
(Name, address and telephone number of agents for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAY M. KAPLOWITZ, ESQ. ROBERT STEVEN BROWN, ESQ.
ARTHUR S. MARCUS, ESQ. DAVID A. COLLINS, ESQ.
GERSTEN, SAVAGE, KAPLOWITZ BROCK SILVERSTEIN MCAULIFFE LLC
& FREDERICKS, LLP ONE CITICORP CENTER, 56TH FLOOR
101 EAST 52ND STREET, 9TH FLOOR NEW YORK, NEW YORK 10022-4611
NEW YORK, NEW YORK 10022 (212) 371-2000
(212) 752-9700 (212) 371-5500 (FAX)
(212) 752-9713 (FAX)
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PER SECURITY PRICE FEE
<S> <C> <C> <C> <C>
Common Shares, no par value...................... 1,150,000(1) $5.00 $5,750,000 $1,949.16
Representative's Warrants........................ 100,000 $.001 $100 -- (2)
Common Shares, no par value, issuable on Exercise
of Representative's Warrants(3)................ 100,000 $5.50 $550,000 186.45
Total Registration Fee........................... $6,300,000 $2,135.61
</TABLE>
(1) Includes up to 150,000 Common Shares, no par value issuable upon exercise of
the Underwriters' over- allotment option.
(2) No fee due pursuant to Rule 457(g).
(3) To be acquired by the Representative.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
IT STAFFING LTD.
1,000,000 COMMON SHARES
IT Staffing Ltd., an Ontario corporation (the "Company"), hereby offers
1,000,000 common shares (the common shares offered hereby shall be referred to
as the "Shares"), no par value.
Prior to this offering, there has been no market for the Company's common
shares ("Common Shares"), and there can be no assurance that a market will
develop for the Company's securities in the future or that, if developed, it
will be sustained. Application has been made for the quotation of the Common
Shares on the Nasdaq SmallCap-Registered Trademark-Market under the symbol
"ITSTF" and application has been made for the listing of the Common Shares on
the Boston Stock Exchange under the symbol "ITS."
The initial public offering price of the Shares will be determined by
negotiation between the Company and the Representative and will not necessarily
bear any direct relationship to the Company's assets, earnings, book value per
share or other generally accepted indicia of value. See "Underwriting." It is
currently contemplated that the initial public offering price per Share will be
$5.00.
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY(2)
<S> <C> <C> <C>
Per Share....................................... $5.00 $.50 $4.50
Total(3)........................................ $5,000,000 $500,000 $4,500,000
</TABLE>
(1) Does not include additional consideration to be paid to Strasbourger Pearson
Tulcin Wolff Incorporated, as the representative (the "Representative") of
the several underwriters (the "Underwriters"), consisting of: (i) a
non-accountable expense allowance; (ii) warrants (the "Representative's
Warrants") to purchase an aggregate of 100,000 Common Shares (the "Warrant
Shares"); and (iii) a 24-month consulting agreement. In addition, the
Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See Underwriting."
(2) Before deducting expenses of this offering payable by the Company, including
the Representative's non-accountable expense allowance, and assuming no
exercise of the Underwriters' over-allotment option.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
an additional 150,000 Common Shares, on the same conditions as set forth
above, solely to cover over-allotments, if any (the "Over-Allotment
Option"). If the Underwriters exercise such option in full, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $5,750,000, $575,000 and $5,175,000, respectively. See
"Underwriting."
------------------------
The Shares are being offered by the several Underwriters, subject to prior
sale, when, as and if delivered to, and accepted by, them and subject to their
right to reject orders in whole or in part and to certain other conditions. It
is expected that delivery of the certificates representing the Shares will be
made against payment therefor at the offices of Strasbourger Pearson Tulcin
Wolff Incorporated on or about , 1998.
[STRASBOURGER PEARSON TULCIN WOLFF INCORPORATED]
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
THE COMPANY INTENDS TO FURNISH TO ITS SHAREHOLDERS ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS AND TO MAKE AVAILABLE QUARTERLY REPORTS FOR THE
FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED INTERIM FINANCIAL
STATEMENTS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING PURCHASES OF COMMON SHARES TO STABILIZE THEIR MARKET PRICE, PURCHASES
OF COMMON SHARES TO COVER SOME OR ALL OF A SHORT POSITION IN COMMON SHARES
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR
SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
THE SECURITIES ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD,
DIRECTLY OR INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF
THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company's headquarters are located in, and its officers, directors and
auditors are residents of, Canada and a substantial portion of the Company's
assets are, or may be, located outside the United States. Accordingly, it may be
difficult for investors to effect service of process within the United States
upon non-resident officers and directors, or to enforce against them judgments
obtained in the United States courts predicated upon the civil liability
provision of the Securities Act or state securities laws. The Company has been
advised by its Canadian legal counsel, McMillan Binch, that there is doubt as to
the enforceability in Canada against the Company or against any of its
directors, controlling persons, officers or the experts named herein, who are
not residents of the United States, in original actions or in actions for
enforcement of judgments of U.S. courts, of liabilities predicated solely upon
U.S. federal securities laws. Service of process may be effected, however, upon
the Company's duly appointed agent for service of process, Gersten, Savage,
Kaplowitz & Fredericks, LLP, New York, New York. If investors have questions
with regard to these issues, they should seek the advice of their individual
counsel. The Company has also been informed by its Canadian legal counsel,
McMillan Binch that, pursuant to the Currency Act (Canada), a judgment by a
court in any Province of Canada may only be awarded in Canadian currency.
Pursuant to the provision of the Courts of Justice Act (Ontario), however, a
court in the Province of Ontario shall give effect to the manner of conversion
to Canadian currency of an amount in a foreign currency, where such manner of
conversion is provided for in an obligation enforceable in Ontario.
2
<PAGE>
EXCHANGE RATE DATA
The Company maintains its books of account in Canadian dollars, but has
provided the financial data in this Prospectus in United States dollars and on
the basis of generally accepted accounting principles as applied in the United
States, and its audit has been conducted in accordance with generally accepted
auditing standards in the United States. All references to dollar amounts in
this Prospectus, unless otherwise indicated, are to United States dollars.
The following table sets forth, for the periods indicated, certain exchange
rates based on the noon buying rate in New York City for cable transfers in
Canadian dollars. Such rates are the number of United States dollars per one
Canadian dollar and are the inverse of rates quoted by the Federal Reserve Bank
of New York for Canadian dollars per US$1.00. The average exchange rate is based
on the average of the exchange rates on the last day of each month during such
periods. On September 16, 1998, the exchange rate was Cdn$1.00 per US$0.6651.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Rate at end of period.................. $ 0.7323 $ 0.7301 $ 0.6999 $ 0.7241 $ 0.6795
Average rate during period............. 0.7305 0.7332 0.7220 0.7268 0.6931
High................................... 0.7527 0.7513 0.7487 0.7487 0.7105
Low.................................... 0.7023 0.6945 0.6945 0.7145 0.6782
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO (I) THE REPRESENTATIVE'S WARRANTS OR THE EXERCISE THEREOF; (II) THE
UNDERWRITERS' OVER-ALLOTMENT OPTION OR THE EXERCISE THEREOF; (III) UP TO 435,000
COMMON SHARES RESERVED FOR ISSUANCE UPON THE EXERCISE OF OPTIONS WHICH MAY BE
GRANTED PURSUANT TO THE COMPANY'S 1998 STOCK OPTION PLAN (THE "PLAN"), OPTIONS
EXERCISABLE FOR 50,000 OF WHICH HAVE BEEN GRANTED TO DATE; AND (IV) UP TO
222,125 COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS AND WARRANTS
OUTSTANDING ON THE DATE OF THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED
HEREIN, THE INFORMATION HEREIN REFLECTS A 1.31 FOR ONE STOCK SPLIT EFFECTED
PRIOR TO THE DATE OF THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE
TERM "COMPANY" REFERS TO IT STAFFING LTD., AND ITS WHOLLY OWNED SUBSIDIARIES
SYSTEMSEARCH CONSULTING SERVICES INC. ("SCI"), SYSTEMS PS INC. ("SPSI," AND
COLLECTIVELY WITH SCI , "SYSTEMS"), AND INTERNATIONAL CAREER SPECIALISTS LTD.
("ICS"). THE OPERATIONS OF THE COMPANY EXCLUSIVE OF ICS AND SYSTEMS SHALL BE
REFERRED TO AS THE "IT STAFFING DIVISION."
THE COMPANY
The Company is a provider of information technology ("IT") staffing
services, primarily in Canada, supplying qualified IT professionals to its
customers as independent contractors for short and long term assignments and for
permanent placement within such enterprises. The Company's customers include
financial service companies, software and other technology companies, Canadian
governmental entities and large multinational companies, including Merrill Lynch
Canada, Inc., the Bank of Montreal, Bell Sygma Telecom, and American Express.
The Company has recently expanded its operations into the United States and
intends to develop a network of offices to provide IT staffing services
throughout North America.
The Company has focused on the recruitment of highly qualified IT
professionals and utilizes established testing methods to ensure that its IT
professionals satisfy the Company's internal criteria. The Company also reviews
candidates' technical background and conducts preliminary interviews prior to
referring candidates to its customers. By attracting the most qualified IT
professionals, the Company believes that it will be able to attract high quality
customers, who require the services of such professionals.
Since inception, the Company has pursued a strategy of developing and
utilizing technology that will provide it a competitive advantage. As a result,
the Company believes that one of its primary competitive strengths is its
utilization of technology. The Company maintains a database of 35,000 IT
professionals and advertises on the Internet to attract both candidates and
customers. The Company uses HR Workbench, software developed by the Company in
conjunction with Great Lakes Research and Development ("Great Lakes"), to locate
the IT professionals in the Company's database with the technical skills and job
interests that best satisfy the requirements of the position that the Company is
attempting to staff. The database allows all of the Company's recruiters
immediate access to active candidates. Candidates can register themselves
directly into the database through the Internet or be entered into the system by
the Company's recruiters.
The Company and Great Lakes have developed and are in the process of testing
an additional software product called AppTracker, which the Company, through a
joint venture with Great Lakes, intends to market to human resource departments
during the year ending December 31, 1999. The software is designed to aid human
resource departments in performing numerous recruitment tasks, such as
scheduling interviews and evaluating candidates. Statistics about the
recruitment process, including the costs and expenses, are tabulated in various
databases. The Company believes that it will have an advantage in marketing its
staffing services to companies using the AppTracker because of the Company's
familiarity with the software and the ease of electronic data interchange
("EDI") with the Company.
4
<PAGE>
According to the STAFFING INDUSTRY REPORT, a leading industry publication,
revenue for the year ended December 31, 1997 for IT staffing services (which
includes revenue for permanent placement services and for supplying contract
services) in the United States is estimated to have been approximately $14.8
billion, an increase of 27% over the year ended December 31, 1996. The market
for IT staffing services in Ontario, Canada, the Company's largest market, is
estimated to have been approximately $700 million in the year ended December 31,
1997. Although there can be no assurance that growth will continue at such
rates, or at all, the Company believes that such growth will continue as a
result of the following factors: (i) the hiring of the proper IT professional
for a particular project may require technical knowledge that many human
resource departments do not possess; (ii) there exists a shortage of IT
professionals in the United States and Canada and many companies lack the time
and resources to conduct a proper search; (iii) increased specialization and
sophistication of IT requirements; (iv) costs associated with termination of
employees, as compared to independent contractors, following the completion of a
project; and (v) the costs associated with the benefits received by employees,
as compared to independent contractors.
The Company's business objectives are to increase its share of the IT
staffing services market in Canada and the United States, as well as to
establish a network of offices throughout such countries which, when linked by
means of the Internet, will allow the Company to provide its customers with an
array of IT staffing services. The primary components of the Company's strategy
to achieve such objectives are as follows:
- Leverage client base to attract and retain highly qualified IT
professionals.
- Focus on niche markets
- Expand into new regional markets by opening new offices or acquiring
competitive or complementary companies.
- Continue to utilize the internet and information technology to provide a
competitive advantage.
- Develop and promote a managed services practice.
- Capitalize on the Year 2000 and other opportunities.
The Company's headquarters are located at 55 University Avenue, Suite 505,
Toronto, Ontario, Canada M5J 2H7. The Company also maintains offices in New
York, New York; Tampa, Florida; Etobicoke, Ontario; and Scarborough, Ontario and
is currently opening offices in Indian Wells, California and Ottawa, Ontario.
The Company was incorporated under the laws of the Province of Ontario, Canada
in February 1994. The Company maintains its Web-site at http:/ /itstaff.com and
has registered the Internet domain name of itstaff.org and itstaff.net.
Information contained on the Company's Web site is not a part of this Prospectus
and must not be relied upon in evaluating an investment in the Common Shares
offered hereby. This Prospectus contains trade names, service marks and
trademarks of the Company and others, all of which are the property of their
respective owners.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Company............ 1,000,000 Common Shares
Common Shares outstanding prior to this
offering................................... 1,677,876
Common Shares outstanding immediately
following this offering.................... 2,677,876
Use of Proceeds.............................. To expand into new regional markets by
opening new offices and acquiring
complementary or competitive companies, to
capitalize a joint venture to develop and
market the AppTracker software, and for
general corporate and working capital
purposes. See "Use of Proceeds."
Proposed Nasdaq
SmallCap-Registered Trademark- Market
Trading Symbol(1).......................... ITSTFq
Proposed Boston Stock Exchange trading
symbol(1).................................. ITS
</TABLE>
- ------------------------
(1) The proposed symbols do not imply that a liquid and active market will
develop or be sustained for the Shares upon completion of this offering.
6
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED, DECEMBER SIX MONTHS ENDED
31, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue..................................................................... $ 764 $ 4,704 $ 2,156 $ 5,318
Gross profit................................................................ 505 1,816 870 2,198
Operating Expenses.......................................................... 469 1,615 713 1,810
Income from operations...................................................... 36 201 157 388
Net income.................................................................. 30 154 139 253
Earnings per share.......................................................... .03 .12 .11 .13
Weighted Average Number of Shares Outstanding............................... 1,201 1,309 1,309 1,821
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Working capital........................................................................... 576 4,066
Total assets.............................................................................. 3,124 6,964
Long-term debt............................................................................ 414 414
Total liabilities......................................................................... 1,554 1,554
Shareholders' equity...................................................................... 1,571 5,411
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale by the Company of the 1,000,000 Shares
offered hereby at an assumed initial public offering price $5.00 per Share
and the initial application of the net proceeds therefrom. See "Use of
Proceeds."
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON SHARES OFFERED HEREBY IS HIGHLY SPECULATIVE,
INVOLVES A HIGH DEGREE OF RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO
MAKING AN INVESTMENT DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE
OTHER MATTERS REFERRED TO HEREIN, INCLUDING THE FINANCIAL STATEMENTS AND THE
NOTES THERETO, THE FOLLOWING RISK FACTORS. PROSPECTIVE INVESTORS SHOULD BE IN A
POSITION TO RISK THE LOSS OF THEIR ENTIRE INVESTMENT. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.
ABILITY TO ATTRACT AND RETAIN QUALIFIED IT PROFESSIONALS. The Company's
future success will depend on its ability to attract qualified IT professionals
with the technical skills and experience necessary to meet its customers'
requirements for technical personnel and to retain a sufficient number of
professionals to fulfill its customers needs for contract workers. Competition
for individuals with proven technical skills, particularly in the Windows, Unix,
computer aided design, distributed computing and other technology environments
for which the Company provides services, is intense, and the Company expects
that competition for IT professionals will increase in the future. Furthermore,
IT professionals typically provide services on an assignment-by-assignment basis
and can terminate an assignment with the Company at any time. The Company
competes for such individuals with other providers of IT staffing services,
systems integrators, providers of outsourcing services, computer consultants,
employment listing services, and temporary personnel agencies. Many of the IT
professionals who have been placed by the Company accept assignments from the
Company's competitors and there can be no assurance such IT professionals will
not choose to work for competitors on future assignments. There also can be no
assurance that the Company will be able to attract and retain qualified IT
professionals in sufficient numbers in the future. The Company's revenue in any
period is a function of, among other things, the number of IT professionals it
has on staff and engaged on assignments. In the event that the Company is unable
to attract or retain such personnel when required and on terms acceptable to the
Company, the Company's business, prospects, financial condition and results of
operations would be materially adversely affected. See "Business-- Business
Strategy" and "Business--Competition."
HIGHLY COMPETITIVE MARKET. The IT staffing industry is highly competitive
and fragmented and is characterized by low barriers to entry. The Company
competes for potential customers with other providers of IT staffing services,
systems integrators, providers of outsourcing services, computer consultants,
employment listing services, and temporary personnel agencies. Many of the
Company's current and potential competitors have longer operating histories,
significantly greater financial, marketing and human resources, greater name
recognition and a larger base of IT professionals and customers than the
Company, which may give such competitors a competitive advantage when compared
to the Company. In addition, many of these competitors, including numerous
smaller privately held companies, may be able to respond more quickly to
customer requirements and to devote greater resources to the marketing of
services than the Company. Because there are relatively low barriers to entry in
the staffing industry, the Company expects that competition will increase in the
future. Increased competition could result in price reductions, reduced margins
or loss of market share, any of which could materially adversely affect the
Company's business, prospects, financial condition and results of operations.
Further, there can be no assurance that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on its
business, prospects, financial condition and results of operations. See
"Business--Competition."
RISKS INHERENT IN EXPANSION INTO NEW MARKETS AND OPERATIONS. The Company's
expansion plans depend on its ability to enter new regional markets,
successfully expand existing operations and add additional areas of expertise
within its existing regional markets. This expansion is dependent on a number of
factors, including the Company's ability to: attract, hire, integrate and retain
qualified employees, such
8
<PAGE>
as experienced recruiters; develop, recruit and maintain a base of qualified IT
professionals within each regional market in which the Company conducts or
commences to conduct operations; accurately assess the level of demand for the
Company's services in such markets; and initiate, develop and sustain corporate
client relationships in each new regional market. There can be no assurance that
the addition of qualified employees and entrance into new regional markets will
occur on a timely basis or achieve anticipated financial results. The addition
of qualified employees and entrance into new regional markets typically results
in increases in operating expenses, primarily as a result of increased salaries
and related expense. Expenses are incurred in advance of forecasted revenue, and
there is typically a delay before the Company's newly hired recruiters and sales
employees reach full productivity. If the Company is unable to hire additional
qualified employees or enter new regional markets in a cost-effective manner or
if those employees and offices in regional markets do not achieve anticipated
financial results, the Company's business, prospects, financial condition and
results of operations could be materially adversely affected. Failure to expand
into new markets could hinder the Company's ability to attract multinational and
other large corporations which could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Business Strategy."
RISK OF PAYROLL TAX LIABILITY; INCREASED COSTS FOR CONTRACT WORKERS. The
Company has determined to classify its IT professionals providing contract
services in the United States as independent contractors rather than employees.
Accordingly, the Company has not withheld payroll taxes, social security taxes,
unemployment taxes and workers compensation insurance, with respect to such IT
professionals or recorded a reserve on its financial statements for such taxes
and payments. Although such determination is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), the rules and regulations thereunder, and
the publicly available interpretations of the United States Internal Revenue
Service (the "IRS"), such determination is not free from doubt. In the event
that the Code, such rules and regulations or such interpretations should be
amended or otherwise require the Company to classify such IT professionals as
employees, the Company would be subject to a material liability for failure to
withhold and pay such taxes and insurance, which could have a material adverse
effect on the business, prospects, financial condition and results of operation
of the Company. In addition, in such event, the Company's costs of revenues
would increase materially, which would have a material adverse effect on the
business, prospects, financial condition and results of operations of the
Company.
Similarly, the Company has determined to classify its IT professional
providing contract services in Canada as independent contractors rather than
employees. Accordingly, the Company has not withheld Pension Canada and
unemployment insurance with respect to such IT professionals nor has it created
a reserve on its financial statements for such taxes and payments. Although such
determination is based upon the relevant Canadian law, such determination is not
free from doubt. In the event that such law was amended or would otherwise
require the Company to classify such IT professional as employees, the Company
would be subject to a significant liability for failure to make such payments
when due. Although such payments are significantly less than payroll taxes in
the United States, classification of its independent contractors as employees
would increase the Company's cost of revenues which would have a material
adverse effect on the business, prospects, financial condition and results of
operations of the Company.
FLUCTUATIONS IN QUARTERLY RESULTS. The Company's quarterly operating
results have in the past and may in the future fluctuate significantly depending
on a number of factors, including, but not limited to, the rate of hiring and
the productivity of revenue-generating personnel; the availability of qualified
IT professionals; changes in the Company's relative mix of contract services and
permanent placement services; changes in the pricing of the Company's services;
the timing and rate of commencement of operations in new regional markets;
departures or temporary absences of key sales people or recruiters; the
structure and timing of acquisitions; changes in the demand for IT
professionals; and general economic and industry conditions. In addition,
because the Company often provides services on an assignment-by-assignment
basis, which customers can terminate at any time, there can be no assurance that
existing
9
<PAGE>
customers will continue to use the Company's services at historical levels. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance. In the event the Company's operating results
fall below the expectations of public market analysts and investors, the market
price of the Common Shares would likely be materially adversely affected.
Although the Company has experienced substantial revenue growth in recent years,
there can be no assurance that, in the future, the Company will be able to
sustain revenue growth or profitability on a quarterly or annual basis at
historical levels. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
RISKS OF ACQUISITIONS. A component of the Company's expansion strategy is
the acquisition of complementary or competitive companies. The successful
implementation of this strategy is dependent upon the Company's ability to
identify suitable acquisition candidates, obtain requisite financing, acquire
such companies on suitable terms and integrate their operations successfully
with those of the Company. This strategy will entail reviewing and potentially
reorganizing acquired business operations, corporate infrastructure and systems
and financial controls. Unforseen expenses, difficulties, complications and
delays frequently encountered with acquisitions could inhibit the Company's
growth and have a material adverse effect on the business, prospects, financial
condition and results of operation of the Company.
To date, the Company has completed two acquisitions. There can be no
assurance that the Company will be able to identify additional suitable
acquisition candidates or that the Company will be able to acquire such
candidates on favorable terms. Moreover, other providers of IT professional
services are also competing for acquisition candidates, which could result in an
increase in the price of acquisition targets and a diminished pool of companies
available for acquisition. Acquisitions also involve a number of other risks,
including adverse effects on the Company's reported operating results from
increases in amortized goodwill and interest expense, the diversion of
management attention and the subsequent integration of acquired companies.
To the extent the Company seeks to acquire complementary or competitive
companies for cash, the Company may be required to obtain additional financing,
and there can be no assurance such financing will be available when required, on
favorable terms or at all. In addition, if the Company issues Common Shares to
complete any future acquisitions, existing shareholders will experience further
dilution in ownership. As a result of the foregoing, acquisitions may have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Business--Business Strategy."
INTEGRATION OF ICS AND SYSTEMS. In May 1998, the Company acquired ICS and,
in April 1998, the Company acquired Systems. These companies now operate as
separate divisions within the Company. The integration of ICS and Systems, their
respective customers, IT professionals and employees has required a substantial
portion of management's time and attention, and has resulted in integration
related expenses. The Company expects that it may incur additional integration
related expenses in future periods, and there can be no assurance that the
integration of ICS and Systems will not involve disruptions or difficulties,
such as, departures of customers, IT professionals or employees, any of which
may have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
RISK OF IT SYSTEM CAPACITY CONSTRAINTS; RISK OF SYSTEM FAILURE. A key
element of the Company's expansion strategy is to utilize the Internet (i) to
link its regional offices to its central database, (ii) to offer its staffing
services to existing and potential customers, (iii) to attract and recruit
qualified technical personnel, and (iv) to promote the Company. The Company
anticipates that its expansion will require a high volume of traffic on, and use
of, its Web site. Accordingly, the satisfactory performance, reliability and
availability of the Company's Web site and network infrastructure are and will
be critical to the Company's reputation and its ability to attract and retain
customers and technical personnel and to maintain adequate customer service
levels. Any system interruptions that result in the reduced availability of the
Company's
10
<PAGE>
Web site or reduced performance of such site would interfere substantially with
the communications between the Company's offices and would materially adversely
affect the ability of the Company to attract new customers and technical
personnel. While the Company has not experienced any system interruptions, it
believes that such interruptions may occur from time to time. Any substantial
increase in the volume of traffic on the Company's Web site will require the
Company to expand and upgrade further its network infrastructure, including the
purchase or development of additional computer hardware and software. There can
be no assurance that the Company will be able to accurately project the rate or
timing of increases, if any, in the use of its Web site or timely expand and
upgrade its systems and infrastructure to accommodate such increases. The
Company's inability to add required additional software and hardware or to
develop and upgrade its technology or network infrastructure to accommodate
increased traffic on its Web site may cause unanticipated system disruptions,
slower response times, impediments to attracting additional customers and delays
in locating required technical personnel. In addition, although the Company
takes safeguards, including data encryption and firewalls, to prevent
unauthorized access to Company data, it is impossible to completely eliminate
this risk. Any of the foregoing events could have a material adverse effect on
the Company's business, prospects, financial condition and results of
operations. See "Business--Business Strategy."
DEPENDENCE ON HR WORKBENCH. The Company is substantially dependent on HR
Workbench, a software product recently developed in conjunction with Great
Lakes, for the day to day operation of its business, including the operation and
maintenance of its database. Although the Company has operated and tested such
software extensively, there can be no assurance that such software will function
as intended or that it will provide the Company with any competitive advantage.
See "Business--Information Technology and the Internet."
RISKS ASSOCIATED WITH THE APPTRACKER SOFTWARE. The Company, through a joint
venture with Great Lakes, has developed AppTracker and intends to market such
software to the human resources markets. AppTracker is still in the testing
stage, and there can be no assurance that the Company and Great Lakes will be
able to produce a fully functioning product or that such software will function
as intended. Neither the Company nor Great Lakes have any experience in
marketing software products and, even if the product is developed, there can be
no assurance that there will be a market for such a product. The success of
AppTracker is substantially dependent on the Company's relationship with Great
Lakes and subject to the risk that the parties may disagree on strategy or other
issues, causing delays in the project. There can be no assurance that AppTracker
will ever be completed, will ever provide the Company with revenue, or that the
joint venture regarding AppTracker will ever be profitable. Furthermore, there
can be no assurance that AppTracker will create opportunities for the Company to
promote the Company's IT staffing services, that the use of AppTracker by the
Company's customers will not result in a reduction in the use of the Company's
services, or that the Company's competitors will not be able to utilize EDI and
other benefits of AppTracker to also provide enhanced services to customers. See
"Business--Information Technology and the Internet."
LIABILITY RISKS. Although the Company's customer agreements disclaim
responsibility for the conduct of IT professionals provided by the Company, the
Company may be exposed to liability with respect to actions taken by its IT
professionals while on assignment, such as damages caused by errors of IT
professionals, misuse of client proprietary information or theft of client
property. Although the Company maintains insurance coverage, due to the nature
of the Company's assignments, and in particular the access by IT professionals
to client information systems and confidential information and the potential
liability with respect thereto, there can be no assurance that such insurance
coverage will continue to be available on reasonable terms, or at all, or that
it will be adequate to cover any such liability. Although the IT professionals
providing the Company's contract services are independent contractors, the
Company employs recruiters, sales personnel and others and is therefore exposed
to possible claims of wrongful discharge and violations of immigration laws.
Employment related claims may result in negative publicity, litigation and
liability for money damages and fines.
11
<PAGE>
DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend to a
significant extent on the efforts of its key management personnel, particularly
Declan French, the Company's Chairman of the Board of Directors, President and
Chief Executive Officer, John A. Irwin, President of ICS, and John R. Wilson,
President of Systems. The loss or unavailability of any of these key employees
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. In addition, the Company believes
that its future success will depend in large part upon its continued ability to
attract and retain highly qualified recruiters, who often serve as the contact
person for the Company's customers. There can be no assurance that the Company
will be able to attract and retain the qualified personnel necessary for its
business. See "Management."
SUBSTANTIAL INFLUENCE OF EXISTING MANAGEMENT. Upon the completion of this
offering, the current directors and executive officers of the Company will, in
the aggregate, beneficially own approximately 1,396,413 Common Shares, or 51.7%
of the outstanding Common Shares, or approximately 49.0% of such outstanding
Common Shares if the Underwriters' over-allotment option is exercised in full.
As a result, the current executive officers and directors of the Company will
have the ability to substantially influence the outcome of all matters on which
shareholders are entitled to vote, including the elections of the Company's
directors and the approval of significant corporate transactions. See "Principal
Shareholders."
POTENTIAL ANTI-TAKEOVER EFFECT OF PREFERRED SHARES. The Company's
Certificate of Incorporation, as amended, authorizes the Board of Directors to
issue up to 1,000,000 preferred shares, which may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights,
and sinking fund provisions. No preferred shares are currently outstanding, and
the Company has no present plans for the issuance of any preferred shares.
However, the issuance of any such preferred shares could materially adversely
affect the rights of holders of Common Shares and, therefore, could reduce the
value of the Common Shares. In addition, specific rights granted to future
holders of preferred shares could be used to restrict the Company's ability to
merge with, or sell its assets to, a third party. The ability of the Board of
Directors to issue preferred shares could discourage, delay or prevent a
takeover of the Company, thereby preserving control of the Company by the
current shareholders. See "Description of Securities--Preferred Shares."
INDUSTRY AND GEOGRAPHIC CONCENTRATION. The Company's business is dependent
on the trends prevalent in, and the continued growth and rate of change of, the
high technology industry. Furthermore, for the year ended December 31, 1997 and
six months ended June 30, 1998, 96% and 99% of the Company's revenue,
respectively, was derived by providing services to customers in the metropolitan
Toronto region. A substantial deterioration in general economic conditions in
such region or in the high technology industry as a whole would have a material
adverse affect on the Company's business, prospects, financial condition and
results of operations. See "Business--Customers."
INTELLECTUAL PROPERTY; ABSENCE OF PATENT PROTECTION. The Company's ability
to compete effectively will depend on its ability to maintain the proprietary
nature of its technology, including its proprietary software developed in
conjunction with Great Lakes. The Company holds no patents and relies on a
combination of trade secrets and copyright laws, non-disclosure and other
contractual agreements and technical measures to protect its rights in its
technological know-how and proprietary services. The Company currently has no
registered trademarks or service marks, but intends to seek such protection for
the HR Workbench and AppTracker names.
The Company depends upon confidentiality agreements executed by officers,
employees, consultants and customers of the Company to maintain the proprietary
nature of its technology. These measures may not afford the Company sufficient
or complete protection, and there can be no assurance that others will
12
<PAGE>
not independently develop technologies similar to those of the Company,
otherwise avoid the confidentiality agreements of the Company or produce patents
and copyrights that would materially adversely affect the Company's business,
prospects, financial condition and results of operations.
The Company believes that its know-how and technologies do not infringe upon
the patents or copyrights of any third parties; however, there can be no
assurance that the Company's know-how and technology will not be found to
infringe upon the rights of third parties. The Company is aware of another
company in its industry that uses a name which may be deemed to be confusingly
similar to the Company. Others may assert infringement claims against the
Company, and if the Company should be found to infringe upon the patents or
copyrights, or otherwise impermissibly utilize the intellectual property, of
others, the Company's ability to utilize the technology referred to herein could
be materially restricted or prohibited. If such an event occurs, the Company may
be required to obtain licenses from such third parties, enter into royalty
agreements or redesign its products so as not to utilize such intellectual
property, each of which may prove to be uneconomical or otherwise impossible.
There can be no assurance that any licenses or royalty agreements required with
respect to any such proprietary rights could be obtained on terms acceptable to
the Company or such third party, or at all. Such claims could result in
litigation, which could materially adversely affect the Company's business,
prospects, financial condition and result of operations. See
"Business--Information Technology and the Internet."
UNTESTED MARKETING STRATEGY. To date, the Company has engaged in limited
marketing efforts in the United States. Achieving market penetration will
require significant efforts by the Company to create awareness of, and demand
for, the Company's staffing services. The Company intends to upgrade its
marketing efforts to include advertising on the Internet, e-mail and an expanded
sales and recruiting staff. Internet and e-mail marketing efforts have been
largely untested in the marketplace, and there can be no assurance that such
efforts will result in the increased provision by the Company of staffing
services. The failure of the Company to develop its marketing capabilities or
successfully market its staffing services would have a material adverse effect
on the Company's business, prospects, financial condition, and results of
operations. See "Use of Proceeds," "Business--Business Strategy," and
"Business--Customers."
FOREIGN EXCHANGE RISK. During the years ended December 31, 1996 and 1997,
and the six months ended June 30, 1998, approximately 100%, 96% and 99%,
respectively, of the Company's revenue was in Canadian dollars. Accordingly, the
relationship of the Canadian dollar to the value of the United States dollar may
materially affect the Company's operating results. In the event that the
Canadian dollar were materially devalued against the United States dollar, the
Company's operating results could be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY;
NASDAQ MAINTENANCE REQUIREMENTS. Prior to this offering, there has been no
public market for the Shares, and there can be no assurance that any active
trading market will develop or, if any such market develops, that it will be
sustained. Accordingly, unless and until a public market develops, purchasers of
the Shares may experience difficulty selling or otherwise disposing of such
securities.
The initial public offering price of the Shares was arbitrarily determined
by negotiations between the Company and the Representative, and does not
necessarily bear any relationship to the Company's assets, book value, results
of operations, or any other generally accepted indicia of value. See
"Underwriting." From time to time after this offering, there may be significant
volatility in the market price of the Common Shares. Quarterly operating results
of the Company or other developments affecting the Company, such as
announcements by the Company or its competitors regarding acquisitions or
dispositions, new procedures or technology, changes in general conditions in the
economy and general market conditions could cause the market price of the Common
Shares to fluctuate substantially. The equity markets have, on occasion,
experienced significant price and volume fluctuations that have affected the
market prices for many companies' securities and have often been unrelated to
the operating performance of these companies.
13
<PAGE>
Under the currently effective criteria for listing of securities on the
Nasdaq SmallCap-Registered Trademark- Market, for initial listing, a company
must have at least $4,000,000 in net tangible assets, a minimum bid price of
$4.00 per share, and a public float of at least $5,000,000. For continued
listing, a company must maintain $2,000,000 in net tangible assets, a minimum
bid price of $1.00, and a public float of at least $1,000,000. In the event that
the Company should be unable to maintain the standards for continued listing,
the Common Shares could be subject to delisting from the Nasdaq
SmallCap-Registered Trademark- Market. Trading, if any, in the Common Shares
would thereafter be conducted in the over-the-counter market on the OTC Bulletin
Board established for securities that do not meet the Nasdaq
SmallCap-Registered Trademark- Market listing requirements or in what are
commonly referred to as the "pink sheets." As a result, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the price
of, the Shares.
RISK OF LOW PRICED STOCKS. If the Common Shares were delisted from the
Nasdaq SmallCap-Registered Trademark- Market, and no other exclusion from the
definition of a "penny stock" under the Exchange Act were available, such
securities could be subject to the penny stock rules that impose additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally
defined as investors with net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with a spouse). For transactions covered
by these rules, the broker-dealer must make a special suitability determination
for the purchase, and must have received the purchaser's written consent to the
transaction prior to sale. Consequently, such delisting, if it were to occur,
could materially adversely affect the ability of broker-dealers to sell the
Common Shares and the ability of purchasers in this offering to sell their
Shares in the secondary market.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the Common Shares offered
hereby will experience immediate and substantial dilution of $3.48 per share,
assuming an initial public offering price of $5.00 per Share, or approximately
68%, in the net tangible book value of the Shares purchased thereby. Additional
dilution to future net tangible book value per share may occur upon exercise of
outstanding stock options and warrants (including the Representative's Warrants)
and may occur, in addition, if the Company issues additional equity securities
in the future. See "Dilution."
BROAD DISCRETION IN APPLICATION OF PROCEEDS; UNSPECIFIED
ACQUISITIONS. Approximately $290,000, or 7.6%, of the estimated net proceeds of
this offering has been allocated to general corporate and working capital
purposes. Additionally, $3,200,000, or 83.3%, of the net proceeds of this
offering have been allocated to the Company's proposed expansion into new
markets. Those proceeds may be utilized to open new offices or to acquire
existing companies in such markets. Accordingly, management of the Company will
have broad discretion over the application of such net proceeds. Although the
Company may utilize a portion of the net proceeds for potential investments in,
or acquisitions of, complementary or competitive companies, as of the date
hereof, the Company has no agreements, plans or arrangements with respect to any
such investment of acquisition. Shareholders of the Company may have no
opportunity to approve specified acquisitions or to review the financial
condition of any potential acquisition or investment candidate. See "Use of
Proceeds."
NEED FOR ADDITIONAL FINANCING. Based on the Company's operating plan, the
Company believes that the net proceeds of this offering, together with available
cash and anticipated revenues from operations, will be sufficient to finance the
Company's working capital requirements for a period of at least 18 months
following the completion of this offering. This belief is based on certain
assumptions, which may prove to be incorrect. In addition, the Company's
expansion strategy contemplates acquisitions of, and investments in, competing
and complementary companies and use of such companies by the Company to expand
into new markets, although the Company presently has no agreements, plans or
arrangements with respect to any such investment or acquisition. Accordingly,
there can be no assurance that the Company's financial resources will be
sufficient to satisfy the Company's capital requirements for such period. If the
Company's financial resources are insufficient and, in any case, after such 18
month period, the Company will require additional financing in order to meet its
plans for expansion. Additional financing may take the form of the
14
<PAGE>
issuance of common or preferred equity securities or debt securities, or may
involve bank financings. There can be no assurance that the Company will be able
to obtain the necessary additional capital on a timely basis or on acceptable
terms, if at all. In any of such events, the Company may be unable to implement
its current plans for expansion or to repay its debt obligations as they become
due. In the event that any such financing should take the form of equity
securities, the holders of the Common Shares may experience additional dilution.
See "Use of Proceeds," "Dilution," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business--Business
Strategy."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. The sale, or
availability for sale, of a substantial number of Common Shares in the public
market subsequent to this offering, pursuant to Rule 144 under the Securities
Act ("Rule 144") or otherwise, could materially adversely affect the market
price of the Common Shares and could impair the Company's ability to raise
additional capital through the sale of its equity securities or debt financing.
The availability of Rule 144 to the holders of restricted securities, as defined
in Rule 144, of the Company would be conditioned on, among other factors, the
availability of certain public information concerning the Company. All of the
1,677,876 Common Shares currently outstanding are "restricted securities" as
that term is defined in Rule 144 and may, under certain circumstances, be sold
without registration under the Securities Act. In addition, any shares issuable
upon exercise of options granted under the Plan could be sold publicly
commencing 90 days after the Company becomes a reporting company under the
Exchange Act, pursuant to Rule 701 under the Securities Act. However, officers,
directors, and shareholders of the Company and option holders under the Plan
have executed agreements ("Lock-Up Agreements") pursuant to which they have
agreed not to, directly or indirectly, issue, offer, agree to sell, sell, grant
an option for the purchase or sale of, transfer, pledge, assign, hypothecate,
distribute or otherwise dispose of or encumber any Common Shares or options,
rights, warrants or other securities convertible into, or exercisable or
exchangeable for, or evidencing any right to purchase or subscribe for, Common
Shares, whether or not beneficially owned by such person, or any beneficial
interest therein, for a period of 18 months from the date of this Prospectus.
See "Underwriting."
For a period of 18 months from the date of this Prospectus, the Company has
agreed that it will not sell or otherwise dispose of any securities of the
Company without the prior written consent of the Representative, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, during such
period, the Company shall be entitled to issue (i) Common Shares in connection
with mergers and acquisitions, (ii) up to 435,000 Common Shares issuable upon
exercise of options which may be granted under the Plan, (iii) up to 22,125
Common Shares issuable upon the exercise of currently outstanding warrants which
will, except in certain circumstances, be issued for an aggregate exercise price
of $1.00, (iv) 200,000 Common Shares issuable upon the exercise of currently
exercisable options, the holder of which has agreed not to sell, transfer,
assign, hypothecate or otherwise dispose of such Common Shares for a period of
two years after he exercises such options without the consent of the Company and
(v) up to 100,000 Common Shares issuable upon the exercise of the
Representative's Warrants.
The holders of the Representative's Warrants will have certain demand
registration rights with respect to such Warrants and the Warrant Shares
commencing one year after the date hereof. If the Representative should exercise
its registration rights to effect a distribution of the Representative's
Warrants or the Warrant Shares, the Representative, prior to and during such
distribution, may be unable to make a market in the Company's securities. If the
Representative ceases making a market in the Common Shares, the market and
market prices of the Common Shares may be materially adversely affected, and
holders thereof may be unable to sell or otherwise dispose thereof. See "Shares
Eligible for Future Sale" and "Underwriting."
NO DIVIDENDS. The Company does not intend to pay dividends on the Common
Shares in the foreseeable future, but rather intends to retain future earnings,
if any, for reinvestment in the development and expansion of its business.
Pursuant to the Company's agreement with the BDC, the Company will not pay
dividends so long as any portion of the Company's loan from BDC remains
outstanding. At June 30, 1998, the outstanding balance on such loan was
$476,905. Such loan is due in August 2003, and the
15
<PAGE>
Company has no plans to pre-pay such loan. Dividend payments in the future may
also be limited by other loan agreements or covenants contained in other
securities which the Company may issue. Dividend payments from the Company are
subject to Canadian withholding tax requirements. Any future determination to
pay cash dividends will be at the discretion of the Board of Directors and will
be dependent upon the Company's financial condition, results of operations,
capital and legal requirements and such other factors as the Board of Directors
deems relevant. See "Dividend Policy," "Description of Securities -- Common
Shares" and "Certain United States and Canadian Federal Income Tax
Considerations."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS. This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based on a successful execution of the Company's expansion
strategy and are based upon a number of assumptions, including assumptions
relating to the growth in the use of the Internet and that there will be no
unanticipated material adverse change in the Company's operations or business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, political, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying such forward-looking statements
are reasonable, any of the assumptions could prove to be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Shares
offered hereby are estimated to be $3,840,000 ($4,492,500 if the Underwriters'
over-allotment option is exercised in full) assuming an initial public offering
price of $5.00 per Share, after deducting underwriting commissions and offering
expenses to be paid by the Company. The Company expects to apply the net
proceeds of this offering as follows:
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS APPROXIMATE AMOUNT PERCENTAGE OF NET PROCEEDS
- ------------------------------------------------------------------ ------------------- ---------------------------
<S> <C> <C>
Expansion into new regional markets (1)........................... $ 3,200,000 83.3%
Funding of the joint venture regarding AppTracker (2)............. 350,000 9.1%
Working capital and general corporate purposes.................... 290,000 7.6%
------------------- -----
Total............................................................. $ 3,840,000 100.0%
------------------- -----
------------------- -----
</TABLE>
- ------------------------
(1) Such funds will primarily be used for expenses incurred in the opening of
new offices, including leasing office space, purchasing or leasing office
equipment and computer hardware and related expenses prior to the
commencement of operations in new locations. The Company estimates that
opening a new office will cost approximately $200,000 to $500,000 per
location, which costs will vary depending on the size of the office and the
cost of doing business in the location in question. As part of its expansion
plan, the Company may utilize a portion of these proceeds for the
acquisition of, or investment in, complementary or competitive companies in
these new locations. The Company has not currently identified any
acquisition or investment candidates and has no agreements, plans, or
arrangements with respect to any such acquisition or investments.
(2) Such funds will represent the Company's capital contribution to a joint
venture with Great Lakes for the continued development and commercialization
of AppTracker. Such capital contribution will be utilized for continued
development and testing costs and, if such testing is successful, to provide
funds for the initial marketing of the product. See "Business--Information
Technology and the Internet."
The proceeds to the Company from the exercise of the Underwriters'
over-allotment option, if any, will be utilized for general corporate and
working capital purposes.
Pending their use, the net proceeds of this offering will be invested in
high-quality, short-term, interest bearing U.S. government obligations.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the sale of the Shares based upon the Company's currently
contemplated operations, the Company's business plan and current economic and
industry conditions and is subject to reapportionment among the categories
listed above in response to, among other things, changes in its plans,
regulations, industry conditions and future revenues and expenditures. The
amount and timing of expenditures will vary depending on a number of factors,
including changes in the Company's contemplated operations or business plan and
changes in economic and industry conditions.
Based on the Company's operating and expansion plans, the Company believes
that the net proceeds of this offering, together with available cash and
anticipated revenues from operations, will be sufficient to satisfy its capital
and legal requirements and finance its plans for expansion for at least the next
18 months. Such beliefs are based upon assumptions and there can be no assurance
that the assumptions underlying the Company's plans will prove to be correct.
After such 18-month period, or sooner if the Company's assumptions prove to be
incorrect, the Company may require additional capital in order to meet its then
current plans for expansion and capital requirements. Such financing may take
the form of ordinary or preferred equity securities or debt securities, or may
involve bank financing. There can be no assurance that the Company will be able
to obtain additional capital on a timely basis, on favorable terms, or at all.
In any of such events, the Company may be unable to implement its current plans
for expansion. See
17
<PAGE>
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DIVIDEND POLICY
The payment of dividends, if any, in the future is within the discretion of
the Board of Directors and will depend upon the Company's earnings, capital and
legal requirements and financial condition and such other factors that the Board
of Directors deem relevant. For the foreseeable future, the Company intends to
retain future earnings, if any, for reinvestment in the development and
expansion of its business. Pursuant to the Company's agreement with the BDC, the
Company will not pay dividends so long as any portion of the Company's loan from
BDC in the amount remains outstanding. At June 30, 1998, the outstanding balance
on such loan was $476,905. Such loan is due in August 2003, and the Company has
no plans to pre-pay such loan. Dividend payments in the future may also be
limited by other loan agreements or covenants contained in other securities
which the Company may issue. Dividend payments from the Company are subject to
Canadian withholding tax requirements. See "Certain United States and Canadian
Federal Income Tax Considerations."
18
<PAGE>
DILUTION
At June 30, 1998, the net tangible book value of the Company was
approximately $251,686, or $0.15 per Common Share, based on 1,677,876 Common
Shares outstanding. The net tangible book value per Share represents the amount
of the Company's total assets less the amount of its intangible assets and
liabilities, divided by the number of Common Shares outstanding. After giving
effect to the receipt of net proceeds (estimated to be approximately $3,840,000,
from the sale of the Shares at an assumed initial public offering price of $5.00
per Share), the pro forma net tangible book value of the Company at June 30,
1998 would be approximately $4,091,686, or $1.52 per Share. This would result in
dilution to the public investors (i.e., the difference between the assumed
public offering price per Share and the net tangible book value thereof after
giving effect to this offering) of approximately $3.48 per share (or 68%). The
following table illustrates the per Share dilution:
<TABLE>
<CAPTION>
PER COMMON
SHARE
-------------
<S> <C> <C>
Assumed initial public offering price................................. $ 5.00
Net tangible book value at June 30, 1998............................ $ 0.15
Increase in net tangible book value attributable to new investors... 1.37
Net tangible book value after this offering (1)....................... 1.52
--------- -----
Dilution of net tangible book value to new investors (1).............. $ 3.48
--------- -----
--------- -----
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment option is exercised in full, the net
tangible book value per share would be $1.66 and the dilution per Share to
new investors in this offering would be $3.34.
The following table sets forth, as of the date of this Prospectus, the
number of Common Shares purchased, the percentage of the total number of Common
Shares purchased, the total consideration paid, the percentage of total
consideration paid, and the average price per Common Shares paid by the
investors in this offering and the current shareholders of the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE PER
NUMBER(1) PERCENTAGE AMOUNT(1) PERCENTAGE SHARE
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Shareholders............................... 1,677,876 63% $ 1,234,803 20% $ 0.74
New Investors(2)................................... 1,000,000 37% $ 5,000,000 80% $ 5.00
---------- ----- ------------ -----
Total.......................................... 2,677,876 100.0% $ 6,234,803 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
- ------------------------
(1) Assuming an initial public offering price of $5.00 per Share.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 and as adjusted to reflect the sale of the Shares offered hereby at the
assumed initial public offering price per share of $5.00, after deducting
estimated underwriting discounts and commissions, estimated offering expenses
and the initial applications of the net proceeds of this offering as set forth
in "Use of Proceeds." The information provided below should be read in
conjunction with the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ ------------
Long-term debt, less current maturities............................................... $ 414,484 $ 414,484
Shareholders' equity
Common Shares, no par value, 1,677,876 issued and outstanding; and 2,677,876 issued
and outstanding as adjusted(1)...................................................... 1,248,368 5,088,368
Foreign currency transaction adjustment............................................... (72,818) (72,818)
Retained earnings..................................................................... 395,059 395,059
Total Shareholders' equity............................................................ 1,570,609 5,410,609
Total capitalization.................................................................. 1,985,093 5,825,093
</TABLE>
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the years ended
December 31, 1996 and 1997 are derived from the Financial Statements of the
Company and Notes thereto included elsewhere herein audited by Schwartz,
Levitsky, Feldman, Chartered Accountants, the independent accountants for the
Company. The unaudited statement of operations data presented for the six month
periods ended June, 1997 and 1998, and the unaudited balance sheet data at June
30, 1998, are derived from the unaudited Financial Statements of the Company,
which have been prepared on a basis consistent with the audited Financial
Statements of the Company, and in the opinion of management, include all
adjustments consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial condition and results of operations of the
Company as of the dates and for the periods presented.
The adjusted balance sheet data at June 30, 1998 gives effect to the sale of
the balance of 1,000,000 Common Shares offered hereby by the Company at an
offering price of $5.00 per Share.
This information should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements and the notes thereto, each
included elsewhere herein. The results of operations for any interim period are
not necessarily indicative of results to be expected the entire year.
<TABLE>
<CAPTION>
YEAR ENDED, DECEMBER SIX MONTHS ENDED
31, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue.................................................................... $ 764 $ 4,704 $ 2,156 $ 5,318
Gross profit............................................................... 505 1,816 870 2,198
Operating Expenses......................................................... 469 1,615 713 1,810
Income from operations..................................................... 36 201 157 388
Net income................................................................. 30 154 139 253
Earnings per share(1) .03...... .12 .11 .13
Weighted Average Number of Shares Outstanding.............................. 1,201 1,309 1,309 1,821
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Working capital........................................................................... 576 4,066
Total assets.............................................................................. 3,124 6,964
Long-term debt............................................................................ 414 414
Total liabilities......................................................................... 1,554 1,554
Shareholders' equity...................................................................... 1,571 5,411
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale by the Company of the 1,000,000 Shares
offered hereby at an assumed initial public offering Price of $5.00 per
Share and the initial application of the net proceeds therefrom. See "Use of
Proceeds."
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE OTHER FINANCIAL DATA INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS REGARDING THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE
OPERATIONS. THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT
EXPECTATIONS AND ASSUMPTIONS THAT INVOLVE NUMEROUS RISKS AND UNCERTAINTIES.
ALTHOUGH MANAGEMENT BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE TO BE INACCURATE
AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS
INCLUDED HEREIN WILL PROVE TO BE ACCURATE. IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE
INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE
ACHIEVED.
GENERAL
The Company is a provider of IT staffing services, primarily in Canada,
supplying qualified IT professionals to its customers as independent contractors
for short and long term assignments and for permanent placement within such
enterprises. The Company's customers include financial service companies,
software and other technology companies, Canadian governmental entities and
large multinational companies, including Merrill Lynch Canada, Inc., The Bank of
Montreal, Bell Sygma Telecom, and American Express. The Company has recently
expanded its operations into the United States and intends to develop a network
of offices to provide IT staffing services throughout North America.
For the year ended December 31, 1997 and the six months ended June 30, 1998,
the Company derived 96% and 99%, respectively, of its revenue in Canada and the
remainder in the United States. The Company's books and records are recorded in
Canadian dollars. For purposes of financial statement presentation, the Company
converts balance sheet data to U.S. dollars using the exchange rate in effect at
the balance sheet date. Income and expense accounts are translated using an
average exchange rate prevailing during the relevant reporting period. There can
be no assurance that the Company would have been able to exchange currency on
the rates used in these calculations. The Company does not engage in exchange
rate hedging transactions. A material change in exchange rates between U.S. and
Canadian dollars could have a material effect on the reported results of the
Company.
The Company's services are generally classified as either contract services
or permanent placement services. In the case of contract services, the Company
provides its customers with independent contractors or "contract workers" who
usually work under the supervision of the customer's management. Generally, the
Company enters into a time-and-materials contract with its customer whereby the
customer pays the Company an agreed upon hourly rate for the contract worker.
The Company pays the contract worker pursuant to a separate consulting
agreement. The contact worker generally receives between 75% and 80% of the
amount paid by the customer to the Company, however such payment is usually not
based on any formula and may vary for different engagements. The Company has
been seeking to gain "preferred supplier status" with its larger customers to
secure a larger percentage of those customers' business. While such status is
likely to result in increased revenue and gross profit, it is likely to reduce
gross margin percentage because the Company is likely to accept a lower hourly
rate from its customers and there can be no assurance that it will be able to
reduce the hourly rate paid to its consultants.
Revenue from contract services is recognized as services are provided.
Similarly, expenses for contract services, which usually consist solely of
consulting fees paid to contract workers, are recognized as services are
provided. For the year ended December 31, 1997 and the six months ended June 30,
1998, the gross margin on contract services revenue was approximately 23% and
23%, respectively. Contract services accounted for 79% of revenue and 46% of
gross profit for the year ended December 31, 1997 and approximately 76% of
revenue and 42% of gross profit for the six months ended June 30, 1998.
22
<PAGE>
In the future, the Company may perform contract services for customers on a
project by project basis whereby the Company will be engaged to complete a
particular, specified project. The Company may hire full time employees to
supervise these projects. These projects may be billed on a time-and-materials
basis or the Company may charge a fixed price for the project. If the Company
charges a fixed price for a project, it will be required to estimate the total
costs involved in the project and formulate a bid that contains an adequate
profit margin. If the Company is unable to accurately predict the costs of such
a project, or the costs of the project change due to unanticipated
circumstances, which may be circumstances that are beyond the control of the
Company, the Company may earn lower profit margins or suffer a loss on a given
project. Currently, the Company is not providing any IT professionals pursuant
to fixed price contracts.
In the case of permanent placement services, the Company identifies and
provides candidates to fill a permanent position for its customer. The Company
recognizes revenue when the IT professional commences employment. The Company
performs permanent placement services pursuant to three invoicing policies.
Contingency services are engagements in which the Company is only paid if it is
successful in placing a candidate in a position. Contingency exclusive services
are similar to contingency engagements, however, the Company is the only firm
engaged to fill the position. Retained search services are similar to
contingency exclusive services, except that the Company receives a
non-refundable portion of the fee prior to performing any services, with the
remainder paid if the position is filled. Contingency, contingency exclusive and
retained search services accounted for approximately 71%, 18% and 11%,
respectively, of the Company's permanent placement services for the year ended
December 31, 1997 and 83%, 15% and 2% for the six months ended June 30, 1998.
The Company calculates gross profit by subtracting the fees paid to
contractors from net revenue. The Company does not attribute any direct costs to
permanent placement services, therefore the gross profit margin on such services
is 100% of revenue. As a result, the mix in permanent placement revenue as
compared to contract services revenue will have a significant affect on the
gross profit margin of the Company as a whole. Permanent placement services
accounted for 21% of revenue and 54 % of gross profit for the year ended
December 31, 1997 and 24% of revenue and 58 % of gross profit for the six months
ended June 30, 1998.
The Company anticipates expanding into new regional markets by establishing
new offices or by acquiring or investing in complementary or competitive
companies. The Company has not yet identified any acquisition candidates and has
no agreements, plans, or arrangements with respect to such acquisitions or
investments. The Company expects the cost of opening and funding a new office to
range from $200,000 to $500,000, depending on the size of the office and the
costs of doing business in the city that the office is to be located. Such costs
will consist of leasing office space, purchasing or, among other things, leasing
office equipment and computer hardware and other related expenses incurred prior
to the commencement of operations in new locations. Such costs also include
operating expenses, such as payroll and advertising, prior to such time that the
new office is able to generate significant cash flow from operations. The
Company is likely to utilize acquisitions as an attempt to avoid or limit these
costs, but the Company will incur other costs as a result of any acquisitions,
including funding the purchase price and expenses related to the integration of
operations and training of new employees. With regard to previous acquisitions,
integration costs were expensed in the period that they were incurred and the
Company expects to continue to do so with future acquisitions. The Company
intends its acquisition targets to be small companies who can benefit from the
Company's advanced IT and other operating systems. There can be no assurance
that integrating the Company's operations with those of acquired companies will
result in improvements in such companies operations or increased revenue from
such operations.
In April 1998, the Company acquired all the issued and outstanding shares of
SCI and SPSI for $102,249 and 130,914 Common Shares. SPSI is inactive but holds
certain assets utilized by Systems in its operations. The acquisition was
effective as of January 2, 1997. Declan French participated in the
23
<PAGE>
management of Systems during 1997 and the Company and Systems shared data and
operating information during the year ended December 31, 1997. Accordingly, the
Company's financial statements incorporate the operations of Systems since
January 1, 1997.
On May 19, 1998, the Company completed the acquisition of all the issued and
outstanding shares of capital stock of ICS for $340,832 in cash and 100,000
Common Shares from John A. Irwin, who was not affiliated with the Company prior
to this acquisition. In connection with the acquisition, ICS made a distribution
to Mr. Irwin of certain ICS assets that were not necessary for the operation of
the business. The transaction was effective as of January 2, 1998. Declan French
and other officers of the Company participated in the management of ICS during
the six months ended June 30, 1998. Accordingly, the Company's financial
statements incorporate the operation of ICS since January 1, 1998.
Each acquisition was accounted for using the purchase method of accounting,
which requires that the purchase price be allocated to the assets of the
acquired entity based on fair market value. In connection with the Systems and
ICS acquisitions, the Company recorded $469,000 and $889,000, respectively, in
goodwill, which is being amortized over thirty years in accordance with
generally accepted accounting principles as applied in the United States.
RESULTS OF OPERATIONS
The following table presents certain financial data of the Company as a
percentage of the Company's revenue based in information derived from the
Company's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED, DECEMBER 31, SIX MONTHS ENDED JUNE
30,
------------------------ ------------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
----- ----- ----- -----
Sales....................................................... 100% 100% 100% 100%
Contractor Costs............................................ 34% 61% 60% 59%
Gross profit................................................ 66% 39% 40% 41%
Operating Expenses.......................................... 61% 34% 33% 34%
Income from operations...................................... 5% 4% 7% 7%
Net income.................................................. 4% 3% 6% 5%
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUE. Revenue for the six months ended June 30, 1998 increased by $3.1
million, or 141%, to $5.3 million, as compared to $2.2 million for the six
months ended June 30, 1997. The increase is primarily attributable to the
acquisition effective January 1, 1998 of ICS, which had sales of $2.4 million
for the six months ended June 30, 1998. Also contributing to the increase was an
increase of $260,000 in the sales of Systems as a result of improvements in
operations since its was acquired by the Company effective January 2, 1997, and
growth in the contract sales in the Toronto office. Revenue from contract
services and permanent placement services accounted for 76% and 24%,
respectively, of revenue for the six months ended June 30, 1998 as compared to
78% and 22%, respectively, for the six months ended June 30, 1997.
CONTRACTOR COSTS. Contractor costs for the six months ended June 30, 1998
increased by $1.8 million, or 138%, to $3.1 million, as compared to $1.3 million
for the six months ended June 30, 1997. This increase was due to the increased
volume of contract services. As a percentage of revenue from contract services,
contractor costs remained constant at 77%.
GROSS PROFIT. Gross profit for the six months ended June 30, 1998 increased
by $1.3 million, or 149%, to $2.2 million, as compared to $870,000 for the six
months ended June 30, 1997. This increase was attributable to the aforementioned
increase in revenue during the six months ended June 30, 1998. As a percentage
of revenue, gross profit increased to 41% for the six months ended June 30, 1998
as compared
24
<PAGE>
to 40% for the six months ended June 30, 1997. This increase was due to the
slight decrease in the percentage of revenue which was derived from contract
services.
OPERATING EXPENSES. Operating expenses for the six months ended June 30,
1998 increased by $1.1 million, or 154%, to $1.8 million, as compared to
$713,000 for the six months ended June 30, 1997. This increase was primarily
attributable to an increases of $578,000 in selling expenses and $156,000 in
administrative expenses at ICS during the six months ended June 30, 1998.
Administrative expenses at the IT Staffing Division also increased as the
Company expanded infrastructure to support operations from multiple locations
and operated additional offices. As a percentage of revenue, operating costs
increased to 34% for the six months ended June 30, 1998 from 33% for the six
months ended June 30, 1997 due to increased locations and volume of
transactions.
NET INCOME. Net income for the six months ended June 30, 1998 increased by
$114,000, or 82 % to $253,000 as compared to $139,000 for the six months ended
June 30, 1997 due, among other things, to the reasons enumerated above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
REVENUE. Revenue for the year ended December 31, 1997 increased by $3.9
million, or 510%, to $4.7 million, as compared to $764,000 for the six months
ended December 31, 1996. The increase is primarily due to the acquisition of
Systems, which had revenue for the year ended December 31, 1997 of $2.0 million,
effective January 2, 1997, and an increase of $1.7 million of revenue during
such period from contract services at the IT Staffing Division as a result of
internal growth. Revenue from contract services and permanent placement services
accounted for 79% and 21%, respectively, of revenue for the year ended December
31, 1997 as compared to 39% and 61%, respectively, for the year ended December
31, 1996.
CONTRACTOR COSTS. Contractor costs for the year ended December 31, 1997
increased by $2.6 million, or 1000%, to $2.9 million, as compared to $260,000
for the year ended December 31, 1997. This increase was attributable to the
increased volume of contract services. As a percentage of revenue from contract
services, contractor costs decreased to 78% for the year ended December 31, 1997
from 88% for the year ended December 31, 1996 as a result of an increase in
average hourly billing rates for the Company's contract services.
GROSS PROFIT. Gross profit for the year ended December 31, 1997 increased
by $1.3 million, or 256%, to $1.8 million, as compared to $505,000 for the year
ended December 31, 1996. This increase was atttributable to the aforementioned
increase in revenue. As a percentage of revenue, gross profit decreased to 38%
for the year ended December 31, 1997 as compared to 66% for the year ended
December 31, 1996. This decrease was due to the increase in the percentage of
revenue which was derived from contract services.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1997
increased $1.1, or 234%, to $1.6 million, as compared to $470,000 for the year
ended December 31, 1997. This increase was primarily attributable to the
acquisition of Systems, which incurred operating expenses of $515,000 during the
year ended December 31, 1997, and an increase of $442,000 in selling expenses at
the IT Staffing division due to increased volume of sales. Administrative
expenses at the IT Staffing Division also increased as the Company expanded
infrastructure to support operations from multiple locations. As a percentage of
revenue, operating costs decreased to 41% for the year ended December 31, 1997
from 50% for the year ended December 31,1996 as a result of increased revenue
since many administrative costs are relatively fixed and do not vary with
revenue.
25
<PAGE>
NET INCOME. Net income for the year ended December 31, 1997 increased by
$124,000, or 413%, to $154,000 for the year ended December 31, 1997 as compared
to $30,000 for the year ended December 31, 1996 as a result of, among other
things, the reasons enumerated above.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary sources of cash are cash flow from operations and a
credit line with the Toronto-Dominion Bank ("TDB").
At June 30, 1998, the Company had cash and cash equivalents of $114,000 and
working capital of $575,000. During the six months ended June 30, 1998, the
Company had a cash flow deficit from operations of $385,000, due primarily to an
increase in accounts receivable of $768,000, which was partially offset by net
income of $253,000. The increase in accounts receivable is primarily due to the
increase in revenue in the months prior to June 30, 1998 as compared to the
months prior to December 31, 1997. At December 31, 1997, the Company had no cash
and cash equivalents, and a working capital deficiency of $57,000. For the year
ended December 31, 1997, the Company had a cash flow deficit of $85,000, due
primarily to an increase in accounts receivable of $577,000, which was partially
offset by increase in accounts payable of $317,000 and net income of $154,000.
For the six months ended June 30, 1998, the Company had cash flow from
financing activities of $1.3 million, attributable primarily to proceeds from
the issuances of Common Shares. For the year ended December 31, 1997, the
Company had cash flow from financing activities of $371,000 attributable
primarily to proceeds from the issuances of Common Shares. During the six months
ended June 30, 1998, the Company received $909,752 for the issuance of 281,667
Common Shares. During the year ended December 31, 1997, the Company received
gross proceeds of $325,051 for the issuance of 86,667 Common Shares. Such funds
were utilized to fund the expansion of the Company, including the acquisitions
of Systems and ICS.
The Company's arrangement with TDB allows for an operating line, payable on
demand, of up to $340,645. Outstanding balances shall bear interest at 1.75%
over TDB's prime rate. The line is secured by substantially all of the Company's
assets, an assignment of life insurance on the life of Declan French to the
extent of $300,000, and is personally guaranteed by Declan French and his wife
to the extent of $170,322. The loan is subject to certain financial covenants
including a minimum net worth of $562,065. At June 30, 1998, there was no
outstanding balance on this line.
As of June 30, 1998, the Company had a total of $476,905 due to BDC pursuant
to three separate loans. The loans bear interest at the Canadian prime rate plus
4% and are being repaid in monthly installments which currently aggregate
$8,670. In addition to interest, the Company granted BDC an option to acquire
22,125 Common Shares for an aggregate of $1.00 and to pay BDC a royalty equal to
.063% of gross sales until August 2003. The Company is restricted from paying
dividends until these loans have been repaid to BDC.
During the six months ended June 30, 1998, the Company had a cash flow
deficit from investing activities of $910,000, primarily attributable to the
aforementioned acquisition of Systems. During the year ended December 31, 1997,
the Company had a cash flow deficit from investing activities of $541,000,
primarily attributable to the aforementioned acquisition of ICS.
The Company believes that cash flow from operations together with the
proceeds of the offering will be sufficient to satisfy the Company's working
capital needs for at lease the next 18 months.
YEAR 2000 PREPARATION
Many computer systems and software products worldwide and throughout all
industries will not function properly, unless upgraded, as the year 2000
approaches, due to a once-common programming standard that represents years
using two-digits. This is the "Year 2000 problem" that has received considerable
media coverage. The Company believes that it is Year 2000 compliant with respect
to its internal systems, including its HR Workbench software. Apptracker is also
designed to be Year 2000 complaint.
26
<PAGE>
BUSINESS
The Company is a provider of IT staffing services, primarily in Canada,
supplying qualified IT professionals to its customers as independent contractors
for short and long term assignments and for permanent placement within such
enterprises. The Company's customers include financial service companies,
software and other technology companies, Canadian governmental entities and
large multinational companies, including Merrill Lynch Canada, Inc., the Bank of
Montreal, Bell Sygma Telecom, and American Express. The Company has recently
expanded its operations into the United States and intends to develop a network
of offices to provide IT staffing services throughout North America.
The Company has focused on the recruiting of quality IT professionals. The
Company utilizes established testing methods to ensure that its IT professionals
are properly qualified. The Company also reviews a candidates' technical
background and conducts preliminary interviews prior to referring candidates to
its customers. By attracting the most qualified IT professionals, the Company
believes that it will be able to attract high quality customers, who require the
services of such professionals.
Since inception, the Company has pursued a strategy of developing and
utilizing technology that it believes will provide it a competitive advantage.
As a result, the Company believes that one of its primary competitive strengths
is its utilization of technology. The Company maintains a database of 35,000 IT
professionals and advertises for the Company and their customers on the
Internet. The Company uses HR Workbench, software that the Company developed in
conjunction with Great Lakes to locate the IT professionals in the Company's
database with the technical skills and job interests that best satisfy the
requirements of the position the Company is attempting to staff. The Company and
Great Lakes have developed another software package called AppTracker which the
Company, via a joint venture with Great Lakes, intends to market to human
resources departments in 1999. The software aids a human resource department in
performing numerous recruitment tasks, such as scheduling interviews and
evaluating candidates. Statistics about the recruitment process, including the
costs and expenses, are tabulated in various databases. The Company believes
that it will have an advantage in marketing its IT staffing services to
companies using AppTracker because of the Company's familiarity with the
software and the ease of EDI with the Company.
INDUSTRY BACKGROUND
The staffing industry has experienced significant growth in recent years in
response to the increased popularity of outsourcing of many staffing
requirements. This growth has been driven by employers who have sought to
convert personnel costs from fixed to variable in nature by reducing their
permanent staff and supplementing their workforce with contract employees for
specific projects, peak work loads and other needs. The use of flexible staffing
services has allowed employers to improve productivity, outsource specialized
skills and avoid the negative effects of layoffs. This trend has accelerated
with the pace of technological change and greater global competitive pressures.
Regulations governing employee benefits, insurance and retirement plans as well
as the high cost of hiring, laying off and terminating permanent employees have
prompted many employers to take advantage of the flexibility offered through
contract staffing arrangements. According to the STAFFING INDUSTRY REPORT, a
leading industry publication, revenue for the year ended December 31, 1997 for
IT staffing services in the United States is estimated to have been $14.8
billion, a 27% increase over such reviews for the year ended 1996. The market
for IT staffing services in Ontario, Canada, the Company's largest market, is
estimated to be $700 million.
The high technology industry as a whole continues to experience substantial
growth as constant innovations, such as open and distributed computing,
client/server technology, the Internet, relational databases and object-oriented
programming, shortens product lifecycles and accelerates the demand for
computer-related products. These trends, combined with the intense competition
faced by high technology companies, have put considerable pressure on such
companies to shorten the time-to-market of their products. The development of
these next generation products often requires highly specialized technical
27
<PAGE>
talent which may not be available internally. This need for IT professionals is
particularly critical during the period prior to the release of new software or
hardware products. As a result, these high technology companies are frequently
utilizing supplemental sources of IT professionals with expertise in current
technologies.
As new technologies are developed and introduced, businesses are attempting
to integrate and implement these technologies into their already complex IT
systems. As these systems are being deployed on an enterprise-wide basis and on
multiple hardware and software platforms, the process of systems design and
implementation has become more complex. As a result, these businesses are forced
to find qualified IT professionals to design, develop, deploy and maintain their
systems. Frequently, however, qualified IT professionals do not exist internally
or it may be impractical to redeploy and retrain internal personnel.
Consequently, these businesses are increasingly seeking to augment their staffs
with IT professionals skilled in the management and operation of such systems.
The Company believes the growth of the Internet is likely to contribute to
the demand for IT professionals. North American companies are increasingly
establishing or maintaining a presence on the Internet. Although many companies
outsource to web site maintenance companies, others retain direct control of
their web sites and may utilize contract workers to establish and maintain such
sites.
Despite increased demand for IT professionals, there is a shortage of IT
professionals proficient in the most current computer languages and
applications. Recent studies indicate that the United States has a shortage of
approximately 190,000 IT professionals and Canada has a shortage of 15,000 IT
professionals. The studies also suggests that the shortfall is growing. Due to
the high demand for their services, many IT professionals have a variety of
opportunities in the job market. An increasing number are attracted to the
benefits of working on a contract basis. Such benefits include more flexible
work schedules and the opportunity to work with emerging and challenging
technologies in a variety of industries.
To address their increasing demand for contract and permanent IT
professionals, both research and development departments of technology companies
and IT departments of large corporations are turning to IT staffing companies to
augment their existing operations. Technology-dependent companies are
increasingly utilizing outside consultants to: (i) meet critical production
deadlines; (ii) focus on their core business and avoid devoting valuable time to
the recruiting and hiring processes; (iii) access specialized technical skills;
(iv) better match staffing levels to current needs; and (v) reduce the costs of
recruiting, training and terminating employees.
BUSINESS STRATEGY
The Company's objective is to become a leading provider of IT staffing
services to high technology companies and large corporations throughout North
America. To achieve this objective, the Company focuses on the following key
elements of its business and growth strategies:
LEVERAGE CLIENT BASE TO ATTRACT AND RETAIN HIGHLY QUALIFIED IT PROFESSIONALS
A key element of the Company's success has been its ability to attract and
retain highly qualified IT professionals. The Company believes that the primary
reason that it can attract such professionals is due to its high quality
customer base which allows the Company the opportunity to identify and deliver
high quality assignments involving leading-edge technologies. Additionally, the
Company believes that it has developed a reputation among IT professionals for
efficient and high quality placements by focusing on an IT professional's
particular field of technical specialization and providing access for IT
professionals to cash compensation levels comparable to, or higher than, that of
similarly skilled, full-time employees.
As the Company's high quality clients have allowed it to attract a large
number of qualified IT professionals, the Company's database of IT
professionals, in turn, has allowed the Company to increase its number of
clients. The Company believes that this cyclical phenomenon in the recruiting
business
28
<PAGE>
creates the opportunity for significant growth as the Company expands and
implements the other facets of its business plan.
FOCUS ON NICHE MARKETS
The Company believes that its expertise in the IT industry provides it a
competitive advantage over recruiting firms that do not utilize IT specialists
in their recruiting. The Staffing Report On-Line, an on-line magazine for the
employment and temporary service industry, views the IT staffing business as
distinctly different from traditional staffing businesses. The Company's
recruiters follow IT industry trends, are usually knowledgeable in the IT area
and have access to the Company's databases of IT professionals, all of which
enables them to provide their customers with candidates who will satisfy a
particular client's requirements.
Although the Company recruits professionals in all aspects of the IT
business, the Company places added emphasis on certain areas, such as ERP
software products produced by Oracle Corporation, SAP AG, Peoplesoft, Inc. and
the BAAN Company. The Company is often discussed in Web sites for Oracle product
users and believes it can develop a reputation as one of the premier sources of
IT professionals with skills and experience relating to Oracle Corporation and
other ERP products. The Company has also developed an excellent reputation for
recruiting IT professionals who specialize in network management. The Company
believes that developing niche specialties will enhance the reputation of the
Company as a whole and create opportunities for the Company to establish
relationships with new customers who then may utilize the Company to locate IT
professionals with other skills.
EXPAND INTO NEW REGIONAL MARKETS
As opportunities arise, the Company intends to expand into certain markets
via acquisition, but believes that most expansion will come from the
establishment of new offices. The Company intends to establish such offices by
hiring experienced recruiters familiar with the local markets and providing them
access to the Company's existing group of IT professionals and customers via the
Internet. By hiring local recruiters the Company believes that it will be able
to attract local clients and IT professionals who may not have been previously
familiar with the Company. The Company believes that such recruiters will find
the Company to be an attractive place to work because of the Company's existing
relationships with multinational and other large corporate clients, the
Company's good reputation among IT professionals, the Company's quality
information technology system and the Company's incentive based compensation
package which will generally combine base salary, bonuses, commissions and
incentive stock options.
Where the Company deems it more cost effective, or a particular acquisition
candidate will provide the Company with a competitive advantage, the Company may
enter a new regional market by acquiring an existing IT staffing company. The
Company intends to focus on small acquisition targets who will be able to
benefit from the Company's strong IT and operating systems.
CONTINUE TO UTILIZE THE INTERNET AND INFORMATION TECHNOLOGY
The Company believes that its use of technology provides it a competitive
advantage over many of its competitors. The Company utilizes its HR Workbench
software to operate its database and allow recruiters to use a query based
system that matches the skill set and employment preferences of the IT
professionals with the needs of the customer. This system also tracks other
information, such as average salaries of a particular position, which enables
the Company to provide valuable advice to its clients in selecting the proper IT
professional. The Company's IT professional database and recruiting software is
available to its employees in other cities through its fully secure intranet
system. For example, a recruiter in a new office in Austin could have complete
access to the Company's information technology in Toronto. The Company believes
that this will enable it to open new offices that are quickly ready to provide
services to customers without incurring significant IT start-up costs. In
smaller markets, the Company intends to
29
<PAGE>
utilize its IT system to create lightly staffed "virtual offices" that rely on
the Toronto office for all administrative and many operating functions.
The Company utilizes the Internet to promote its services and to provide IT
professionals with a complete listing of available employment opportunities. IT
professionals can e-mail their resumes to the Company's recruiters and, by
completing an on-line form, enter themselves into the Company's database.
Currently, the Company is upgrading its Web site so that it will more
effectively promote the Company's services to potential customers.
The Company, in conjunction with Great Lakes, is developing software that
will enable human resources departments to perform numerous recruitment tasks,
such as scheduling interviews and evaluating candidates. Statistics related to
the recruitment process, including the costs and expenses, are tabulated in
various databases. The Company believes that it will have an advantage in
marketing its recruitment services to companies that are using AppTracker
because of the Company's familiarity with the software and the ease of EDI with
the Company.
DEVELOP AND PROMOTE A MANAGED SERVICES PRACTICE
The Company intends to form a team of consultants who will aid the Company's
customers in determining their IT staffing needs. Management believes that this
will provide the Company with a competitive advantage when compared with
traditional recruiting firms. Furthermore, the Company believes that Managed
Services could provide it with an additional source of revenue, which could be
particulary important if companies utilize AppTracker and Internet sources to
reduce their reliance on recruiting firms.
CAPITALIZE ON YEAR 2000 AND OTHER OPPORTUNITIES
Due to a once-common programming standard that represents years using
two-digits, many computer systems and software products, unless upgraded, will
not function properly as the year 2000 approaches. The problem will result in
the inability of computer systems to properly recognize date-sensitive data and
will result in the production of erroneous information or system failure.
The Company believes that many companies will turn to contract workers to
review their computer systems and make necessary changes to avoid Year 2000
problems. For example, the Company assembled a group of specialists to remedy
the potential Year 2000 problems at the Canadian offices of a large financial
services firm. Contract workers are ideal for this task because it is likely to
be a time consuming and complicated, yet temporary, project. Although the
increase in revenues from Year 2000 related projects will be temporary, the
Company intends to use the Year 2000 as an opportunity to develop additional
customer relationships and to expand the scope of its contract work on a
project-by-project basis. The Company intends to assemble teams of Year 2000
specialists and aggressively market their services to the Company's customers.
The Company believes that there will be opportunities for projects like Year
2000 projects as the Dow Jones Industrial Average, which is often recorded in
data fields designed to read four digits, approaches 10,000, and when the
European Union adopts a single currency. IT Systems will require modifications
to be able to properly record these data changes and companies may rely on
contract workers and consulting teams to implement these changes.
CONTRACT SERVICES
The Company's contract services revenue is derived from time and materials
contracts in which the Company supplies a contract worker to perform under the
supervision of the client. The Company's contract services generally consist of
providing contract workers to customers for short and long term assignments.
These assignments generally last from three to twelve months, but can sometimes
last much
30
<PAGE>
longer. The assignments may be for specified projects or general IT consulting
work. Although the Company currently bills the clients only on a time and
materials basis at an agreed upon hourly rate, in the future it may assemble
teams that will perform projects for an agreed upon fixed price for the project.
The Company pays the contract worker an agreed upon rate, pursuant to the
Company's standard consulting services agreement. The contract worker generally
receives between 75% and 80% of the amount paid by the customer to the Company,
however such payment is usually not based on any formula and may vary for
different engagements. This agreement, which is terminable by the Company at any
time, obligates the contract worker to provide notice prior to leaving the
position, contains a confidentiality clause, and prohibits the worker from going
to work directly for the customer for a period of six months without the consent
of the Company. At September 1, 1998, approximately 160 contract workers placed
by the Company were performing services for the Company's customers.
The Company intends to increase the amount of project services work it is
doing by assembling teams specializing in particular projects such as Year 2000
problem resolution. See "Business--Business Strategy--Focus on Niche Markets."
In the future, the Company may hire project leaders as salaried employees to
lead teams of consultants on certain projects. The Company believes that this
will enable the Company to earn higher margins on its project work. Furthermore,
such teams would enable the Company to market itself as a full-service provider
of IT staffing services with a wide array of services that can be tailored to
meet a customer's particular needs.
PERMANENT STAFFING PLACEMENT SERVICES
The Company's permanent placement services generally consist of the
placement of an IT professional in a position for the Company's customers. The
Company identifies and provides candidates to its customers who its recruiters
believe, based on the Company's data, have the technical skills and job interest
to best satisfy the requirements of the position. The Company recognizes revenue
when the IT professional commences employment. However, the Company is required
to find a replacement free of charge if the employee does not remain in the
position for at least 90 days. This placement fee is usually structured as a
percentage of the IT professional's first-year annual compensation. This
percentage ranges from 20% to 30%, although the Company expects to reduce the
fee to 15% for customers utilizing the Company's Internet technology because
those placements will require less time and input from the Company's recruiters.
Salaries for the IT professionals that the Company places generally range from
$45,000 to $125,000.
The Company performs permanent placement services pursuant to three
invoicing policies. Contingency services are engagements in which the Company is
only paid if it is successful in placing a candidate in a position. Contingency
exclusive services are similar to contingency engagements, however, the Company
is the only firm engaged to fill the position. Retained search services are
similar to contingency exclusive services, except that the Company receives a
non-refundable portion of the fee prior to performing any services, with the
remainder paid if the position is filled.
SALES AND MARKETING
The Company's primary target markets are software, telecommunications and
other technology companies, financial service companies and multinational and
other large corporations. The Company maintains a database of human resource
administrators and IT department heads at these firms and utilizes its sales
forces to build relationships with these individuals by stressing the quality of
IT professionals that the Company recruits. As the Company expands into new
regional markets it intends to hire local sales people who are familiar with
local customers. Because many of the Company's customers maintain offices in
more than one city, the Company believes that it will have an advantage in
establishing relationships with these additional offices as the Company expands
into new regional markets.
31
<PAGE>
The Company markets its services via the Internet. The Company is in the
process of upgrading its home page, which previously has been used primarily as
a tool to advertise job opportunities to IT professionals and to promote its
services to its customers. The Company also utilizes traditional advertising
outlets and trade shows to promote its services to potential customers.
CUSTOMERS
The Company provides staffing services to customers in a wide array of
industries. Software development, telecommunications, and other technology
companies utilize the Company's services to locate programmers in the
development of new products. The Company also provides services to financial
services companies, such as The Bank of Montreal and Merrill Lynch Canada, Inc.,
which are extremely reliant on their IT systems. Large consulting firms, such as
Deloitte & Touche, are also beginning to utilize the Company to meet their need
for IT professionals.
The Company's customers include the Canadian units of Fortune 1000 companies
such as American Express, Revlon and IBM. The Company believes that it will be
able to provide services to other multinational and large companies and expand
services provided to these existing customers by expanding into new regional
markets. These multinational and other large companies have indicated to the
Company that they desire to use fewer suppliers to meet their needs and the
Company believes that it will be able to utilize relationships in one market to
establish relationships with such companies in other markets. Additionally, the
Company believes that its high profile customer base provides it credibility
when pursuing other customers. The following is a list of certain of the larger
companies who utilize the Company's services.
<TABLE>
<CAPTION>
FINANCIAL SERVICES SOFTWARE, TECHNOLOGY AND TELECOMMUNICATIONS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
the Bank of Montreal Bell Sygma Technology Solutions
Merrill Lynch Canada, Inc. Bell Canada
CIBC Wood Gundy Securities, Inc. SHL Systemhouse, Inc.
First American Title Insurance Star Data
Citibank IBM Canada
Harris Bank & Trust
<CAPTION>
GOVERNMENT AND EDUCATIONAL OTHER
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Revenue Canada American Express
Environment Canada Imperial Oil
University of Toronto Deloitte & Touche
National Grocers Company
SolCorp
Revlon Canada
</TABLE>
The Company generally enters into a standard form agreement with its
customers that indicates which parties are responsible for taxes and other
expenses, and provides that all intellectual property and other proprietary
information will remain confidential and the property of the customer. Some
customers, such as the Canadian government, Dow Jones and CIBC Wood Gundy
Securities, Inc., require the Company to use another form of agreement which is
similar in all material respects to the Company's standard form. With certain
clients, most significantly, The Bank of Montreal, the Company enters into an
agreement allocating other responsibilities, such as the supervision of the IT
professionals it recruits. Other customers, such as Bell Sygma, Inc., enter into
annual contracts with the Company pursuant to which the Company will supply
contract workers during the year as required by the customer at fees to be
negotiated.
32
<PAGE>
STRATEGIC ALLIANCES
The Company has entered into a strategic alliance with Great Lakes which has
resulted in the development of HR Workbench and AppTracker. See
"Business--Information Technology and the Internet." The Company has also
established relationships with other job search resources on the Internet to
promote the Company's services. For example, the job listing page of the Toronto
Star newspaper's Web site displays the Company's name and has a hyperlink to the
Company's Web site.
The Company intends to utilize strategic alliances to promote its staffing
services. The Company may enter into arrangements with consulting firms to staff
major IT projects. Alternatively, the Company may enter into arrangements with
software companies whereby the Company's contract workers will be trained to
perform customer support services. Lastly, the Company may enter into agreements
with other staffing companies in geographic regions in which the Company does
not intend to expand. Such arrangements will allow the Company to provide its
existing large corporate clients with services in areas where the Company is not
familiar with the local market. Currently, the Company is not a party to any
agreements to enter into arrangements such as these, and there can be no
assurance that the Company will find entities with which to enter into strategic
alliances on terms acceptable to the Company, or at all.
RECRUITING
The Company believes that its technology and experienced recruiting staff of
43 individuals enables it to recruit qualified IT professionals whose skills
match the needs of its customers. Many of the Company's recruiters have strong
IT backgrounds, and are required by the Company to take a two week training
course when hired by the Company. The Company maintains a database of over
35,000 IT professionals. The Company's recruiters maintain ongoing relationships
with certain IT professionals and are aware of their particular skills and
employment status. Using the Company's database and its recruiters' knowledge of
available IT professionals, the Company is often able to quickly locate a number
of suitable candidates for a position, which is particularly important for
positions in which the Company does not have an exclusive engagement. The data
base also contains reference and employment history information which
accelerates the screening process.
The Company tests the computer skills of all of its IT professionals
utilizing Tekcheck software. This software provides recruiters with a consistent
rating system and a reliable method of evaluating candidates, which aids
recruiters in matching candidates with positions requiring their skill set. This
software also allows the Company to provide evidence to its customers that
potential employees have sufficient technical skills. Additionally, the Company
screens candidates by telephone and in-person interviews and by reference
checks.
If the Company is unable to locate suitable candidates for a position by
means of its databases, the Company may utilize advertisements in newspapers and
trade magazines. The Company often prepares and places advertisements on behalf
of its clients. The Company has been approved by the Canadian Newspaper
Association as an advertising agency, which allows the Company to earn a
commission on any advertisements it places. Additionally, the Company posts job
openings on its Internet Web site and invites IT professionals to submit their
resumes to the Company by e-mail.
The Company intends to recruit IT professionals from other countries, such
as Singapore and India, where there are a number of IT professionals and the job
opportunities are inferior to those in North America. U.S. and Canadian
immigration laws contain preferences for immigrants who can fill skilled labor
positions for which there is a shortage of native applicants.
33
<PAGE>
INFORMATION TECHNOLOGY AND THE INTERNET
The Company has established an extensive IT system which it believes
provides it with a competitive advantage over less technologically advanced
competitors. The primary components of the Company's IT system and its use of
technology are described below.
THE HR WORKBENCH SOFTWARE AND PROPRIETARY DATABASES.
The HR Workbench software is an Internet-based software application that is
used by the Company in the administration and tracking of internal processes
relating to the recruitment and placement of IT professionals. This software was
developed by the Company in conjunction with Great Lakes, and they will share in
all intellectual property rights to the software equally. The HR Workbench
software is a query based software program that allows the Company's recruiters
to locate the IT professional in the Company's database with the technical
skills and job interests that best satisfy the requirements of the position that
the Company is attempting to staff. This system also tracks other information,
such as average salaries of a particular position, which enables the Company to
provide valuable advice to its clients in selecting the proper IT professional.
The software also incorporates the Company's database of over 35,000 IT
professionals. The Company continually updates its database and occasionally
accesses other databases of IT professionals that are available for sale or over
the Internet. HR Workbench allows information entered into the database by a
Company employee, or directly by an IT professional by means of the Internet, to
be shared by all of the Company's recruiters and salespeople.
UTILIZATION OF THE INTERNET
The Company utilizes the Internet to promote its services and to enable
customers and IT professionals to utilize its services. The descriptions of the
employment opportunities are segregated among permanent and contract positions,
describe the necessary skills required by IT professional candidates, and
provides a phone number and e-mail address for the Company's recruiter who works
with the relevant client. Alternatively, IT professionals can e-mail their
resumes to the Company or an enter themselves into the Company's database by
means of the Internet. The Company also utilizes the Internet to connect its
offices to its Toronto office. This results in substantial savings in software
and hardware costs in the maintenance of the Company's IT system and allows for
the creation of lightly staffed regional virtual offices.
THE APPTRACKER SOFTWARE
The Company and Great Lakes have developed a software package designated
AppTracker. The software is designed to aid a human resource department in
performing numerous recruitment tasks, such as scheduling interviews and
evaluating candidates. The software has a feature that allows a human resources
department to have a description of any job openings sent automatically to
selected e-mail addresses, such as those of recruiting firms or previous
applicants. Statistics about the recruitment process, including the costs and
expenses, are tabulated in various databases. Additionally, the software allows
the human resource department to compile their own database of prospective
employees and contract workers.
The joint venture between the Company and Great Lakes intends to market
AppTracker to human resources departments commencing in 1999. Currently, the
product is being test marketed by the human resources departments of two of the
Company's customers. The Company believes that it will be able to provide
assistance in the marketing of the software as a result of its existing
relationships with management in the human resources and IT departments of its
customers, although there can be no assurance thereof. The Company is currently
negotiating with Great Lakes to enter into a definitive agreement that will
allocate costs and responsibilities in marketing Apptracker.
34
<PAGE>
Although there can be no assurance thereof, the Company believes that it
will have an advantage in marketing its recruitment services to companies using
AppTracker because of its familiarity with the software and the ease of EDI with
the Company. There is a possibility, however, that utilization of the software
will reduce reliance of certain customers on recruiting firms, including the
Company. Notwithstanding the foregoing, the Company does not anticipate any
material reduction in such reliance as a result of the utilization of this
software due to the difficulty of hiring IT professionals. Furthermore, the
Company intends to offer lower commission rates to customers using AppTracker
software to make it less likely that they will reduce the level of utilization
of the services of recruiting firms. The Company believes that the use of
AppTracker and its familiarity with the software will enable it to aid customers
in finding suitable, professionals in a more timely and cost efficient manner,
allowing for the decrease in prices charged by the Company.
EXPANSION AND ACQUISITIONS
The Company believes that it can leverage its base of IT professionals, its
reputation, and its IT system to achieve revenue growth by establishing new
offices in other regional markets. Such offices may be established by opening
new offices and staffing them with local recruiters and sales people or by
acquiring complimentary or competitive companies.
The Company primarily intends to focus its expansion in large U.S. cities,
such as Atlanta, Chicago, San Francisco and Austin. The Company is selecting
locations that have other offices of its existing customers, such as Chicago,
the headquarters of Harris Bank & Trust, or areas with numerous technology
companies, such as Austin. In addition to attracting local IT professionals, the
Company intends to attempt to recruit Canadian and other foreign IT
professionals for these positions in the U.S. Due to the strength of the U.S.
dollar against the Canadian dollar and other currencies, the Company believes
that foreign IT professionals will find the economic opportunities in the U.S.
attractive. The Company is currently endeavoring to expand its operations in the
northeastern United States by the July 1998 hiring of John J. Silver as Senior
Vice President and placing him in charge of the New York office. Mr. Silver has
existing relationships with numerous potential customers in the New York market.
The Company believes that recruiters in other markets will find the Company to
be an attractive place to work because of the Company's existing relationships
with multinational and other large corporate clients, the Company's good
reputation among IT professionals, the Company's quality information technology
system and the Company's incentive based compensation package which will
generally combine base salary, bonuses, commissions and incentive stock options.
The Company has also expanded in Ontario, Canada in order to obtain
additional business from large Canadian customers. For example, the Company is
opening an office in Ottawa in order to expand its relationship with Bell
Canada. The Company believes that other large customers with offices or
affiliated offices in Ottawa will consider using the Company's services in that
city, providing the Company's sales force an advantage in building relationships
when compared with other companies opening new offices.
The Company may seek to establish offices in smaller markets that contain
desirable customers. The Company believes that it can do so in a cost effective
manner because of the strength of its IT system. A single recruiter/sales person
can operate a "virtual office" by utilizing the Toronto office's database and
other operational systems via the Company's intranet. For example, the Company
intends to open an office in Indian Wells, California to provide services to
U.S. Filters and Armtech Incorporated.
The Company may also expand by acquiring complementary or competitive
Companies, including existing IT staffing companies, which will provide an
immediate increase to the Company's customer base and in some circumstances,
providing a more cost effective method of expansion than opening a new office.
The Company intends to target companies who have a strong customer base or group
of IT professionals, but do not utilize an advanced internal IT system. The
Company believes that providing an acquired company access to the Company's IT
system will allow the acquired company to provide better
35
<PAGE>
service without substantially increasing costs, which may also lead to increased
revenue. Although, due to consolidation in the industry, there is competition
for the acquisition of companies in the IT staffing industry, the Company
intends to avoid competing for acquisition candidates by focusing on smaller
companies.
The Company may also utilize acquisitions or hiring of new employees to
achieve growth in its existing markets. The Company utilized the acquisitions of
Systems and ICS in the metropolitan Toronto area to acquire access to
experienced recruiters with an existing customer base.
With regard to customer services, the Company plans to implement a
decentralized management plan. The Company believes that allowing existing
management of an acquired company to remain an important part of its operations
will be beneficial in retaining customers, recruiters and IT professionals.
Similarly, local recruiters and sales people hired to staff new offices will
have the flexibility to continue relationships with customers and IT
professionals. The Company's intranet will provide all offices full access to
the Company's databases and operating software, promoting a uniformity in
certain functions. The Company intends to hold monthly meetings of its
Operations Committee, which will consist of the heads of each regional office
and subsidiary, to exchange information on industry trends and promote "best
practices" among the offices. With regard to financial controls, the Company
plans to have a fully integrated system which will allow control of cash flows
and accounting and payroll functions from the Toronto office.
COMPETITION
The IT staffing industry is highly competitive and fragmented and is
characterized by low barriers to entry. The Company competes for potential
clients with other providers of IT staffing services, systems integrators,
providers of outsourcing services, computer consultants, employment listing
services and temporary personnel agencies. Many of the Company's current and
potential competitors have longer operating histories, significantly greater
financial, marketing and human resources, greater name recognition and a larger
base of IT professionals and clients than the Company which may provide such
competitors with a competitive advantage when compared to the Company. In
addition, many of these competitors, including numerous smaller privately held
companies, may be able to respond more quickly to customer requirements and to
devote greater resources to the marketing of services than the Company. Because
there are relatively low barriers to entry, the Company expects that competition
will increase in the future. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
materially and adversely affect the Company's business, prospects and financial
condition and results of operations. Further, there can be no assurance that the
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on its business, prospects, financial condition and
results of operations. The Company believes that the principal factors relevant
to competition in the IT staffing services industry are the recruitment and
retention of highly qualified IT professionals, rapid and accurate response to
client requirements and, to a lesser extent, price. The Company believes that it
competes favorably with respect to these factors.
PROPERTY AND FACILITIES
The Company maintains its headquarters in a 6,000 square foot office located
at 55 University Avenue in Toronto Canada. The Company has leased such facility
for a term of ten years terminating in
36
<PAGE>
November 2007. The Company pays annual rent of $46,200, which will increase to
$55,000 commencing in December 2002. The Company leases additional offices at
the following locations:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET LEASE EXPIRATION CURRENT RENT PER ANNUM
- ----------------------------------------------------- ------------- -------------------- -----------------------
<S> <C> <C> <C>
Etobicoke, Ontario................................... 2,000 4/13/03 $ 22,300
New York, New York................................... 295 10/31/98 $ 74,400
(extended quarter)
to quarter
Tampa, Florida....................................... 188 2/28/99 $ 4,080
Scarborough, Ontario................................. 6,000 5/31/01 $ 39,000
</TABLE>
EMPLOYEES AND CONSULTANTS
EMPLOYEES:
The Company's corporate staff at June 30, 1998 consisted of 65 full-time
employees, including 43 recruiters, 10 account managers/salespeople and 12
administrative employees. The Company is not a party to any collective
bargaining agreements covering any of its employees, has never experienced any
material labor disruption and is unaware of any current efforts or plans to
organize its employees. The Company considers its relationships with its
employees to be good.
CONSULTANTS:
The Company enters into consulting agreements with the IT professionals at
hourly rates negotiated with each IT professional based on such individuals
technical and other skills. The agreements provide that the IT professional is
responsible for taxes and all other expenses and that the IT professional is not
an employee of the Company for tax or other legal purposes. At September 1,
1998, approximately 160 contract workers placed by the Company were performing
services for the Company's customers.
LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Declan French........................................ 54 Chairman of the Board of Directors, President, Chief
Executive Officer and Director
John R. Wilson....................................... 45 President--Systems
John A. Irwin........................................ 45 President--ICS
John J. Silver....................................... 41 Senior Vice President
Lloyd Maclean........................................ 45 Chief Financial Officer and Director
William J. Neill..................................... 45 Director Nominee
John Dunne........................................... 55 Director Nominee
Blair Taylor......................................... 45 Director Nominee
James Reddy.......................................... 59 Director Nominee
Robert M. Rubin...................................... 54 Director Nominee
</TABLE>
Each director is elected for a period of one year at the Company's annual
meeting of shareholders and serves until the next such meeting and until his or
her successor is duly elected and qualified. Directors may be re-elected
annually without limitation. Officers are appointed by, and serve at the
discretion of, the Board of Directors. The Company's directors do not presently
receive any compensation for their services as directors' but it is contemplated
that directors will be granted options pursuant to the Plan. In addition, for a
period of three years following the date of this Prospectus, the Representative
shall have the right, at its option, to designate one director or observor to
the Board of Directors, which director shall be reasonably acceptable to the
Board of Directors.
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
DECLAN FRENCH has served as the Company's Chairman of the Board of
Directors, President and Chief Executive Officer since the inception of the
Company in February 1994. Prior to founding the Company, Mr. French was
President and Chief Executive Officer of TEC Partners Ltd., a IT recruiting firm
in Toronto, Canada. Mr. French has a diploma in Psychology and Philosophy from
the University of St. Thomas in Rome, Italy.
JOHN R. WILSON has served as President of Systems since 1982 and was its
sole shareholder prior to its sale to the Company in April 1998. Mr. Wilson is a
member of the Company's Operations Committee.
JOHN A. IRWIN has served as President of ICS since 1980 and was its sole
shareholder prior to its sale to the Company in May 1998. Mr. Irwin has a degree
in Computer Programming from Cambridge College of Arts and Technology. Mr. Irwin
is a member of the Company's Operations Committee.
JOHN J. SILVER has served as a Senior Vice-President of the Company since
July 1998. From April 1995 until July 1998, Mr. Silver served as Director of
Professional Services Volt Technical Services, a New York based IT staffing
firm, where he was in charge of managed services for major accounts. From
November 1994 until March 1995, he was a regional manager for ADIA Personell
Services in Santa Monica, California. From July 1992 until November 1994, Mr.
Silver was a regional Vice President for Spectrum Information Technolgies/Data
One in Lancaster, California. Mr. Silver has a marketing degree from Suffolk
College. Mr. Silver is a member of the Company's Operations Committee.
LLOYD MACLEAN has served as the Company's Chief Financial Officer since
September 1997. Mr. Maclean is the sole officer and director of Globe Capital
Corporation. From 1996 to 1997,
38
<PAGE>
Mr. Maclean was Vice-President and Chief Financial Officer of ING Direct Bank of
Canada. From 1994 until 1996, he was Vice-President and Chief Financial Officer
of North American Trust, Inc., where he also served as a Vice President from
1990 until 1994. Mr. Maclean has an MBA from Harvard University and is a member
of the Canadian Institute of Chartered Accountants.
WILLIAM J. NEILL has been nominated and has agreed to join the Board of
Directors after the Closing of the Offering. Mr. Neill has served as Publisher
and Chief Executive Officer of the Financial Post since October 1997. From 1996
until 1997, Mr. Neill was Publisher of the Ottawa Sun. From 1993 until 1996, he
was a Vice-President of the Financial Post. Mr. Neill has an MBA from Queens
University in Kingston, Ontario.
BLAIR TAYLOR has been nominated and has agreed to join the Board of
Directors after the Closing of the Offering. Since July 1997, Mr. Taylor has
served as Director of Finance and Operations for Phoenix Research and Trading
Corporation. From 1993 to 1997, he was a managing director of CIBC Wood Gundy
Securities, Inc. Mr. Taylor has a degree in computer science from the University
of Waterloo and is a member of the Canadian Institute of Chartered Accountants.
JOHN DUNNE has been nominated and has agreed to join the Board of Directors
after the Closing of the Offering. Mr. Dunne has been Chairman and Chief
Executive Officer of the Great Atlantic & Pacific Company of Canada, Ltd ("Great
Atlantic") since August 1997, where he also served as President and Chief
Operating Officer from September 1996 until August 1997. From November 1995
until September 1996, Mr. Dunne was Chairman and Chief Executive Officer of Food
Basics Ltd. Prior to that, he had served as Vice Chairman and Chief
Merchandising Officer of Great Atlantic.
JAMES REDDY has been nominated and has agreed to join the Board of Directors
after the Closing of the Offering. Mr. Reddy has served as Chief Financial
Officer of Gemstar Communications, Inc. since July 1998. From July 1997 to July
1998, Mr. Reddy was an independent management consultant. He is a member of the
Canadian Institute of Chartered Accountants. From 1989 to 1997, he was employed
by DFI Securities, Inc., most recently as Chief Financial Officer.
ROBERT M. RUBIN has been nominated and has agreed to join the Board of
Directors after the Closing of the Offering. Mr. Rubin has served as Chairman of
the Board of Diplomat Direct Marketing Corporation since 1992. Between October,
1990 and January 1, 1994 Mr. Rubin served as the Chairman of the Board of
Directors and Chief Executive Officer of American United Global Inc., a
telecommunications and software company ("AUGI") and since January 1, 1994,
solely as Chairman of the Board of Directors of AUGI. Mr. Rubin was formerly a
Director and Vice Chairman of the Board of Directors, and is a minority
stockholder of American Complex Care, Incorporated ("ACCI"). In April 1995, the
principal operating subsidiaries of ACCI petitioned in the Circuit Court of
Broward County, Florida for an assignment for the benefit of creditors. Mr.
Rubin is also a Director, Chairman of the Board of Directors and minority
stockholder of Universal Self Care, Inc., and Response USA, Inc. and a director
of Kay Kotts Associates, Inc. and Med-Emerg International, Inc., each of which
are public companies. Mr. Rubin was Chairman of the Board of Directors, Chief
Executive Officer and remains a Director and a principal stockholder of ERD
Waste Corp., which filed for bankruptcy protection in 1997. Mr. Rubin was the
founder, President, Chief Executive Officer and a Director of Superior Care,
Inc. ("SCI") from its inceptioni in 1976 until May 1986 and continued as a
Director of SCI (now known as Olsten Corporation ("Olsten")) until the latter
part of 1987. Olsten, a New York Stock Exchange listed company is engaged in
providing home care and institutional staffing services and health care
management services.
COMMITTEES OF THE BOARD
In July 1998, the Board of Directors formalized the creation of a
Compensation Committee, which is comprised of Blair Taylor, William J. Neill and
Declan French. The Compensation Committee has (i) full power and authority to
interpret the provisions of, and supervise the administration of, the Plan and
(ii) the authority to review all compensation matters relating to the Company.
The Compensation
39
<PAGE>
Committee has not yet met and has not yet formulated compensation policies for
senior management and executive officers. However, it is anticipated that the
Compensation Committee will develop a company-wide program covering all
employees and that the goals of such program will be to attract, maintain, and
motivate the Company's employees. It is further anticipated that one of the
aspects of the program will be to link an employee's compensation to his or her
performance, and that the grant of stock options or other awards related to the
price of the Common Shares will be used in order to make an employee's
compensation consistent with shareholders' gains. It is expected that salaries
will be set competitively relative to the IT staffing industry and that
individual experience and performance will be considered in setting salaries.
In July, 1998, the Board of Directors also formalized the creation of an
Audit Committee, which is comprised of two or more directors of the Company
designated by a majority vote of the entire Board of Directors. A majority of
the Audit Committee are Directors who are not officers of the Company and who
are not and have not been employed by the Company or any affiliates thereof. The
Audit Committee currently consists of Lloyd Maclean, James Reddy and John Dunne
and is charged with reviewing the following matters and advising and consulting
with the entire Board of Directors with respect thereto: (i) the preparation of
the Company's annual financial statements in collaboration with the Company's
chartered accountants; (ii) annual review of the financial statements and annual
report of the Company; and (iii) all contracts between the Company and the
officers, directors and other affiliates thereof. The Audit Committee, like most
independent committees of public companies, does not have explicit authority to
veto any actions of the entire Board of Directors relating to the foregoing or
other matters; however, the Company's senior management, recognizing their own
fiduciary duty to the Company and its stockholders, is committed not to take any
action contrary to the recommendation of the Audit Committee in any matter
within the scope of its review.
OPERATIONS COMMITTEE
The Company has established an Operations Committee in order for the
Company's officers to exchange information on industry trends and promote "best
practices" among the offices. The head of each regional office and subsidiary
will serve on the Executive Committee. Currently, the Executive Operations
consists of Declan French, Lloyd Maclean, John A. Irwin, John R. Wilson and John
J. Silver.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Bylaws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Canadian law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the defense of
any civil, criminal or administrative action or proceeding to which such person
is made a party by reason of being or having been an officer or director of the
Company if such person was substantially successful on the merits in his or her
defense of the action and he or she acted honestly and in good faith with a view
to the best interests of the Company, and if a criminal or administrative action
that is enforced by a monetary penalty, such person had reasonable grounds to
believe his or her conduct was lawful.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriters pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriters in connection
with the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of
40
<PAGE>
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the last three fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000 during the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
YEAR/ OTHER
ENDED ANNUAL COM-
NAME AND PRINCIPAL POSITION DECEMBER COMPENSATION BONUS PENSATION
- ------------------------------------------------------------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Declan French...................................................... 1997 $ 104,275 -- $ 8,342
President, Chief Executive 1996 108,350 -- 8,668
Officer and Chairman of the 1995 5,001 -- 8,800
Board
John A. Irwin...................................................... 1997 139,034 -- 8,342
President-Systems 1996 -- -- --
1995 -- -- --
John R. Wilson..................................................... 1997 83,420 -- 20,855
President-ICS 1996 80,659 -- 10,113
1995 -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Declan French
whereby he will serve as the Company's Chairman of the Board, President and
Chief Executive Officer for a period of five years commencing on the effective
date of the Registration Statement of which this Prospects forms a part. Mr.
French shall be paid a base salary of $97,900 ($150,000 Cdn) and a bonus based
on a percentage of the Company's net income.
On May 19, 1998, in connection with the acquisition of ICS, the Company
entered into an employment agreement for John A. Irwin whereby he will serve as
President of ICS. The employment agreement is for a term of three years
commencing on January 1, 1998, the effective date of the acquisition of ICS. Mr.
Irwin receives a salary of $130,580 ($200,000 Canadian) plus a quarterly bonus
of 2% of all permanent placement service revenue and 2% of the gross profit all
contract services revenue.
In February 1998, in connection with the acquisition of Systems, the Company
entered into a three year employment agreement with John R. Wilson whereby he
will serve as President of Systems at a salary of $120,000 per year. The
agreement was effective as of January 2, 1997. Mr. Wilson receives a commission
of 10% of the permanent placement revenue of Systems. Additionally, he receives
$0.65 for every hour of contract services provided by IT Professionals placed by
Systems, provided that the gross margin on such hour exceeds $6.50. Pursuant to
the agreement, Mr. Wilson will have control of the day-to-day management of
Systems.
In August 1998, the Company entered into a one year employment with John J.
Silver whereby he will serve as a Senior Vice President. Mr. Silver is to be
paid an annual salary of $175,000 plus a bonus of 4% of the net income of the
Company's New York office. The agreement also requires the Company to grant Mr.
Silver 50,000 stock options exercisable at the initial public offering price.
The agreement is terminable by either party upon three months notice.
41
<PAGE>
CONSULTING AGREEMENTS
In May 1998, the Company entered into a consulting agreement with Robert M.
Rubin, a director of the Company, pursuant to which Mr. Rubin will aid the
Company in structuring and negotiating acquisitions, strategic partnerships and
other expansion opportunities. In exchange for such services, Mr. Rubin has been
granted an option to purchase 200,000 Common Shares at a purchase price of $2.10
per share and a consulting fee of $80,000 per year. The consulting agreement is
for a term of five years. Mr. Rubin has agreed not to sell, transfer, assign,
hypothecate or otherwise dispose of the Common Shares issuable upon exercise of
the options for a period of two years after exercise without the consent of the
Company.
STOCK OPTION PLAN
The Plan will be administered by the Compensation Committee or the Board of
Directors, which will determine among other things, those individuals who shall
receive options, the time period during which the options may be partially or
fully exercised, the number of Common Shares issuable upon the exercise of the
options and the option exercise price.
The Plan is effective for a period for ten years, expiring in 2008. Options
to acquire 435,000 Common Shares may be granted to officers, directors,
consultants, key employees, advisors and similar parties who provide their
skills and expertise to the Company. The Plan is designed to enable management
to attract and retain qualified and competent directors, employees, consultants
and independent contractors. Options granted under the Plan may be exercisable
for up to ten years, generally require a minimum two year vesting period, and
shall be at an exercise price all as determined by the Board of directors
provided that, pursuant to the terms of the Underwriting Agreement between the
Company and the Underwriters, the exercise price of any options may not be less
than the fair market value of the Common Shares on the date of the grant.
Options are non-transferable, and are exercisable only by the participant (or by
his or her guardian or legal representative) during his or her lifetime or by
his or her legal representatives following death.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 65, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant 90 days to
exercise the option, except for termination for cause which results in immediate
termination of the option.
The Company has agreed with the Representative not to grant any options
under the Plan at less than 100% of the fair market value of the Common Shares
at the date of the grant of the option.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan, subject to applicable securities regulation.
The Plan may be terminated or amended at any time by the Board of Directors,
except that the number of Common Shares reserved for issuance upon the exercise
of options granted under the Plan may not be increased without the consent of
the shareholders of the Company.
42
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to this offering and the transactions
contemplated thereby, with respect to the beneficial ownership of the Common
Shares by (i) each person known to the Company to beneficially own more than 5%
of the outstanding shares of Common Shares, (ii) each executive officer and
director of the Company and (iii) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE
COMMON SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
- --------------------------------------------------------------- ------------------- --------------------- -----------
<S> <C> <C> <C>
Declan A. French(2)............................................ 1,021,126 60.9% 38.1%
John R. Wilson................................................. 130,914 7.8% 4.9%
John A. Irwin.................................................. 130,914 7.8% 4.9%
Lloyd Maclean (3).............................................. 113,459 6.8% 4.2%
Robert M. Rubin (4)............................................ 200,000 10.7% 6.9%
All Executive Officers and Directors as a Group (5 persons).... 1,596,413 85.0% 55.5%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address is c/o IT Staffing Ltd., 55
University Avenue, Suite 505, Toronto, Ontario M5J 2H7.
(2) Includes 510,563 Common Shares owned by Christine French, the wife of Declan
French. Does not include 15,000 Common Shares owned by Patrick French, the
son of Mr. French, of which Mr. French disclaims beneficial ownership.
(3) Such Common Shares are owned by Globe Capital Corporation, an Ontario
corporation that is wholly owned by Lloyd Maclean.
(4) Consists of currently exercisable options to acquire 200,000 Common Shares
at an exercise price of $2.10 per share.
43
<PAGE>
CERTAIN RELATIONS AND RELATED PARTY TRANSACTIONS
In April 1998, the Company acquired all the issued and outstanding Capital
Shock of SCI and SPSI from John R. Wilson for $170,417 and 130,914 Common
Shares. The acquisition was effective as of January 2, 1997. SPSI is inactive
but holds certain assets utilized by Systems in its operations. Mr. Wilson was
not affiliated with the Company prior to the acquisition.
On May 19, 1998, the Company completed the acquisition of all the issued and
outstanding Capital Shock of International Career Specialists, Ltd. ("ICS") for
$340,838 in cash and 130,914 shares of Common Shares from John A. Irwin. In
connection with the acquisition, ICS made a distribution to Mr. Irwin of certain
ICS assets that were not necessary for the operation of the business. The
transaction was effective as of January 1, 1998. Mr. Irwin was not affiliated
with the Company prior to the acquisition.
The Company, through ICS, leases its Scarborough office facility from
1242541 Ontario Ltd., a corporation owned by John A. Irwin, President of ICS,
and certain other ICS employees. The three year lease, which expires in May
2001, requires annual rental payments of $60,000, which the Company believes is
as least as favorable as could be obtained from a non-affiliated third party.
In May 1998, the Company entered into a consulting agreement with Robert M.
Rubin, a director of the Company, pursuant to which Mr. Rubin will aid the
Company in structuring and negotiating acquisitions, strategic partnerships and
other expansion opportunities. In exchange for such services, Mr. Rubin received
an option to purchase 200,000 Common Shares at a purchase price of $2.10 per
share and a consulting fee of $80,000 per year. The consulting agreement is for
a term of five years. Mr. Rubin has agreed not to sell, transfer, assign,
hypothecate or otherwise dispose of the Common Shares issuable upon exercise of
the options for a period of two years after exercise without the consent of the
Company.
All future transactions between the Company and its officers, directors or
5% Shareholders, and their respective affiliates, will be on terms no less
favorable than could be obtained from unaffiliated third parties.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 2,677,875 Common
Shares outstanding (2,827,875 Common Shares outstanding if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 1,000,000
Common Shares offered hereby (1,150,000 shares if the Underwriters' over-
allotment option is exercised in full) and 1,265,499 of the 1,677,875 Common
Shares outstanding immediately prior to the offering giving effect to the sale
of the Selling Shareholder Shares) will be freely tradeable commencing 90 days
after the effective date of the registration statement of which this prospectus
is a part, without further registration thereunder, subject to compliance with
the volume requirements, the holding period and other requirements of Rule 144.
All executive officers and directors of the Company, the holders of Common
Shares outstanding immediately prior to the offering, and all the option holders
under the Plan have agreed (i) not to publicly sell, or otherwise dispose of,
any Common Shares or Common Shares issuable upon exercise of options or warrants
for a period of 18 months from the date of this offering without the
Representative's prior written consent; and (ii) not to privately sell or
otherwise dispose of any such shares during such period unless the proposed
transferee agrees to be bound by such restrictions on transfer. The
Representative may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to the above described
restrictions on sale.
For a period of 18 months from the date of this Prospectus, the Company has
agreed that it will not sell or otherwise dispose of any securities of the
Company without the prior written consent of the Representative, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, during such
period, the Company shall be entitled to issue (i) Common Shares in connection
with mergers and acquisitions, (ii) up to 435,000 Common Shares issuable upon
exercise of options which may be granted under the Plan, (iii) up to 22,125
Common Shares issuable upon the exercise of currently outstanding warrants which
will, except in certain circumstances, be issued for an aggregate exercise price
of $1.00, (iv) 200,000 Common Shares issuable upon the exercise of currently
exercisable options, the holder of which has agreed not to sell, transfer,
assign, hypothecate or otherwise dispose of such Common Shares for a period of
two years after he exercises such options without the consent of the Company and
(v) up to 100,000 Common Shares issuable upon the exercise of the
Representative's Warrants.
All of the 1,677,875 Common Shares outstanding prior to this offering are
"restricted securities" within the meaning of Rule 144 of the Securities Act
and, if held for at least one year, would be eligible for sale in the public
market in reliance upon, and in accordance with, the provisions of Rule 144
following the expiration of such one year period. As of December 31, 1997,
1,265,499 Common Shares had been held for at least one year. In general, under
Rule 144 as currently in effect, beginning 90 days after the date of this
Prospectus, a person or persons whose shares are aggregated, including a person
who may be deemed to be an "affiliate" of the Company, as the term is defined
under the Securities (an "Affiliate"), would be entitled to sell within any
three month period a number of shares beneficially owned for at least one year
that does not exceed the greater of (i) 1% of the then outstanding Common
Shares, or (ii) the average weekly trading volume in the Common Shares during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
who is not deemed to have been an affiliate of the Company during the 90 days
preceding a sale by such person and who has beneficially owned Common Shares for
at least two years may immediately sell such shares without regard to the
volume, manner of sale or notice requirements of Rule 144.
Rule 701 under the Securities Act provides that the Common Shares acquired
on the exercise of options granted under a written compensatory plan of the
Company or contract with the Company prior to the date of this Prospectus may be
resold by persons, other than Affiliates, beginning 90 days after the date of
this Prospectus, subject only to the manner of sale provisions of Rule 144 and
by Affiliates under Rule 144 without compliance with its one-year minimum
holding period, subject to certain limitations. There are 435,000 Common Shares
issuable upon the exercise of options which may be granted under the Plan prior
to the date of this Prospectus (the "Option Shares"). Except as otherwise
provided above, beginning 90
45
<PAGE>
days after the date of this Prospectus, the Option Shares, if any, would be
eligible for sale in reliance on Rule 701, subject to certain vesting
provisions.
Prior to this offering, there has been no public market for the Company's
securities. Following this offering, the Company cannot predict the effect, if
any, that sales of Common Shares pursuant to Rule 144 or otherwise, or the
availability of such shares of sale, will have on the market price prevailing
from time to time. Nevertheless, sales by the current shareholders of a
substantial number of Common Shares in the public market could materially
adversely affect prevailing market prices for the Common Shares. In addition,
the availability for sale of a substantial number of Common Shares acquired
through the exercise of the Representative's Warrants or the outstanding options
under the Plan could materially adversely affect prevailing market prices for
the Common Shares. See "Risk Factors--Shares Eligible for Future Sale."
46
<PAGE>
DESCRIPTION OF SECURITIES
The total authorized capital stock of the Company consist of an unlimited
number of Common Shares, with no par value, and 1,000,000 preferred shares, with
no par value per share. The following descriptions contain all material terms
and features of the Securities of the Company and are qualified in all respects
by reference to the Articles of Incorporation and Bylaws of the Company, copies
of which are filed as Exhibits to the Registration Statement of which this
Prospectus is a part.
COMMON SHARES
The Company is authorized to issue an unlimited number of Common Shares, no
par value per share, of which as of the date of this Prospectus, 1,677,876
Common Shares are outstanding, not including the Shares offered herein. All
outstanding Common Shares are, and all Common Shares to be outstanding upon the
closing of this offering will be, validly authorized and issued, fully paid, and
non-assessable.
The holders of Common Shares are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of Common
Shares are entitled to receive ratably dividneds 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 the Common
Shares are entitled to share ratably in all assets remaining, if any, after
payment of liabilities. Holders of Common Shares have no preemptive rights and
have no rights to convert their Common Shares into any other securities.
Pursuant to the Business Corporation Act, Ontario ("BCA"), a shareholder of
an Ontario Corporation has the right to have the corporation pay the shareholder
the fair market value for his shares of the corporation in the event such
shareholder dissents to certain actions taken by the corporation, such as
amalgamation or the sale of all or substantially all of the assets of the
corporation and such shareholder follows the procedures set forth in the BCA.
PREFERRED SHARES
The Company's Articles of Incorporation authorize the issuance of up to
1,000,000 preferred shares with designations, rights and preferences determined
from time to time by its Board of Directors. Accordingly, the Company's Board of
Directors is empowered, without shareholder approval, to issue preferred shares
with dividend, liquidation, conversion, or other rights that could adversely
affect the rights of the holders of the Common Shares. Although the Company has
no present intention to issue any preferred shares, there can be no assurance
that it will not do so in the future.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Continental Stock
Transfer & Trust Company.
47
<PAGE>
CERTAIN UNITED STATES AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
UNITED STATES
The following describes the principal United States federal income tax
consequences of the purchase, ownership and disposition of the Common Shares by
a shareholder, that is a citizen or resident of the United States or a United
States domestic corporation or that otherwise will be subject to United States
federal income tax (a "U.S. Holder"). This summary is based on the United States
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
the principal United States federal income tax consequences to those beneficial
owners holding the securities as capital assets within the meaning of Section
1221 of the Code and does not address the tax treatment of a beneficial owner
that owns 10% or more of the Common Shares. It is for general guidance only and
does not address the consequences applicable to certain specialized classes of
taxpayers such as certain financial institutions, insurance companies, dealers
in securities or foreign currencies, or United States persons whose functional
currency (as defined in Section 985 of the Code) is not the United States
dollar. Persons considering the purchase of these securities should consult
their tax advisors with regard to the application of the United States and other
income tax laws to their particular situations. In particular, a U.S. Holder
should consult his tax advisor with regard to the application of the United
States federal income tax laws to his situation.
A U.S. Holder generally will realize, to the extent of the Company's current
and accumulated earnings and profits, foreign source ordinary income on the
receipt of cash dividends, if any, on the Common Shares equal to the United
States dollar value of such dividends determined by reference to the exchange
rate in effect on the day they are received by the U.S. Holder (with the value
of such dividends computed before any reduction for any Canadian withholding
tax). U.S. Holders should consult their own tax advisors regarding the treatment
of foreign currency gain or loss, if any, on any dividends received which are
converted into United States dollars on a date subsequent to receipt. Subject to
the requirements and limitations imposed by the Code, a U.S. Holder may elect to
claim Canadian tax withheld or paid with respect to dividends on the Common
Shares as a foreign credit against the United States federal income tax
liability of such holder. Dividends on the Common Shares generally will
constitute "passive income" or, in the case of certain U.S. Holders, "financial
services income," for United States foreign tax credit purposes. U.S. Holders
who do not elect to claim any foreign tax credits may claim a deduction for
Canadian income tax withheld. Dividends paid on the Common Shares will not be
eligible for the dividends received deduction available in certain cases to
United States corporations.
Upon a sale or exchange of a Common Share, a U.S. Holder will recognize gain
or loss equal to the difference between the amount realized on such sale or
exchange and the tax basis of such Common Share.
Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long-term or short-term depending upon
the period of time the Common Shares sold or exchanged, as the case may be, were
held.
THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.
CANADA
The following is a summary of the principal Canadian federal income tax
considerations generally applicable to the acquisition, holding and disposition
of Common Shares purchased pursuant to this Prospectus by a holder (a "U.S.
holder") who, for the purposes of the INCOME TAX ACT (Canada) (the "ITA") and
the CANADA-UNITED STATES INCOME TAX CONVENTION (the "Convention"), as applicable
and at all relevant times, (i) is resident in the United States and not resident
in Canada, (ii) holds Common Shares as
48
<PAGE>
capital property, (iii) does not have a "permanent establishment" or "fixed
base" in Canada (as defined in the Convention), and (iv) deals at arm's length
with the Company. Special rules, which are not discussed in this summary, may
apply to "financial institutions" (as defined in the ITA) and to non-resident
insurers carrying on an insurance business in Canada and elsewhere.
This summary is based on the current provisions of the ITA and the
regulations thereunder and the Convention, all specific proposals to amend the
ITA or the regulations thereunder announced by the Canadian Minister of Finance
prior to the date of this Prospectus and the current published administrative
practices of Revenue Canada. This summary does not otherwise take into account
or anticipate any changes in law or administrative practice nor does it take
into account income tax laws or considerations of any province or territory of
Canada or any jurisdiction other than Canada, which may differ from the federal
income tax consequences described herein. This summary is of a general nature
only and is not intended to be, and should not be interpreted as, legal or tax
advice to any particular purchaser of Common Shares.
DIVIDENDS
Under the ITA and the Convention, dividends paid or credited, or deemed to
be paid or credited, on the Common Shares to a U.S. holder who owns less than
10% of the Company's voting shares will be subject to Canadian withholding tax
at the rate of 15% of the gross amount of such dividends or deemed dividends.
Under the Convention, dividends paid or credited to certain religious,
scientific, charitable and similar tax exempt organizations and certain pension
organizations that are resident, and exempt from tax, in the United States and
that have complied with certain administrative procedures are exempt from this
Canadian withholding tax.
DISPOSITION OF COMMON SHARES
A capital gain realized by a U.S. holder on a disposition or deemed
disposition of Common Shares will not be subject to tax under the ITA unless
such Common Shares constitute taxable Canadian property within the meaning of
the ITA at the time of the disposition or deemed disposition. In general, the
Common Shares will not be "taxable Canadian property" to a U.S. holder unless
they are not listed on a prescribed stock exchange (which includes the Nasdaq
SmallCap Market) or at any time within the five year period immediately
preceding the disposition the U.S. holder, persons with whom the U.S. holder did
not deal at arm's length, or the U.S. holder together with such persons owned or
had an interest in or a right to acquire more than 25% of any class or series of
the Company's shares. A deemed disposition of Common Shares will arise on the
death of a U.S. holder.
If the Common Shares are taxable Canadian property to a U.S. holder, any
capital gain realized on a disposition or deemed disposition of such Common
Shares will generally be exempt from tax under the ITA by virtue of the
Convention if the value of the Common Shares at the time of the disposition or
deemed disposition is not derived principally from real property (as defined by
the Convention) situated in Canada. The Company is of the view that the Common
Shares do not now derive their value principally from real property situated in
Canada; however, the determination as to whether Canadian tax would be
applicable on a disposition or deemed disposition of Common Shares must be made
at the time of the disposition or deemed disposition.
THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.
49
<PAGE>
INVESTMENT CANADA ACT
The Investment Canada Act, a Federal Canadian statute, regulates the
acquisition of control of existing Canadian businesses by any non-Canadian (as
that term is defined in the Investment Canada Act).
The Company is currently a Canadian (as that term is defined in the
Investment Canada Act). If a non-Canadian seeks to acquire control of the
Company, such acquisition will be subject to the Investment Canada Act. In
general, any transaction which is subject to the Investment Canada Act is a
reviewable transaction if the book value of the Company's assets, as set out in
its most recent financial statements, exceeds the applicable threshold. If the
potential acquiror is a WTO Investor, acquiring control of the Company would
only be reviewable if the book value of te Company assets exceeded Cdn$179
million. (This number is the threshold amount for 1998 and this amount is
increased each year by a factor equal to the increase in the rate of Canadian
inflation for the previous year). A WTO Investor is defined in the Investment
Canada Act as an investor ultimately controlled by nationals of World Trade
Organization member states, such as the United States of America.
If the book value of the Company's assets exceeds the applicable threshold
for review, the potential acquiror must file an application for review and
obtain the approval of the Minister of Industry before acquiring control of the
Company. In deciding whether to approve the reviewable transaction, the Minister
considers whether the investment "is likely to be of net benefit to Canada".
This determination is made on the basis of economic and policy criteria set out
in the Investment Canada Act.
The approval process begins with an initial review period of 45 days from
the date the completed application is received. However, the Minister of
Industry has authority to extend the review period unilaterally for 30 more
days. Any further extensions requires the potential acquiror's consent.
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for which Strasbourger
Pearson Tulcin Wolff Incorporated is acting as Representative, has severally,
and not jointly, agreed, to purchase the number of Shares offered hereby set
forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Strasbourger Pearson Tulcin Wolff Incorporated.......................................................
Total................................................................................................ 1,000,000
</TABLE>
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement, to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriters to purchase the
Shares is subject to certain conditions. The Underwriters shall be obligated to
purchase all of the Shares (other than those covered by the Underwriters'
over-allotment option described below), if any are purchased.
The Representative has advised the Company that the Underwriters propose to
offer the Shares to the public at the initial public offering price set forth on
the cover page of this Prospectus and that they may allow to certain dealers who
are members of the National Association of Securities Dealers, Inc. (the
"NASD"), and to certain foreign dealers, concessions not in excess of $
per Share, of which amount a sum not in excess of $ per Share may in
turn be reallowed by such dealers to other dealers who are members of the NASD
and to certain foreign dealers. After the commencement of this offering, the
offering price, the concession to selected dealers, and the reallowance to other
dealers may be changed by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or will
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has agreed to pay to the Representative an expense allowance, on
a non-accountable basis, equal to 3% of the gross proceeds derived from the sale
of 1,000,000 Shares offered hereby (or 1,150,000 Shares if the Underwriters'
over-allotment option is exercised in full). The Company paid an advance on such
allowances in the amount of $75,000. The Company has also agreed to pay certain
of the Representative's expenses in connection with this offering, including
expenses in connection with qualifying the Shares offered hereby for sale under
the laws of such states as the Representative may designate and the placement of
tombstone advertisements.
In connection with this offering, the Company has granted the Representative
the right, for the three-year period commencing on the closing date of this
offering, to appoint an observer to attend all meetings of the Company's Board
of Directors. This designee has the right to notice of all meetings of the Board
of Directors and to receive reimbursement for all out-of-pocket expenses
incurred in attending such meetings. In addition, such designee will be entitled
to indemnification to the same extent as the Company's directors.
The Company has agreed to retain the Representative as financial consultants
for a period of two years to commence on the closing of this offering at an
aggregate fee of $150,000, $100,000 of which shall be payable at the closing of
this offering and the remainder of which shall be due on the first anniversary
of such closing. Pursuant to this agreement, the Representative shall provide
advisory services related to mergers and acquisitions activity, corporate
finance and other matters.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales of the Shares offered hereby to any account over which
they exercise discretionary authority.
51
<PAGE>
The Company, its officers, directors, and shareholders, as well as the
holders of options under the Plan, have agreed not to offer, assign, issue,
sell, hypothecate, or otherwise dispose of any Common Shares, securities of the
Company convertible into, or exercisable or exchangeable for, Common Shares, or
Common Shares received upon conversion, exercise, or exchange of such
securities, to the public without the prior written consent of the
Representative for a period of 18 months from the date of this Prospectus.
Prior to this offering, there has been no public trading market for the
Common Shares. The initial public offering price for the Shares will be
determined by arms-length negotiations between the Company and the
Representative and does not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition, or other
established criteria of value. Among the factors to be considered in such
negotiations will be prevailing market conditions, the history and prospects for
the Company and the industry in which the Company competes, an assessment of the
Company's management, its capital structure, and such other factors deemed
relevant.
The Company has also granted to the Underwriters an option, exercisable
during the 45-day period commencing on the date of this Prospectus, to purchase
at the public offering price per share, less the underwriting discounts and
commissions, up to an aggregate of 150,000 Common Shares. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase additional Common Shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table. The
Underwriters may exercise such right of purchase only for the purpose of
covering over-allotments, if any, made in connection with the sale of Shares.
Purchases of Common Shares upon exercise of the over-allotment option will
result in the realization of additional compensation by the Underwriters.
In connection with this offering, the Company has agreed to sell to the
Representative, individually and not as Representative of the several
Underwriters, at the price of $.001 per warrant, the Representative's Warrants
to purchase 100,000 Common Shares. The Representative's Warrants are exercisable
for a period of four years commencing one year from the date of this Prospectus
at an exercise price per share (the "Exercise Price") equal to 110% of the
public offering price per share. The Representative's Warrants may not be sold,
transferred, assigned, pledged, or hypothecated for a period of 12 months from
the date of the Prospectus, except to members of the selling group and to
officers and partners of the Representative and members of the selling group.
The Representative's Warrants contain anti-dilution provisions providing for
adjustments of the Exercise Price and number of shares issuable on exercise of
the Representative's Warrants, upon the occurrence of certain events, including
dividends, stock splits, and recapitalizations. The holders of the
Representative's Warrants have no voting, dividend, or other rights as
stockholders of the Company with respect to Common Shares underlying the
Representative's Warrants, unless the Representative's Warrants shall have been
exercised.
A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the Representative's Warrants and the Warrant
Shares. The Company has agreed, on one occasion during the period beginning one
year after the date of this Prospectus and ending four years thereafter, if
requested by the holders of a majority of the Representative's Warrants or
Warrant Shares, to make all necessary filings to permit a public offering of the
Representative's Warrants and Warrant Shares and to use its best efforts to
cause such filing to become effective under the Securities Act and to remain
effective for at least 12 months, at the Company's sole expense. Notwithstanding
the foregoing, the Company shall have no obligation to prepare and file such new
registration statement or post-effective amendment to the Registration Statement
if, within 20 days after it receives the request therefor, the Company or
insiders who own individually in excess of 2% of the Common Shares agree to
purchase the Representative's Warrants and/or the underlying securities from
such requesting holders at a price, in the case of the Representative's
Warrants, equal to the difference between the exercise price of the
Representative's Warrants and the current market price (as defined) of the
underlying securities. In addition, the Company has agreed to give advance
notice to holders of the Representative's Warrants and Warrant Shares of its
intention to file a registration
52
<PAGE>
statement, and in such case, holders of the Representative's Warrants and the
Warrant Shares shall have the right to require the Company to include the
Warrant Shares in such registration statement at the Company's expense (subject
to certain limitations).
During and after this offering, the Underwriters may purchase and sell
Common Shares in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with this offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Shares sold in this offering for their
account may be reclaimed by the syndicate if such shares are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Shares
which may be higher than the price that might otherwise affect the market price
of the Common Shares, which may be higher than the price that might otherwise
prevail in the open market. Neither the Company nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Shares. In addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions of that
such transactions, once commenced, will not be discontinued at any time.
The Company has granted the Representative, individually and not as the
Representative of the several Underwriters, a right of first refusal to act as
the Company's investment banker with respect to future financings or any merger,
acquisition, or disposition of assets of the Company for a period of two years
from the date of this Prospectus.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."
LEGAL MATTERS
Certain legal matters relating to Canadian law, including the validity of
the issuance of the Common Shares offered hereby, will be passed upon for the
Company by McMillan Binch, Toronto, Ontario. Certain legal matters in connection
with the offering will be passed upon for the Company by its United States
counsel, Gersten, Savage, Kaplowitz & Fredericks, LLP, New York, New York.
Certain legal matters will be passed upon for the Underwriters by Brock
Silverstein McAuliffe LLC.
EXPERTS
The financial statements of the Company for each of the two fiscal years
ended December 31, 1996 and 1997, appearing in this Prospectus and Registration
Statement have been audited by Schwartz Levitsky Feldman, Chartered Accountants,
as set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Act with respect to the Common Shares offered hereby. This Prospectus omits
certain information contained in the Registration Statement and the exhibits
thereto, and references are made to the Registration Statement and the exhibits
thereto for further information with respect to the Company and the Common
Shares offered hereby. Statements contained herein concerning the provisions of
any documents are not necessarily complete, and in each instance reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by such reference.
The Registration Statement, including exhibits and schedules filed therewith,
may be inspected without charge at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
53
<PAGE>
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and its public reference facilities in New York, New York and
Chicago, Illinois upon payment of the prescribed fees. Electronic registration
statements filed through the Electronic Data Gathering, Analysis, and Retrieval
System are publicly available through the Commission's Web site
(http://www.sec.gov). Further information on public reference rooms available at
the Commission is available by contacting the Commission at 1-(800) SEC-0330.
54
<PAGE>
IT STAFFING LTD.
CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors................................................................. F-2
Consolidated Balance Sheets.................................................................... F-3
Consolidated Statements of Income.............................................................. F-4
Consolidated Statements of Stockholders' Equity................................................ F-5
Consolidated Statements of Cash Flows.......................................................... F-6
Notes to Consolidated Financial Statements..................................................... F-7
</TABLE>
SUPPLEMENTARY SCHEDULES
<TABLE>
<S> <C>
Consolidated Schedules of Expenses............................................................. F-15
</TABLE>
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(EXPRESSED IN U.S. DOLLARS)
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................................................... F-17
Balance Sheets................................................................................. F-18
Statement of Income............................................................................ F-19
Statements of Cash Flows....................................................................... F-20
Statement of Stockholder's Equity.............................................................. F-21
Notes to Financial Statements.................................................................. F-22
Schedules of Expenses.......................................................................... F-26
</TABLE>
SYSTEMSEARCH CONSULTING SERVICES INC.
FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(EXPRESSED IN U.S. DOLLARS)
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................................................... F-28
Balance Sheets................................................................................. F-29
Statements of Income........................................................................... F-30
Statements of Stockholders' Equity............................................................. F-31
Statements of Cash Flows....................................................................... F-32
Notes to Financial Statements.................................................................. F-33
SUPPLEMENTARY INFORMATION
Schedules of Expenses.......................................................................... F-36
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
IT Staffing Ltd.
We have audited the accompanying consolidated balance sheets of IT Staffing
Ltd. (incorporated in Canada) as of December 31, 1997 and 1996 and the related
consolidated statements of income, cash flows and stockholders' equity for the
years ended December 31, 1997 and 1996. These consolidated financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
IT Staffing Ltd. as of December 31, 1997 and 1996 and the consolidated results
of its operations and its cash flows for the years ended December 31, 1997 and
1996, in conformity with generally accepted accounting principles in the United
States of America. Toronto, Ontario
July 27, 1998
Chartered Accountants
F-2
<PAGE>
IT STAFFING LTD.
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31 AND JUNE 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................................... 113,670 -- -- --
Accounts receivable (note 3)............................ 1,495,213 628,940 761,570 211,928
Prepaid expenses........................................ 106,208 33,256 7,981 4,352
----------- ----------- ------------ ------------
1,715,091 662,196 769,551 216,280
CAPITAL ASSETS (note 4)................................... 90,412 37,068 47,955 22,000
GOODWILL (note 5)......................................... 1,318,923 498,255 472,825 --
----------- ----------- ------------ ------------
3,124,426 1,197,519 1,290,331 238,280
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (note 6).............................. 78,366 52,824 210,137 117,653
Accounts payable........................................ 826,042 572,120 388,250 84,742
Income taxes payable.................................... 147,277 32,307 50,786 6,421
Note payable (note 7)................................... -- 217,313 104,858 --
Current portion of long-term debt (note 8).............. 87,648 8,693 13,049 7,296
Advances from stockholders.............................. -- 52,908 49,749 29,988
----------- ----------- ------------ ------------
1,139,333 718,852 816,829 246,099
LONG-TERM DEBT (note 8)................................... 414,484 26,802 21,671 4,864
----------- ----------- ------------ ------------
1,553,817 745,654 838,500 250,964
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (note 9).................................... 1,248,368 328,327 328,327 4
CUMULATIVE TRANSLATION ADJUSTMENT......................... (72,818) (3,028) (18,133) 59
RETAINED EARNINGS (DEFICIENCY)............................ 395,059 126,566 141,637 (12,747)
----------- ----------- ------------ ------------
1,570,609 451,865 451,831 (12,684)
----------- ----------- ------------ ------------
3,124,426 1,197,519 1,290,331 238,280
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
APPROVED ON BEHALF OF THE BOARD
________________________Director
F-3
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31 AND JUNE 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
REVENUE
Contract services..................................... 4,048,620 1,679,385 3,729,703 295,980
Permanent placements.................................. 1,269,387 476,620 974,638 468,207
----------- ----------- ------------ ------------
5,318,007 2,156,005 4,704,341 764,187
COST OF CONTRACT SERVICES................................. 3,120,411 1,286,001 2,888,540 259,334
----------- ----------- ------------ ------------
GROSS PROFIT.............................................. 2,197,596 870,004 1,815,801 504,853
----------- ----------- ------------ ------------
EXPENSES
Selling............................................... 1,272,301 523,554 1,123,051 273,689
Administrative........................................ 419,036 131,284 315,855 158,944
Financial............................................. 117,837 58,365 176,390 36,665
----------- ----------- ------------ ------------
1,809,174 713,203 1,615,296 469,298
----------- ----------- ------------ ------------
INCOME BEFORE INCOME TAXES................................ 388,422 156,801 200,505 35,555
Income taxes.......................................... 135,000 17,488 46,121 5,353
----------- ----------- ------------ ------------
NET INCOME................................................ 253,422 139,313 154,384 30,202
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
NET INCOME PER WEIGHTED AVERAGE SHARE..................... 13 11 12 3
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (note
9)...................................................... 1,821,095 1,309,135 1,309,135 1,021,125
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK RETAINED CUMULATIVE
NUMBER OF EARNINGS TRANSLATION
SHARES AMOUNTS (DEFICIT) ADJUSTMENTS
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
$ $ $
Balance as of December 31, 1995.................................. 780,000 4 (20,948) --
Foreign currency translation..................................... -- -- -- 59
Dividends paid................................................... -- -- (22,001) --
Net income for the year.......................................... -- -- 30,202 --
---------- ---------- --------- -----------
Balance as of December 31, 1996.................................. 780,000 4 (12,747) 59
Common shares issued............................................. 220,000 328,323 -- --
Foreign currency translation..................................... -- -- -- (3,087)
Net income for the period........................................ -- -- 139,313 --
---------- ---------- --------- -----------
Balance as of June 30, 1997...................................... 1,000,000 328,327 126,566 (3,028)
Foreign currency translation..................................... -- -- -- (15,105)
Net income for the period........................................ -- -- 15,071 --
---------- ---------- --------- -----------
Balance as of December 31, 1997.................................. 1,000,000 328,327 141,637 (18,133)
Common shares issued............................................. 281,667 1,100,041 -- --
Foreign currency translation..................................... -- -- -- (54,685)
Net income for the period........................................ -- -- 253,422 --
---------- ---------- --------- -----------
Balance as of June 30, 1998...................................... 1,281,667 1,248,368 395,059 (72,818)
---------- ---------- --------- -----------
---------- ---------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31 AND JUNE 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. 253,422 139,313 154,384 30,202
----------- ----------- ------------ ------------
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Amortization.......................................... 9,832 4,567 16,968 5,037
Amortization of goodwill.............................. 31,060 -- 8,282 --
Decrease (increase) in accounts receivable............ (768,316) (421,017) (577,114) (211,535)
Decrease(increase) in prepaid expenses................ (100,432) (29,847) (4,672) (3,629)
Decrease (increase) in note payable................... (104,273) 218,603 108,350 --
Increase (decrease) in accounts payable............... 456,766 272,280 317,281 60,934
Decrease (increase) in income taxes payable........... (89,852) 26,087 46,121 6,454
----------- ----------- ------------ ------------
Total adjustments....................................... (385,511) 70,673 (84,784) (142,739)
----------- ----------- ------------ ------------
Net cash generated by operating activities.............. (132,089) 209,986 69,600 (112,537)
----------- ----------- ------------ ------------
Cash flows from investing activities:
Purchases of capital assets............................. (54,397) (19,883) (44,739) (25,830)
Incorporation costs..................................... -- 740 733 (744)
Acquisition of goodwill................................. (906,631) (501,214) (496,851) --
----------- ----------- ------------ ------------
Net cash used in investing activities................... (961,028) (520,357) (540,857) (26,574)
----------- ----------- ------------ ------------
Cash flows from financing activity:
Increase (decrease) in long-term debt................... 477,821 23,560 23,837 12,223
Proceeds from issuance of capital stock................. 909,752 327,905 325,051 --
Increase (decrease) in advances from shareholders....... (49,471) 23,272 21,716 30,142
Payment of dividends.................................... -- -- -- (22,001)
----------- ----------- ------------ ------------
1,338,102 374,737 370,604 20,364
----------- ----------- ------------ ------------
Effect of foreign currency exchange rate changes.......... (4,904) (4,186) 5,719 8,394
----------- ----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents...... 240,081 60,180 (94,934) (110,353)
Cash and cash equivalents
-- Beginning of year.................................... (204,796) (109,862) (109,862) 491
----------- ----------- ------------ ------------
-- End of year.......................................... 35,285 (49,682) (204,796) (109,862)
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Interest paid............................................. 50,434 17,257 42,153 8,762
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Income taxes paid......................................... 34,721 -- 2,000 --
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
1. BASIS OF PRESENTATION
The consolidated financial statements for the six months ended June 30, 1998
and 1997 are unaudited. The interim results are not necessarily indicative of
the results for any future period. In the opinion of management, the data in the
consolidated financial statements reflects all adjustments necessary for a fair
presentation of the results of the interim periods disclosed. All adjustments
are of a normal and recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. The earnings of the subsidiaries are
included from the date of acquisition. All significant inter-company
accounts have been eliminated.
b) Principal Business Activity
IT Staffing is an information technology staffing company, which along
with its subsidiaries System Search Consulting Services Inc. and
International Career Specialists Ltd., specialize in placing information
technology personnel on both a contract and permanent basis
System Search Consultants Inc. was purchased by IT Staffing Ltd. in a
transaction effective January 2, 1997. The acquisition was accounted for
using the purchase method.
International Career Specialists Ltd. was purchased by IT Staffing Ltd.
in a transaction effective January 1, 1998. The acquisition was accounted
for using the purchase method.
c) Bank indebtedness and Cash Equivalents
Bank indebtedness and cash equivalents include cash on hand, amounts due
to banks, and any other highly liquid investments purchased with a
maturity of three months or less. The carrying amount approximates fair
value because of the short maturity of those instruments.
d) Other Financial Instruments
The carrying amount of the company's other financial instruments
approximate fair value because of the short maturity of these instruments
or the current nature of interest rates borne by these instruments.
e) Long-term Financial Instruments
The fair value of each of the company's long-term financial assets and
debt instruments is based on the amount of future cash flows associated
with each instrument discounted using an estimate of what the company's
current borrowing rate for similar instruments of comparable maturity
would be.
f) Capital Assets
Property and equipment are recorded at cost and are depreciated on the
declining balance basis over their estimated useful lives.
F-7
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
g) Revenue
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements is recognized upon commencement of
employment.
h) Goodwill
Goodwill representing the cost in excess of the fair value of net assets
acquired related to the acquisitions of System Search Consulting Services
Inc. and International Career Specialists Ltd. is being amortized on a
straight-line basis over a thirty year period. The Company calculates the
recoverability of goodwill on a quarterly basis by reference to estimated
undiscounted future cash flows.
i) Foreign Currency Translation
The translation of the consolidated financial statements from Canadian
dollars ("CDN $") into United States dollars is performed for the
convenience of the reader. Balance sheet accounts are translated using
closing exchange rates in effect at the balance sheet date and income and
expense accounts are translated using an average exchange rate prevailing
during each reporting period. No representation is made that the Canadian
dollar amounts could have been, or could be, converted into United States
dollars at the rates on the respective dates or at any other rates.
Adjustments resulting from the translation are included in the cumulative
translation adjustments in stockholders' equity.
j) Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Accounts receivable....................................... 1,529,278 591,532 778,334 197,894
Less: Allowance for doubtful accounts..................... 34,065 -- 36,117 --
----------- ----------- ------------ ------------
Accounts receivable, net.................................. 1,495,213 591,532 742,217 197,894
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-8
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31,
----------------------------------- 1996
ACCUMULATED -------------
COST AMORTIZATION NET NET
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Furniture and equipment.......................................... 40,565 16,000 24,565 14,084
Computer equipment............................................... 25,477 9,078 16,399 7,175
Computer software................................................ 13,982 6,991 6,991 --
Incorporation costs.............................................. 710 710 -- 741
--------- ------ --------- ------
80,734 32,779 47,955 22,000
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ ----------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Furniture and equipment................................... 99,704 39,146 60,559 25,894
Computer equipment........................................ 38,511 21,160 17,351 10,806
Computer software......................................... 13,626 10,219 3,406 --
Incorporation costs....................................... 692 692 -- 368
Automobile................................................ 18,105 9,009 9,096 --
----------- ----------- ------ ------
170,638 80,226 90,412 37,068
----------- ----------- ------ ------
----------- ----------- ------ ------
</TABLE>
Amortization for the period ended June 30, 1998 amounted to $9,832 ; ($4,567
for the six months ended in June 1997).
5. GOODWILL
Goodwill is the excess of cost over the value of assets acquired over
liabilities assumed.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ -------------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ -----------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Cost...................................................... 1,358,264 468,620 469,091 --
Accumulated amortization.................................. 39,341 -- 8,282 --
--
----------- ----------- ------------
Net....................................................... 1,318,923 468,620 460,809
--
--
----------- ----------- ------------
----------- ----------- ------------
Amortization for the period............................... 31,059 -- 8,282 --
--
--
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-9
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
6. BANK INDEBTEDNESS AND LINE OF CREDIT
The companies have available a line of credit to a maximum of $500,000,
which bears interest at Canadian prime plus 2.1% per annum and is secured by a
general assignment of book debts, a general security agreement and guarantees
and postponements of claims by various affiliated companies.
7. NOTES PAYABLE
Notes payable are represented by $104,858 ($108,657 in June 1997) of notes
payable in conjunction with the acquisition of Systems Search Consulting Ltd. A
second note for $108,656 was outstanding June 1997 representing a short-term
bank advance made against the companies' line of credit.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Included therein
a) A BDC loan, secured by a general security agreement,
with a carrying value of $272,517, payable in 1 payment
of $4,529 on September 23, 1998 and 59 equal monthly
payments of $4542 commencing thereafter, plus interest
of prime plus 4% per annum. Currently the interest rate
is 12.4%. In addition IT Staffing Ltd. shall pay
interest monthly by way of a royalty of 0.0436% per
annum of IT Staffing Ltd.'s projected annual gross
sales.................................................. 272,517 -- -- --
----------- ----------- ------------ ------------
Balance forward........................................... 272,517 -- -- --
----------- ----------- ------------ ------------
a) Balance forward........................................ 272,517 -- -- --
A BDC loan, secured by a general security agreement,
with a carrying value of $204,388 payable in 60 monthly
payments of $3,406 plus interest of prime plus 4% per
annum. Currently, the interest rate is 12.5%. In
addition IT Staffing Ltd. shall pay interest monthly by
way of royalty of 0.0198% per annum of its projected
gross annual sales...................................... 204,388 -- -- --
Bank loan secured by a general security agreement, with
a carrying value of $24,941 payable in 37 remaining
monthly payments of $722 plus interest of prime plus 5%,
per annum. Currently, the interest rate is 13.5%........ 24,941 35,495 28,974 --
</TABLE>
F-10
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
8. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
A National Bank of Canada non-revolving, demand loan
currently with no outstanding balance. Payments were
made on a monthly basis in the amount of $608 for 24
months, at a rate of prime plus 2% per annum............ -- -- 5,746 11,355
----------- ----------- ------------ ------------
501,846 35,495 34,720 11,355
Less: Current portion................................... 87,648 8,693 13,049 6,813
----------- ----------- ------------ ------------
414,198 26,802 21,671 4,542
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
b) Future principal payments consist of the following as of June 30, 1998:
<TABLE>
<S> <C>
June 30, 1999..................................................... $ 87,915
June 30, 2000..................................................... 103,471
June 30, 2001..................................................... 103,471
June 30, 2002..................................................... 95,975
June 30, 2003..................................................... 95,383
September 23, 2003................................................ 15,631
---------
$ 501,846
</TABLE>
c) Interest expense with respect to the long-term debt amounted to $21,135
for the six months ended June 30, 1998 ($18,104 for the six months ended
in June 1997) and $62,691 in December 1997 ($7,910 in 1996).
F-11
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
9. CAPITAL STOCK
<TABLE>
<S> <C> <C>
Authorized
An unlimited number of common shares
Issued
<CAPTION>
SHARES $
--------- ---------
<S> <C> <C>
June 30, 1998.......................................... 1,281,667 1,248,368
June 30, 1997.......................................... 1,000,000 328,327
December 31, 1997...................................... 1,000,000 328,327
December 31, 1996...................................... 780,000 4
</TABLE>
On January 2, 1997 220,000 shares were issued in conjunction with the
acquisition of System Search Consulting Services Inc. with a carrying value of
$291,843
On January 1, 1998 100,000 shares were issued in conjunction with the
acquisition of International Career Specialists Ltd. with a carrying value of
$349,528.
A private placement of 150,000 shares was completed in March 1998 yielding
proceeds of $423,639.
A second private placement of 65,000 shares was completed in April 1998
yielding proceeds of $216,814
The company redeemed 33,333 shares for $69,940 in April 1998.
The company has outstanding stock options issued in conjunction with its
long-term financing arrangements for 16,900 shares and additional options issued
in conjunction with its purchase of the wholly owned subsidiaries for 200,000
shares.
Subsequent to the period ending June 1998, the company split its stock. The
result of the split converted the outstanding shares from 1,281,667 to 1,667,875
shares. Stock options were split from 216,900 shares to 222,124 shares.
The fully diluted shares outstanding after the effect of the stock split is
1,900,000 shares .
Weighted average number of shares outstanding is calculated on a fully
diluted basis after giving effect to the stock split.
10. TRANSACTIONS WITH RELATED COMPANIES
Prior to IT Staffing Ltd. Purchasing shares of International Career
Specialists Ltd. on January 1, 1998, the company rented premises from
International Career Specialists Ltd. The land and building were disposed of as
part of the purchase price.
F-12
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
11. LEASE COMMITMENTS
a) Minimum payments under operating leases for premises occupied by the
company and its subsidiaries in Toronto and New York, exclusive of most
operating costs and realty taxes, for the fiscal year end of December 31 for the
next five years are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 117,849
1999.............................................................. 95,734
2000.............................................................. 95,734
2001.............................................................. 71,888
2002.............................................................. 55,855
---------
$ 437,060
---------
---------
</TABLE>
b) Minimum payments under other operating leases for the fiscal year end
December 31 until expiry are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 53,158
1999.............................................................. 32,916
2000.............................................................. 16,011
2001.............................................................. 4,242
2002.............................................................. 3,181
---------
$ 109,508
---------
---------
</TABLE>
12. SALES BY GEOGRAPHIC AREA
a)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Canada.................................................... 5,279,437 2,156 4,503,642 764,187
United States of America.................................. 38,570 -- 200,699 --
----------- ----------- ------------ ------------
5,318,007 2,156,005 4,704,341 764,187
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-13
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
12. SALES BY GEOGRAPHIC AREA (CONTINUED)
b) Net Income by Geographic Area The company's accounting records do not readily
provide information on net income by geographic
area. Management is of the opinion that the
proportion of net income based principally on
sales, presented below, would fairly present
the results of operations by geographic area.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ ---------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Canada.................................................... 226,765 139,313 147,798 30,202
United States of America.................................. 1,657 -- 6,586 --
----------- ----------- ------------ ------
228,422 139,313 154,384 30,202
----------- ----------- ------------ ------
----------- ----------- ------------ ------
</TABLE>
c) Identifiable Assets by Geographic Area All identifiable assets were located
in Canada for 1998, 1997 and 1996.
13. SALES TO MAJOR CUSTOMERS
The consolidated entity had the following sales to major customers:
June 1998--none
June 1997--none
<TABLE>
<S> <C> <C>
December 1997
Bank of Montreal........................................................... $ 674,426 14%
SHL Systemhouse............................................................ $ 511,951 11%
December 1996
Bank of Montreal........................................................... $ 176,972 23%
Inco Limited............................................................... $ 77,119 10%
</TABLE>
There were no significant purchases from major suppliers
14. SUBSEQUENT EVENTS
The company has entered into a Letter of Intent with an underwriting firm
and is proceeding to complete an Initial Public Offering of 1,000,000 shares of
common stock for net proceeds to the company of $4,500,000. Upon successful
completion of the offering the company will apply to have its stock listed on
NASDAQ.
F-14
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
15. COMPARATIVE FIGURES
Certain figures in the 1997 financial statements have been reclassified to
conform with the basis of presentation used in 1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
SELLING
Commissions............................................. 1,106,795 459,928 954,915 190,551
Advertising and promotion............................... 126,593 54,702 144,455 67,589
Automobile and travel................................... 38,913 8,924 23,681 15,549
----------- ----------- ------------ ------------
1,272,301 523,554 1,123,051 273,689
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
ADMINISTRATIVE
Office and salaries and benefits........................ 135,428 43,707 96,132 56,288
Rent.................................................... 89,382 35,630 66,261 33,599
Management salaries and fees............................ 75,454 -- -- --
Telephone............................................... 39,227 14,660 40,011 16,034
Office and general...................................... 25,540 20,866 60,898 35,001
Taxes and licenses...................................... 6,915 6,458 15,066 5,326
Insurance............................................... 5,201 4,193 8,751 6,897
Repairs and maintenance................................. 998 463 3,486 762
Incorporation costs..................................... -- 740 -- --
Amortization of goodwill................................ 31,059 -- 8,282 --
Amortization............................................ 9,832 4,567 16,968 5,037
----------- ----------- ------------ ------------
419,036 131,284 315,855 158,944
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
FINANCIAL
Equipment rental........................................ 46,268 22,059 50,796 22,932
Bad debts............................................... -- -- 36,117 --
Interest and bank charges............................... 50,434 17,257 42,153 8,762
Professional fees....................................... 21,135 19,049 47,324 4,971
----------- ----------- ------------ ------------
117,837 58,365 176,390 36,665
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-15
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(EXPRESSED IN U.S. DOLLARS)
F-16
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(EXPRESSED IN U.S. DOLLARS)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
International Career Specialists Ltd.
We have audited the balance sheets of International Career Specialists Ltd.
(incorporated in Canada) as at December 31, 1997 and 1996 and the related
statements of income, cash flows and stockholders' equity for the years ended
December 31, 1997 and 1996. 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 an audit to obtain
reasonable assurance 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 consolidated 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the International Career Specialists Ltd. as
at December 31, 1997 and 1996 and the results of its operations and its cash
flows for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles in the United States of America.
Toronto, Ontario
July 27, 1998
Chartered Accountants
F-17
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
BALANCE SHEET
AS AT DECEMBER 31 AND JUNE 30
(EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Bank.......................................................... 57,078 33,322 161,839 76,220
Accounts receivable........................................... 506,092 297,335 426,121 174,243
Short-term investments (note 2)............................... -- 73,176 47,135 32,773
Loan receivable--parent company............................... 61,317 -- -- --
Due from shareholder.......................................... -- -- -- 43,702
----------- ----------- ------------ ------------
624,487 403,833 635,095 326,938
CAPITAL ASSETS (note 3)......................................... 32,126 33,722 151,844 34,132
INVESTMENT IN RELATED COMPANY................................... -- 55,491 61,167 --
----------- ----------- ------------ ------------
656,613 493,046 848,106 361,070
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable.............................................. 468,437 271,683 505,446 235,093
Accrued wages................................................. -- 144,150 209,018 65,665
Income taxes payable.......................................... 122,781 (4,491) 3,845 (1,016)
Advances from shareholder..................................... -- -- 34,228 --
----------- ----------- ------------ ------------
591,218 411,342 752,537 299,742
----------- ----------- ------------ ------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 4).......................................... 1 1 1 1
CUMULATIVE TRANSLATION ADJUSTMENT............................... (5,955) (861) (4,093) (298)
RETAINED EARNINGS............................................... 71,349 82,564 99,661 61,625
----------- ----------- ------------ ------------
65,395 81,704 95,569 61,328
----------- ----------- ------------ ------------
656,613 493,046 848,106 361,070
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
APPROVED ON BEHALF OF THE BOARD
________________________Director
F-18
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31 AND SIX MONTHS ENDED JUNE 30
(EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Contract sales........................................ 1,746,436 914,302 2,275,859 999,680
Permanent sales....................................... 685,558 581,927 1,382,934 716,134
----------- ----------- ------------ ------------
2,431,994 1,496,229 3,658,793 1,715,814
Contractor fees....................................... 1,262,483 699,339 1,736,037 786,245
----------- ----------- ------------ ------------
GROSS PROFIT.............................................. 1,169,511 796,890 1,922,756 929,569
Other income.......................................... 6,729 4,476 2,665 11,332
----------- ----------- ------------ ------------
1,176,240 801,366 1,925,421 940,901
----------- ----------- ------------ ------------
EXPENSES
Administrative........................................ 156,302 289,866 503,627 234,440
Selling............................................... 578,989 489,551 1,356,978 689,834
Financial............................................. (7,681) 1,010 15,946 2,204
----------- ----------- ------------ ------------
727,610 780,427 1,876,551 926,478
----------- ----------- ------------ ------------
EARNINGS BEFORE INCOME TAXES.............................. 448,630 20,939 48,870 14,423
Income taxes.......................................... 160,000 -- 10,834 6,679
----------- ----------- ------------ ------------
NET EARNINGS.............................................. 288,630 20,939 38,036 7,744
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31 AND SIX MONTHS JUNE 30
(EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
------------------------ --------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. 288,630 20,939 38,036 7,744
----------- ----------- ------------ ------------
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Amortization.......................................... 2,714 7,136 15,933 8,264
Decrease (increase) in accounts receivable............ (92,648) (125,081) (267,804) (106,202)
Decrease (increase) in short-term investments......... 46,872 (40,879) (16,258) 2,553
Decrease (increase) due from shareholder.............. (34,037) -- 35,358 --
Increase (decrease) in advances from shareholders..... -- 43,646 43,266 (36,805)
Increase (decrease) in accounts payable............... (24,656) 38,502 289,526 193,767
Increase (decrease) in accrued wages.................. (207,851) 79,426 150,968 66,002
Decrease (increase) in income taxes payable........... 121,456 (3,503) 4,979 (936)
----------- ----------- ------------ ------------
Total adjustments....................................... (188,150) (753) 253,978 126,643
----------- ----------- ------------ ------------
Net cash generated by operating activities.............. 100,480 20,186 294,014 134,387
----------- ----------- ------------ ------------
Cash flows from investing activities:
Purchases of capital assets............................. -- (6,969) (139,041) (25,590)
Disposal of capital assets.............................. 115,502 -- -- --
----------- ----------- ------------ ------------
Net cash used in investing activities................... 115,502 (6,969) (139,041) (25,590)
----------- ----------- ------------ ------------
Cash flows from financing activities:
Decrease (increase) in investment in related company.... 60,826 (55,820) (63,204) --
Decrease (increase) in loan to parent company........... (62,564) -- -- --
Payment of dividends.................................... (316,942) -- -- --
----------- ----------- ------------ ------------
(318,679) (55,820) (63,204) --
----------- ----------- ------------ ------------
Effect of foreign currency exchange rate changes.......... (2,064) (295) (6,150) (391)
----------- ----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents...... (104,761) (42,898) 85,619 108,406
Cash and cash equivalents
-- Beginning of year.................................... 161,839 76,220 76,220 (32,186)
----------- ----------- ------------ ------------
57,078 33,322 161,839 76,220
</TABLE>
F-20
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENT OF STOCKHOLDERS" EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK CUMULATIVE
NUMBER OF RETAINED TRANSLATION
SHARES AMOUNTS EARNINGS ADJUSTMENTS
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
$ $ $
Balance as of December 31, 1995................................ 2 1 53,881 --
Foreign currency translation................................... -- -- -- (298)
Net income for the year........................................ -- -- 7,744 --
---------- ---------- ---------- ------
Balance as of December 31, 1996................................ 2 1 61,625 (298)
Foreign currency translation................................... -- -- -- (563)
Net income for the period...................................... -- -- 20,939 --
---------- ---------- ---------- ------
Balance as of June 30, 1997.................................... 2 1 82,564 (861)
Foreign currency translation................................... -- -- -- (3,232)
Net income for the period...................................... -- -- 17,097 --
---------- ---------- ---------- ------
Balance as of December 31, 1997................................ 2 1 99,661 (4,093)
Foreign currency translation................................... -- -- -- (1,862)
Dividends paid (note 6)........................................ -- -- (316,942) --
Net income for the period...................................... -- -- 288,630 --
---------- ---------- ---------- ------
Balance as of June 30, 1998.................................... 2 1 71,349 (5,955)
---------- ---------- ---------- ------
---------- ---------- ---------- ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 AND JUNE 30
(EXPRESSED IN U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The financial statements for the six-month ended June 30, 1998 and 1997 are
unaudited. The interim results are not necessarily indicative of the results for
any future period. In the opinion of management, the data in the financial
statements reflects all adjustments necessary for a fair presentation of the
results of the interim periods disclosed. All adjustments are of normal and
recurring nature.
b) Business Operations
International Career Specialists is an information technology staffing
company specializing in placing high technology personnel on both a contract and
permanent basis.
c) Bank indebtedness and Cash Equivalents
Bank indebtedness and cash equivalents include cash on hand, amounts due to
banks, and any other highly liquid investments purchased with a maturity of
three months or less. The carrying amount approximates fair value because of the
short maturity of those instruments.
d) Other Financial Instruments
The carrying amount of the company's other financial instruments approximate
fair value because of the short maturity of these instruments or the current
nature of interest rates borne by these instruments.
e) Short-term Investments
The company's marketable securities are in equity investments. Short-term
investments are carried at fair market value.
f) Revenue Recognition
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements are recognized upon commencement of
employment.
g) Capital Assets
Capital assets are recorded at cost and are amortized at the undernoted
rates and methods:
<TABLE>
<S> <C> <C>
Declining
Automobile 20% balance
Declining
Office equipment 20% balance
Declining
Computer 30% balance
Leasehold improvements 5 years Straight-line
Declining
Building--U.S. office 5% balance
Office equipment--U.S. Declining
office 20% balance
</TABLE>
Amortization of assets acquired during the year is recorded at one-half of
the normal rates.
F-22
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31 AND JUNE 30
(EXPRESSED IN U.S. DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Foreign Currency Translation
The translation of the financial statements from Canadian dollars ("CDN$")
into United States dollars is performed for the convenience of the reader.
Balance sheet accounts are translated using closing exchange rates in effect at
the balance sheet date and income and expense accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been, or could be, converted
into United States dollars at the rates on the respective dates or at any other
rates. Adjustments resulting from the translation are including in the
cumulative translation adjustments in stockholders's equity.
i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. SHORT-TERM INVESTMENTS
Short-term investments consist of:
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Marketable securities....................... -- 73,176 47,135 32,773
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1997 DECEMBER 31,
----------------------------------- 1996
ACCUMULATED -------------
COST AMORTIZATION NET NET
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Land--US................................... 24,467 -- 24,467 --
Building--US............................... 85,984 2,150 83,834 --
Office equipment--US....................... 5,276 514 4,762 --
Vehicles................................... 18,577 7,597 10,980 16,372
Office equipment........................... 39,482 16,229 23,253 8,905
Computer................................... 14,038 9,490 4,548 5,080
Leasehold improvements..................... 5,692 5,692 -- 3,776
--------- ------ --------- ------
193,516 41,672 151,844 34,132
--------- ------ --------- ------
--------- ------ --------- ------
</TABLE>
F-23
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31 AND JUNE 30
(EXPRESSED IN U.S. DOLLARS)
3. CAPITAL ASSETS (CONTINUED)
Amortization for the year amounted to $15,933 ($8,264 in 1996).
<TABLE>
<CAPTION>
JUNE 30,
1998 JUNE 30,
----------------------------------- 1997
ACCUMULATED -----------
COST AMORTIZATION NET NET
--------- ------------- --------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
Vehicles.......................................... 17,890 9,009 8,881 13,317
Office equipment.................................. 37,721 18,029 19,692 13,104
Computer.......................................... 13,467 9,914 3,553 4,732
Leasehold improvements............................ -- -- -- 2,569
--------- ------ --------- -----------
69,078 36,952 32,126 33,722
--------- ------ --------- -----------
--------- ------ --------- -----------
</TABLE>
Amortization for the six months ended June 30, 1998 amounted to $2,714
($7,136 for the six months ended June 1997).
4. CAPITAL STOCK
<TABLE>
<S> <C> <C>
Authorized
10,000 Preferred shares, 10% non-cumulative, non-participating, non-voting, redeemable
at par value of $7.30 each ($10 Canadian)
25,000 Common shares, no par value
<CAPTION>
1997 1998
----- -----
$ $
<S> <C> <C>
Issued
2 Common shares............................................... 1 1
- -
- -
</TABLE>
5. DISTRIBUTION OF ASSETS--DIVIDENDS
On January 1, 1998, the company paid a dividend in kind to its shareholder
distributing assets as follows:
<TABLE>
<S> <C>
Short-term investments (at market value).......................... $ 53,464
Investment in 1242541 Ontario Inc................................. 73,686
Land--Building U.S................................................ 109,834
Vehicle........................................................... 10,443
Cash.............................................................. 69,515
---------
$ 316,942
---------
---------
</TABLE>
F-24
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31 AND JUNE 30
(EXPRESSED IN U.S. DOLLARS)
6. LEASE COMMITMENTS
Minimum payments under an operating lease for premises, inclusive of all
operating costs, hydro, basic insurance, utilities and property taxes for which
the company is responsible, for the fiscal year end, is as follows until expiry:
<TABLE>
<S> <C>
1998............................................................... $ 40,878
1999............................................................... 40,878
2000............................................................... 40,878
2001............................................................... 17,032
</TABLE>
F-25
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD
SCHEDULE OF EXPENSES
FOR THE YEARS ENDED DECEMBER 31 AND SIX MONTHS ENDED JUNE 30
(EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ADMINISTRATIVE
Management salaries and fees.............................. 75,454 225,123 366,225 139,338
Office salaries and benefits.............................. 36,107 22,962 47,055 33,574
Rent...................................................... 20,896 20,218 43,688 35,066
Telephone................................................. 11,029 6,731 14,486 11,118
Office and general........................................ 10,102 7,696 16,240 7,080
Amortization.............................................. 2,714 7,136 15,933 8,264
----------- ----------- ---------- -----------
156,302 289,866 503,627 234,440
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
SELLING
Commission................................................ 562,790 477,304 1,323,007 659,090
Advertising and promotion................................. 10,182 8,470 22,235 17,650
Automobile and travel..................................... 6,017 3,777 11,736 13,094
----------- ----------- ---------- -----------
578,989 489,551 1,356,978 689,834
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
FINANCIAL
Professional fees......................................... (8,140) 847 15,596 1,868
Interest and bank charges................................. 459 163 350 336
----------- ----------- ---------- -----------
(7,681) 1,010 15,946 2,204
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
</TABLE>
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Systemsearch Consulting Services Inc.
We have audited the balance sheets of Systemsearch Consulting Services Inc.
(incorporated in Canada) as at December 31, 1997 and 1996 and the statements of
income, stockholders' equity and cash flows for the years ended December 31,
1997 and 1996. 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 an audit to obtain
reasonable assurance 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 audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Systemsearch Consulting Services Ltd. as
at December 31, 1997 and 1996 and the results of its operations and its cash
flows for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles in the United States of America.
Toronto, Ontario
July 27, 1998 Chartered Accountants
F-27
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(EXPRESSED IN U.S. DOLLARS)
F-28
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
BALANCE SHEETS
AS AT DECEMBER 31 AND JUNE 30
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Bank.......................................................... 56,592 -- -- --
Accounts receivable........................................... 256,097 207,796 271,985 144,615
----------- ----------- ----------- -----------
312,689 207,796 271,985 144,615
CAPITAL ASSETS (note 3)......................................... 13,674 12,875 11,176 9,339
----------- ----------- ----------- -----------
326,363 220,671 283,161 153,954
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness............................................. -- 13,706 4,235 1,855
Accounts payable.............................................. 108,500 151,760 176,438 158,700
Intercompany transfer......................................... 20,439 -- -- --
Income taxes payable.......................................... 19,655 -- 20,168 --
----------- ----------- ----------- -----------
148,594 165,466 200,841 160,555
DUE TO SHAREHOLDER (note 4)..................................... -- 21,731 20,972 57,489
----------- ----------- ----------- -----------
148,594 187,197 221,813 218,044
----------- ----------- ----------- -----------
SHAREHOLDER'S EQUITY
CAPITAL STOCK (note 5).......................................... 36 36 36 36
CUMULATIVE TRANSLATION ADJUSTMENT............................... (5,033) 214 (1,074) 329
RETAINED EARNINGS............................................... 182,766 33,224 62,386 (64,455)
----------- ----------- ----------- -----------
177,769 33,474 61,348 (64,090)
----------- ----------- ----------- -----------
326,363 220,671 283,161 153,954
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
APPROVED ON BEHALF OF THE BOARD
________________________ Director
F-29
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 AND SIX MONTHS ENDED JUNE 30
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Contract sales............................................. 869,570 696,817 1,703,097 1,009,238
Permanent sales............................................ 256,110 168,346 248,961 198,550
----------- ----------- ---------- ----------
1,125,680 865,163 1,952,058 1,207,788
Contractor fees............................................ 707,304 485,111 1,289,229 838,855
----------- ----------- ---------- ----------
GROSS PROFIT................................................. 418,376 380,052 662,829 368,933
Other income............................................... 3,595 -- -- --
----------- ----------- ---------- ----------
421,971 380,052 662,829 368,933
----------- ----------- ---------- ----------
EXPENSES
Administrative............................................. 93,108 43,624 89,031 81,617
Selling.................................................... 203,329 223,552 406,718 341,495
Financial.................................................. 5,154 15,197 19,400 9,619
----------- ----------- ---------- ----------
301,591 282,373 515,149 432,731
----------- ----------- ---------- ----------
EARNINGS BEFORE INCOME TAXES................................. 120,380 97,679 147,680 (63,798)
Income taxes............................................... -- -- 20,839 --
----------- ----------- ---------- ----------
NET INCOME................................................... 120,380 97,679 126,841 (63,798)
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31 AND SIX-MONTHS ENDED JUNE 30
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK RETAINED CUMULATIVE
NUMBER OF EARNINGS TRANSLATION
SHARES AMOUNTS (DEFICIT) ADJUSTMENTS
------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Balance as of December 31, 1995................................... 65 36 (657) --
Foreign currency translation...................................... -- -- -- 329
Net loss for the year............................................. -- -- (63,798) --
----- ----- --------- ------
Balance as of December 31, 1996................................... 65 36 (64,455) 329
Foreign currency translation...................................... -- -- -- (1,403)
Net income for the year........................................... -- -- 97,679 --
----- ----- --------- ------
Balance as of June 30, 1997....................................... 65 36 33,224 (1,074)
Foreign currency translation...................................... -- -- -- 1,288
Net income for the year........................................... -- -- 29,162 --
----- ----- --------- ------
Balance as of December 31, 1997................................... 65 36 62,386 214
Foreign currency translation...................................... -- -- -- (5,247)
Net income for the year........................................... -- -- 120,380 --
----- ----- --------- ------
Balance as of June 30, 1998....................................... 65 36 182,766 (5,033)
----- ----- --------- ------
----- ----- --------- ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 AND SIX MONTHS ENDED JUNE 30
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... 120,380 97,679 126,841 (63,798)
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization.................................................. 417 1,302 2,582 2,347
Decrease (increase) in accounts receivable.................... 9,159 (64,599) (137,868) 48,795
Increase (decrease) in accounts payable....................... (64,746) (5,836) 25,196 (50,617)
Increase in intercompany transfer............................. 20,855 -- -- --
Increase in income taxes payable.............................. -- -- 20,839 --
----------- ----------- ---------- -----------
Total adjustments............................................... (34,315) (69,133) (89,251) 525
----------- ----------- ---------- -----------
Net cash generated by operating activities.................... 86,065 28,546 37,590 (63,273)
----------- ----------- ---------- -----------
Cash flows from investing activities
Purchases of capital assets................................... (3,256) (4,927) (4,884) --
----------- ----------- ---------- -----------
Cash flows from financing activities
Advances from (repayments to) shareholder..................... (20,855) (35,555) (35,246) 22,000
----------- ----------- ---------- -----------
Effect of foreign currency exchange rate on changes........... (1,127) 85 160 9
Net increase (decrease) in cash and cash equivalents.......... 60,827 (11,851) (2,380) (41,264)
Cash (bank indebtedness), beginning of year................... (4,235) (1,855) (1,855) 39,409
----------- ----------- ---------- -----------
Cash and cash equivalents, end of year.......................... 56,592 (13,706) (4,235) (1,855)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Interest paid................................................... 7,722 1,929 3,936 8,548
----------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(EXPRESSED IN U.S. DOLLARS)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements for the six-month ended June 30, 1998 and 1997 are
unaudited. The interim results are not necessarily indicative of the results for
any future period. In the opinion of management, the data in the financial
statements reflects all adjustments necessary for a fair presentation of the
results of the interim periods disclosed. All adjustments are of normal and
recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Business
Systemsearch Consulting Services Inc. is an information technology
staffing company, specializes in placing information technology personnel
on both a contract and permanent basis.
b) Bank indebtedness and Cash Equivalents
Bank indebtedness and cash equivalents include cash on hand, amounts due
to banks, and any other highly liquid investments purchased with a
maturity of three months or less. The carrying amount approximates fair
value because of the short maturity of those instruments.
c) Other Financial Instruments
The carrying amount of the company's other financial instruments
approximate fair value because of the short maturity of these instruments
or the current nature of interest rates borne by these instruments.
d) Long-term Financial Instruments
The fair value of each of the company's long-term financial assets and
debt instruments is based on the amount of future cash flows associated
with each instrument discounted using an estimate of what the company's
current borrowing rate for similar instruments of comparable maturity
would be.
e) Capital Assets
Property and equipment are recorded at cost and are depreciated on the
declining balance basis over their estimated useful lives.
f) Revenue Recognition
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements are recognized upon commencement of
employment.
g) Foreign Currency Translation
The translation of the financial statements from Canadian dollars ("CDN
$") into United States dollars is performed for the convenience of the
reader. Balance sheet accounts are translated using closing exchange
rates in effect at the balance sheet date and income and expense accounts
are translated using an average exchange rate prevailing during each
reporting period. No
F-33
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(EXPRESSED IN U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
representation is made that the Canadian dollar amounts could have been,
or could be, converted into United States dollars at the rates on the
respective dates or at any other rates. Adjustments resulting from the
translation are included in the cumulative translation adjustments in
stockholders' equity.
h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER DECEMBER
1997 1996
----------------------------------- -----------
<S> <C> <C> <C> <C>
ACCUMULATED
COST AMORTIZATION NET NET
--------- ------------- --------- -----------
<CAPTION>
$ $ $ $
<S> <C> <C> <C> <C>
Furniture and fixtures............................................... 17,477 10,318 7,159 9,339
Computer equipment................................................... 4,726 709 4,017 --
--------- ------ --------- -----
22,203 11,027 11,176 9,339
--------- ------ --------- -----
--------- ------ --------- -----
Amortization for 1997 amounted to $2,582 ($2,347 in 1996).
</TABLE>
<TABLE>
<CAPTION>
JUNE 1997
---------------------------------------
ACCUMULATED JUNE 1996
AMORTIZATION -----------
COST NET NET NET
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1)
Furniture and fixtures..................................... 21,345 10,999 10,346 8,679
Computer equipment......................................... 4,606 1,278 3,328 4,196
----------- ------ ----------- -----------
25,951 12,277 13,674 12,875
----------- ------ ----------- -----------
----------- ------ ----------- -----------
</TABLE>
Amortization for the period ended June 30, 1998 amounted to $417 ($1,302 for
the period ended June 1997).
4. DUE TO (FROM) SHAREHOLDER
The shareholder loan is unsecured, non-interest bearing and is not expected
to be repaid prior to December 31, 1998.
F-34
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998, JUNE 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(EXPRESSED IN U.S. DOLLARS)
5. CAPITAL STOCK
AUTHORIZED
AN UNLIMITED NUMBER OF COMMON SHARES, NO PAR VALUE
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
ISSUED 1998 1997 1997 1996
- ---------------------------------------------------------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
65 Common shares................................................ 36 36 36 36
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
6. LEASE COMMITMENTS
Minimum lease payments under an operating lease for the premises, exclusive
of all operating costs, hydro, basic insurance, utilities and property taxes for
which the company is responsible, is as follows for the fiscal year end:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................................... $ 21,695
1999............................................................................... 23,380
2000............................................................................... 23,380
2001............................................................................... 23,380
2002............................................................................... 23,380
</TABLE>
F-35
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
SCHEDULE OF EXPENSES
FOR THE YEARS ENDED DECEMBER 31 AND SIX-MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER DECEMBER
1998 1997 1997 1996
$ $ $ $
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
ADMINISTRATIVE
Office salaries and benefits.................................. 42,349 -- -- --
Rent.......................................................... 18,945 16,793 28,848 26,732
Office and general............................................ 15,438 12,168 35,649 32,627
Telephone..................................................... 7,773 5,980 10,473 10,532
Taxes and licences............................................ 4,831 3,742 5,948 2,916
Insurance..................................................... 1,830 1,874 1,858 2,287
Equipment rental.............................................. 1,171 1,377 2,158 4,176
Repairs and maintenance....................................... 354 388 1,515 --
Management salaries and fees.................................. -- -- -- --
Amortization.................................................. 417 1,302 2,582 2,347
----------- ----------- ----------- -----------
93,108 43,624 89,031 81,617
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SELLING
Commission.................................................... 190,847 220,525 402,059 332,529
Automobile and travel......................................... 12,482 3,027 4,659 8,966
----------- ----------- ----------- -----------
203,329 223,552 406,718 341,495
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
FINANCIAL
Interest and bank charges..................................... 7,722 1,929 3,936 8,548
Professional fees............................................. (2,568) 13,268 15,464 1,071
----------- ----------- ----------- -----------
5,154 15,197 19,400 9,619
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER DELIVERY OF THIS
PROSPECTUS NOR ANY COMMON SHARES SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 4
The Offering................................... 5
Summary Combined Financial Information......... 7
Risk Factors................................... 8
Use of Proceeds................................ 17
Dividend Policy................................ 18
Dilution....................................... 19
Capitalization................................. 20
Selected Financial Data........................ 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22
Business....................................... 27
Management..................................... 38
Principal Shareholders......................... 43
Relationships and Related Party................
Certain Transactions........................... 44
Shares Eligible for Future Sale................ 45
Description of Securities...................... 47
Certain United States and Canadian Federal
Income Tax Considerations.................... 48
Investment Canada Act.......................... 50
Underwriting................................... 51
Legal Matters.................................. 53
Experts........................................ 53
Additional Information......................... 53
Financial Statements........................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMPANY'S SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
IT STAFFING LTD.
1,000,000
COMMON SHARES
------------------------
PROSPECTUS
------------------------
STRASBOURGER PEARSON
TULCIN WOLFF INCORPORATED
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company provide that the Company shall indemnify directors
and officers of the Company. The pertinent section of Canadian law is set forth
below in full. In addition, upon effectiveness of this registration statement,
management intends to obtain officers' and directors' liability insurance.
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").
Section 136 of the Business Corporations Act (Ontario) provides as follows:
(1) INDEMNIFICATION OF DIRECTORS. A corporation may indemnify a director or
officer of the corporation, a former director or officer of the corporation or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is a party by reason of
being or having been a director or officer of such corporation or body
corporate, if,
(a) he or she acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she had reasonable grounds for
believing that his or her conduct was lawful.
(2) IDEM. A corporation may, with the approval of the court, indemnify a
person referred to in subsection (1) in respect of an action by or behalf of the
corporation or body corporate to procure a judgment in its favour, to which the
person is made a party by reason of being or having been a director or an
officer of the corporation or body corporate, against all costs, charges and
expenses reasonably incurred by the person in connection with such action if he
or she fulfils the conditions set out in clauses (1)(a) and (b).
(3) IDEM. Despite anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect of all
costs, charges and expenses reasonably incurred by him in connection with the
defense of any civil, criminal or administrative action or proceeding to which
he or she is made a party by reason of being or having been a director or
officer of the corporation or body corporate, if the person seeking indemnity;
(a) was substantially successful on the merits in his or her defense of
the action or proceeding; and
(b) fulfills the conditions set out in clauses (1)(a) and (b).
(4) LIABILITY INSURANCE. A corporation may purchase and maintain insurance
for the benefit of any person referred to in subsection (1) against any
liability incurred by the person,
(a) in his or her capacity as a director or officer of the corporation,
except where the liability relates to the person's failure to act honestly
and in good faith with a view to the best interests of the corporation; or
II-1
<PAGE>
(b) in his or her capacity as a director or officer of another body
corporate where the person acts or acted in that capacity at the
corporation's request, except where the liability relates to the person's
failure to act honestly and in good faith with a view to the best interests
of the body corporate.
(5) APPLICATION TO COURT. A corporation or a person referred to in
subsection (1) may apply to the court for an order approving an indemnity under
this section and the court may so order and make any further order it thinks
fit.
(6) INDEM. Upon application under subsection (5), the court may order notice
to be given to any interested person and such person is entitled to appear and
be heard in person or by counsel.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses to be paid by the
Company in connection with the issuance and distribution of the securities being
registered:
<TABLE>
<S> <C>
SEC Registration Fee........................................................... $ 1,504.50
NASD Filing Fee................................................................ 1,325.00
Nasdaq Listing Fees*........................................................... 15,000.00
Printing Engraving Expenses*................................................... 75,000.00
Legal Fees and Expenses*....................................................... 150,000.00
Accounting Fees and Expenses*.................................................. 70,000.00
Blue Sky Fees and Expenses*.................................................... 35,000.00
Transfer Agent and Registrar Fees and Expenses................................. 3,500.00
Miscellaneous*................................................................. 8,670.50
Total.......................................................................... $360.000.00
</TABLE>
- ------------------------
* estimate
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In October 1997, in consideration for business consulting services,
including identifying, structuring and effecting the acquisitions of Systems and
ECS, the Company issued 113,459 Common Shares to Globe Capital Corporation,
which is controlled by Lloyd Maclean, the Company's Chief Financial Officer and
a Director.
In April 1998, in connection with the acquisition of Systems, the Company
issued 130,914 Common Shares to John R. Wilson.
In February through March of 1998, the Company sold 196,370 Common Shares to
12 individuals at a purchase price of approximately $2.67 per share for
aggregate consideration of $523,653. The twelve individuals included employees
and directors of the Company.
In May 1998, in connection with the acquisition of ICS, the Company issued
130,914 Common Shares to John A. Irwin.
In May and June of 1998, the Company sold 77,239 Common Shares to seven
individuals at a purchase price of approximately $3.33 per share for aggregate
consideration of $257,463. The seven individuals included employees and
directors of the Company.
All of such issuances were made in Canada to Canadian residents in
conformity with the relevant local securities laws and the Company believes
would have been exempt from registration in the United States pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended.
In May 1998, the Company granted an option to purchase 200,000 Common Shares
at an exercise price of $2.10 per share to Robert M. Rubin.
II-2
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
**1.1 Form of Underwriting Agreement
**3.1 Bylaws of Registrant
**3.2 Articles of Incorporation dated February 11, 1994
**3.3 Articles of Amendment dated February 20, 1996
**3.4 Articles of Amendment dated April 15, 1998
**3.5 Articles of Amendment dated August 6, 1998
**4.2 Form of Underwriters' Warrant
**4.3 Specimen Common Share Certificate
**5.1 Opinion of Gersten, Savage, Kaplowitz & Fredericks, LLP
5.2 Opinion of McMillan Binch
**10.1 Form of Financial Consulting Agreement
*10.2 1998 Stock Option Plan.
*10.3(a) Lease of the Company's headquarters in Toronto, Ontario.
*10.3(b) License for the Company's office in New York, New York.
*10.3(c) Lease of the Company's office in Etobicoke, Ontario.
*10.3(d) Lease of the Company's office in Scarborough, Ontario.
*10.3(e) Amendment to the lease of the Company's office in Scarborough, Ontario.
*10.4 Employment Agreement between the Company and Declan French dated August 1998.
*10.5 Employment Agreement between the Company and John A. Irwin dated May 19, 1998.
*10.6 Employment Agreement between the Company and John R. Wilson dated February 8,
1998.
*10.7 Employment Agreement between the Company and John J. Silver dated August 10, 1998.
*10.8 Form of consulting agreement for the Company's independent contractors.
*10.9 Form of services agreement for the Company's customers.
*10.10 Agreement for the Acquisition of the Capital Stock of International Career
Specialists Ltd.
**10.11 Agreement for the acquisition of the Capital Stock of Systemsearch Consulting
Services, Inc. and Systems, PS, Inc.
**10.12 Consulting Agreement between the Company and Robert M. Rubin.
*23.1 Consent of Schwartz Levitsky Feldman, independent auditors.
**23.2 Consent of Gersten, Savage, Kaplowitz & Fredericks, LLP (incorporated into Exhibit
5.1)
**23.3 Consent of McMillan Binch (incorporated into 5.1)
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, by-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer hereby undertakes:
II-3
<PAGE>
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i)To include any
Prospectus required by section 10(a)(3) of the Act; (ii)To reflect in the
Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii)To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.
(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of Prospectus filed by the
small business issuer under Rule 424(b)(1), or (4) or 497(h), under the Act as
part of this registration statement as of the time the Commission declared it
effective.
(5) For determining any liability under the Act, treat each post-effective
amendment that contains a form of Prospectus as a new registration statement at
that time as the initial bona fide offering of those securities.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Province of
Ontario, Canada on September , 1998.
<TABLE>
<S> <C> <C>
IT STAFFING LTD.
By: /s/ DECLAN FRENCH
-----------------------------------------
Declan French
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
We, the undersigned officers and directors of IT STAFFING LTD. hereby
severally constitute and appoint Declan French, our true and lawful
attorney-in-fact and agent with full power of substitution for us and in our
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and all documents
relating thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing necessary or advisable to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman, President, Chief
/s/ DECLAN FRENCH Executive Officer and
- ------------------------------ Director (Principal September 17, 1998
Declan French Executive Officer)
/s/ LLOYD MACLEAN Chief Financial Officer and
- ------------------------------ Director (Principal September 17, 1998
Lloyd Maclean Accounting Officer)
II-5
<PAGE>
Exhibit 10.2
IT STAFFING LTD.
1998 STOCK OPTION PLAN
I. Purpose of the Plan
The IT STAFFING LTD. 1998 STOCK OPTION PLAN (the "Plan") is intended
to provide a means whereby certain employees of IT STAFFING LTD., an Ontario
corporation (the "Company"), and its affiliates may develop a sense of
proprietorship and personal involvement in the development and financial
success of the Company, and to encourage them to remain with and devote their
best efforts to the business of the Company, thereby advancing the interests
of the Company and its shareholders. Accordingly, the Company may grant to
certain service providers ("Optionees") the option ("Option") to purchase
common shares of the Company ("Shares"), as hereinafter set forth.
Options granted under the Plan may be either incentive stock options,
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Incentive Stock Options"), or options which do not
constitute Incentive Stock Options.
II. Administration
(a) The Plan shall be administered by a committee (the "Committee")
of, and appointed by, the Board of Directors of the Company (the "Board"), and
the Committee shall be (a) comprised solely of two or more outside directors
(within the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder), and (b) constituted so as to permit the Plan to comply
with Rule 16b-3, as currently in effect or as hereinafter modified or amended
("Rule 16b-3"), promulgated under the United States Securities Exchange Act of
1934, as amended (the "1934 Act"). The Committee shall have sole authority to
select the Optionees from among those individuals eligible hereunder and to
establish the number of shares which may be issued under each Option. The
limitation set forth in the preceding sentence shall be applied in a manner
which will permit compensation generated under the Plan to constitute
"performance-based" compensation for purposes of section 162(m) of the Code,
including, without limitation, counting against such maximum number of shares,
to the extent required under section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options that are
cancelled or repriced. In selecting the Optionees from among individuals
eligible hereunder and in establishing the number of shares that may be issued
under each Option, the Committee may take into account the nature of the
services rendered by such individuals, their present and potential
contributions to the Company's success and such other factors as the Committee
in its discretion shall deem relevant.
(b) The Committee is authorized to interpret the Plan and may from
time to time adopt such rules and regulations, consistent with the provisions
of the Plan, as it may deem advisable to carry out the Plan. All decisions made
by the Committee in selecting the Optionees, in establishing the number of
shares which may be issued under each Option and in construing the provisions
of the Plan shall be final.
<PAGE>
(c) The provisions of the Plan shall be interpreted and construed in
accordance with the laws of the Province of Ontario.
III. Option Agreements
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions of
the respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the surrender of the right to purchase shares under
the Option in return for a payment in cash or Shares or a combination of cash
and Shares equal in value to the excess of the fair market value of the shares
with respect to which the right to purchase is surrendered over the option
price therefor ("Stock Appreciation Rights"), on such terms and conditions as
the Committee in its sole discretion may prescribe; provided that, except as
provided in subparagraph VIII(c) hereof, the Committee shall retain final
authority (i) to determine whether an Optionee shall be permitted, or (ii) to
approve an election by an Optionee, to receive cash in full or partial
settlement of Stock Appreciation Rights. Moreover, an Option Agreement may
provide for the payment of the option price, in whole or in part, by the
delivery of a number of Shares (plus cash if necessary) having a fair market
value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a Share
on a particular date shall be equal to the mean of the high and low sales
prices of the Shares (i) reported by the SmallCap Market of NASDAQ on that
date or (ii) if the Shares are listed or quoted on a national stock exchange
or quotation system, reported on the stock exchange composite tape on that
date; or, in either case, if no prices are reported on that date, on the last
preceding date on which such prices of the Shares are so reported. If the
Shares are traded over the counter at the time a determination of its fair
market value is required to be made hereunder, its fair market value shall be
deemed to be equal to the average between the reported high and low or closing
bid and asked prices of the Shares on the most recent date on which the Shares
were publicly traded. In the event the Shares are not publicly traded at the
time a determination of its value is required to be made hereunder, the
determination of its fair market value shall be made by the Committee in such
manner as it deems appropriate.
(c) Each Option and all rights granted thereunder shall not be
transferable and shall be exercisable during the Optionee's lifetime only by
the Optionee or the Optionee's guardian or legal representative.
(d) The Committee shall have the discretion to determine a vesting
schedule for any Option granted under the Plan. Unless otherwise determined by
the Committee, Options granted under the Plan shall not vest and be exercisable
prior to the day following the second anniversary of the date on which the
Options concerned are granted.
(e) The expiry date of an Option (the "Expiry Date") shall be the
earlier of the date fixed by the Committee, as set forth in the individual
Option Agreement, and the date established, if
2
<PAGE>
applicable, in clauses (i) to (iii) below, provided that such date shall not be
later than the tenth anniversary of the date on which the Option is granted.
(i) If an Optionee ceases affiliation with the Company or an affiliate by
reason of death, permanent disability or retirement at or after age 65,
the Expiry Date shall be the first anniversary of the occurrence.
(ii) If an Optionee ceases affiliation with the Company or an affiliate for
any other reason (other than termination of his or her employment or
other service for cause), the Expiry Date shall be the date that is 90
days following the occurrence.
(iii) If an Optionee ceases affiliation with the Company or an affiliate upon
the termination of his or her employment or other service for cause,
then the Expiry Date shall be the date on which the Company or its
affiliate gives notice to the Optionee of his or her termination.
IV. Eligibility of Optionee
(a) Options may be granted only to individuals who are employees
(including officers and directors who are also employees) of the Company or any
parent or subsidiary corporation (as defined in section 424 of the Code) of the
Company at the time the Option is granted; provided, however, that Options which
do not constitute Incentive Stock Options may be granted to individuals who are
directors (but not also employees) of the Company or any such parent or
subsidiary corporation. Subject to required regulatory approvals, Options may
also be granted to consultants, advisors and similar parties who provide their
skills and expertise to the Company or its affiliates. Options may be granted to
the same individual on more than one occasion.
(b) No Incentive Stock Option shall be granted to an individual if, at
the time the Option is granted, such individual owns shares possessing more than
10% of the total combined voting power of all classes of capital stock of the
Company or of its parent or subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, unless (i) at the time such Option is granted the
option price is at least 110% of the fair market value of the Shares subject to
the Option and (ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of shares with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds US$100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
Optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Optionee of such determination
as soon as practicable after such determination.
3
<PAGE>
(c) The aggregate number of Shares reserved for issuance pursuant to
Options granted to any one Optionee shall not exceed 5% of the number of Shares
outstanding (on a non-diluted basis) at the time of such grant.
V. Shares Subject to the Plan
(a) The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 435,000 Shares. Such shares may consist
of authorized but unissued Shares or previously issued Shares reacquired by the
Company. Any of such shares which remain unissued and which are not subject to
outstanding Options at the termination of the Plan shall cease to be subject to
the Plan but, until termination of the Plan, the Company shall at all times make
available a sufficient number of shares to meet the requirements of the Plan.
Should any Option hereunder expire or terminate prior to its exercise in full,
the shares theretofore subject to such Option may again be subject to an Option
granted under the Plan to the extent permitted under Rule 16b-3 and applicable
Canadian securities legislation.
(b) The aggregate number of shares which may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph VIII
hereof with respect to Shares subject to Options then outstanding. Exercise of
an Option in any manner, including an exercise involving a Stock Appreciation
Right, shall result in a decrease in the number of Shares which may thereafter
be available, both for purposes of the Plan and for sale to any one individual,
by the number of shares as to which the Option is exercised. Separate share
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option which does not constitute an Incentive
Stock Option.
VI. Option Price
The purchase price of Shares issued under each Option shall be
determined by the Committee, but in no case shall such purchase price be less
than the fair market value of the Shares subject to the Option on the date the
Option is granted.
VII. Term of Plan
The Plan, shall be effective upon the date of its adoption by the
Board, provided the Plan is approved by the shareholders of the Company
within twelve months thereafter. Notwithstanding any provision in this Plan
or in any Option Agreement, no Option shall be exercisable prior to such
shareholder approval. Except with respect to Options then outstanding, if not
sooner terminated under the provisions of paragraph IX, the Plan shall
terminate upon and no further Options shall be granted after the expiration
of ten years from the date of its adoption by the Board.
4
<PAGE>
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are Shares
as presently constituted, but, if and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of Shares or the payment of a stock dividend on Shares without
receipt of consideration by the Company, the number of Shares with respect to
which such Option may thereafter be exercised (i) in the event of an increase in
the number of outstanding shares shall be proportionately increased, and the
purchase price per share shall be proportionately reduced, and (ii) in the event
of a reduction in the number of outstanding shares shall be proportionately
reduced, and the purchase price per share shall be proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure ( a "recapitalization"), the number and
class of Shares covered by an Option theretofore granted shall be adjusted so
that such Option shall thereafter cover the number and class of shares of stock
and securities to which the Optionee would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization, the
Optionee had been the holder of record of the number of Shares then covered by
such Option. If:
(i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary
of an entity);
(ii) the Company sells, leases or exchanges all or substantially all of its
assets to any other person or entity;
(iii) the Company is to be dissolved and liquidated;
(iv) any person or entity, including a "group" as contemplated by Section
13(d)(3) of the 1934 Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting
power); or
(v) as a result of or in connection with a contested election of directors,
the persons who were directors of the Company before such election
shall cease to constitute a majority of the Board (each such event is
referred to herein as a "Corporate Change");
5
<PAGE>
no later than (a) ten days after the approval by the shareholders of the Company
of such merger, consolidation, reorganization, sale, lease or exchange of assets
or dissolution or such election of directors or (b) thirty days after a change
of control of the type described in clause (iv), the Committee, acting in its
sole discretion without the consent or approval of any Optionee, shall act to
effect one or more of the following alternatives, which may vary among
individual Optionees and which may vary among Options held by any individual
Optionee:
(1) accelerate the time at which Options then outstanding may be exercised
so that such Options may be exercised in full for a limited period of
time on or before a specified date (before or after such Corporate
Change) fixed by the Committee, after which specified date all
unexercised Options and all rights of Optionees thereunder shall
terminate;
(2) require the mandatory surrender to the Company by selected Optionees of
some or all of the outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date before or after such Corporate
Change, specified by the Committee, in which event the Committee shall
thereupon cancel such Options and the Company shall pay to each
Optionee an amount of cash per share equal to the excess, if any, of
the amount calculated in subparagraph (d) below (the "Change of Control
Value") of the shares subject to such Option over the exercise price(s)
under such Options for such shares;
(3) make such adjustments to Options then outstanding as the Committee
deems appropriate to reflect such Corporate Change (provided, however,
that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding); or
(4) provide that the number and class of shares covered by an Option
theretofore granted shall be adjusted so that such Option shall
thereafter cover the number and class of shares or other securities or
property (including, without limitation, cash) to which the Optionee
would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately
prior to such merger, consolidation or sale of assets, and dissolution,
the Optionee had been the holder of record of the number of Shares then
covered by such Option.
(d) For the purposes of clause (2) in subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows:
(i) the per share price offered to shareholders of the Company in any such
merger, consolidation, reorganization, sale of assets or dissolution
transaction;
(ii) the price per share offered to shareholders of the Company in any
tender offer or exchange offer whereby a Corporate Change takes place;
or
6
<PAGE>
(iii) if such Corporate Change occurs other than pursuant to a tender or
exchange offer, the fair market value per share of the shares into
which such Options being surrendered are exercisable, as determined by
the Committee as of the date determined by the Committee to be the date
of cancellation and surrender of such Options.
In the event that the consideration offered to shareholders of the Company in
any transaction described in this subparagraph (d) or in subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in subparagraphs (b) or (c) above shall
be subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of any class or securities convertible into shares of any
class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
Shares subject to Options theretofore granted or the purchase price per share.
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time, provided that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the consent of such
Optionee, and provided further that the Board may not make any alteration or
amendment which would increase the aggregate number of shares which may be
issued pursuant to the provisions of the Plan or change the class of individuals
eligible to receive Options under the Plan without the approval of the
shareholders of the Company.
X. Securities Laws
(a) The issue of Shares by the Company pursuant to the exercise of an
Option is subject to this Plan and compliance with the laws, rules and
regulations of all regulatory bodies applicable to the issuance and distribution
of the Company's securities and to the listing requirements of any stock
exchange or market on which the Shares may then be listed or quoted. The Company
shall not be obligated to issue any Shares pursuant to any Option granted under
the Plan at any time when the offering of the Shares covered by such Option has
not been registered under the United States Securities Act of 1933 or otherwise
qualified for distribution under such other U.S. state and federal and Canadian
provincial laws, rules or regulations as the Company or the Committee deems
applicable and, in the opinion of legal counsel for the Company, there is no
exemption from
7
<PAGE>
applicable prospectus and registration requirements of such laws, rules or
regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3 thereunder. If any provision of the Plan or any such Option would
disqualify the Plan or such Option under, or would otherwise not comply with,
Rule 16b-3, such provision or Option shall be construed or deemed amended to
conform to Rule 16b-3.
8
<PAGE>
Additional Plan Provisions, if required:
In addition, until such time as the Plan has been approved by
a majority of the votes cast at a meeting of shareholders (other than votes
attaching to securities beneficially owned by (A) an insider (within the meaning
of the Securities Act (Ontario)) of the Company, other than a person who falls
within that definition solely by virtue of being a director or senior officer of
a subsidiary of the Company, and (B) an associate (within the meaning of the
Securities Act (Ontario)) of any person who is an insider by virtue of (A) above
(such persons herein referred to as "Insiders"):
(i) the number of Shares reserved for issuance pursuant to Options granted
to Insiders shall not exceed 10% of the number of Shares outstanding at
the time of the grant (on a non-diluted basis), less the aggregate
number of Shares reserved for issuance under any other stock option,
stock option plan, employee stock purchase plan or any other
compensation or incentive mechanism involving the issuance or potential
issuance of Shares to one or more service providers, including a share
purchase from treasury that is financially assisted by the Company by
way of loan, guarantee or otherwise (a "Share Compensation
Arrangement") over the preceding one-year period;
(ii) the issuance to any one Insider and such Insider's Associates, within a
one-year period, of Shares on the exercise of Options may not exceed 5%
of the number of Shares outstanding at the time of the grant (on a
non-diluted basis), less the aggregate number of Shares reserved for
issuance under any other Share Compensation Arrangement over the
preceding one-year period; and
(iii) the issuance to all Insiders, within a one-year period, of Shares on
the exercise of Options, may not exceed 10% of the number of Shares
outstanding at the time of the grant (on a non-diluted basis) less the
aggregate number of Shares reserved for issuance under any other Share
Compensation Arrangement over the preceding one-year period.
9
<PAGE>
IT Staffing/55 University Avenue
LEASE
(55 University Avenue)
BETWEEN
PENYORK PROPERTIES I INC.
LANDLORD
AND
IT STAFFING INC.
TENANT
<PAGE>
TABLE OF CONTENTS
ARTICLE I
FUNDAMENTAL PROVISIONS 1
1.1 Landlord 1
1.2 Tenant 1
1.3 Building 1
1.4 Leased Premises 1
1.5 Term 1
1.6 Basic Rent 1
1,7 Additional Rents 1
1.8 Deposit 1
1.9 Basic Rent Commencement Date 1
1.10 Additional Rent Commencement Date 1
1.11 Fundamental Provisions 1
ARTICLE II
LEASED PREMISES 1
2.1 Lease 1
2.2 Use 2
2.3 Rules and Regulations 2
2.4 Observance of I aw 2
2.5 No Waste or Nuisance 2
2.6 Common Areas 2
2.7 Easements 2
ARTICLE Ill
TERM - POSSESSION 2
3,1 Term 2
3.2 Tenant Fixturing 2
3.3 Delay in Posession 3
<PAGE>
3.4 Surrender 3
3.5 Overholding 3
ARTICLE IV
RENT 3
4.1 Payment 3
4.2 Basic Rent 3
4.3 Deposit 3
4.4 Realty Taxes 3
4.5 Proportionate-Share of Operating Costs 3
4.6 Utilities - Light Fixtures 4
4.7 Additional Services 4
4.8 General Provisions 4
ARTICLE V
TAXES 4
6.1 Taxes Payable by the Landlord 5
5.2 Business and Other Taxes Payable by the Tenant 5
5.3 Contesting Taxes 5
5.4 Alternate Methods of Taxation 5
I
<PAGE>
TABLE OF CONTENTS CONTD.
MAINTENANCE, REPAIRS AND ALTERATIONS 5
6.1 General Statement 5
6.2 Responsibility of Tenant 5
6.3 Tenant Not Responsible 5
6.4 Responsibility of Landlord 6
6.5 Inspection, Entry and Notice 6
6.6 Notify the Landlord 6
6.7 Alterations Improvements 6
6.8 Removal and Restoration 8
6.9 External Changes 8
6.10 Trade Fixtures 8
6.11 Lien on Trade-Fixtures 8
6.12 Tenant's Signs 8
6.13 Directory Board 8
6.14 Landlord's Signs 8
ARTICLE VII
STANDARD SERVICES 9
7.1 Heating and Air-Conditioning 9
7.2 Cleaning 9
7.3 Elevators 9
7.4 Security and Information 9
7.5 Utilities 9
7.6 lnterruption or Delay of Services 10
7.7 Lanlord's Alterations 10
ARTICLE VIII
ASSIGNMENT AND SUBLETTING 10
8.1 Assignment, Subletting 10
8.2 Landlord's Consent 10
8.3 Requests for Consent 10
8.4 Assignment by Landlord 11
ARTICLE IX
INSURANCE AND INDEMNIFICATION 11
9.1 Tenant's Insurance 11
9.2 Policy Requirements 11
9.3 Proof of Insurance 11
9.4 Failure to Maintain 12
9.5 Damage to Leasehold Improvements 12
9.6 Increase in Insurance Premiums/Cancellation 12
9.7 Landlord's Insurance 12
9.8 Non-Liability for Loss, lnjury or Damage 12
9.9 Indemnification of the Landlord 12
9.10 Extension of Rights and Remedies 13
ARTICLE X
DAMAGE 13
10.1 Damage to Leased Premises 13
10.2 Damaae to thll Rielitlinn 14
10.3 Architect's Certificate 14
<PAGE>
TABLE OF CONTENTS CONTD.
ARTICLE XI
UNAVOIDABLE DELAY 15
11.1 Unavoidable Delay 15
ARTICLE XII
LANDLORD'S REMEDIES 15
12.1 Landlord May Perform Tenant's Covenants 15
12.2 Re-Entry 15
12.3 Landlord May Beset 16
12.4 Right to Distrain 16
12.5 Landlord May Follow Chattels 16
12.6 Rights Cumulative 16
12.7 Acceptance of Rent Non-Waiver 16
ARTICLE XIII
STATUS STATEMENT, ATTORNMENT AND SUBORDINATION 17
13.1 Certification 17
13.2 Attornment 17
13.3 Subordination 17
13.4 Timely Execution 17
13.5 Rights of Mortgagees, Trustees 17
ARTICLE XIV
MISCELLANEOUS 17
14.1 Joint and Several Liability 17
14.2 Lanlord and Tenant Relationship 17
14.3 Planning Act 17
14.4 No Waiver 18
14.5 ExproDriation 18
14.6 Notice 18
14.7 Net Lease 18
14.8 Non Merger 18
14.9 Lease Entire Agreement 19
14.10 Registration 19
14.11 Name of Building 19
14,12 Exhibiting Premises 19
14.13 Governing Law 19
14.14 Survival of Tenant's Covenants 19
14.15 Quiet Enjoyment 19
14.16 [3inding on Successors 19
14.17 Limitation on Use 19
14.18 Corporate Ownership 19
14.19 Assignment and Subletting 19
14.20 Sever Liability 20
14.21 Time of the Essence 20
ARTICLE XV
DEFINITIONS -- INTERPRETATION 20
15.1 Definitions 20
16.2 Interpretation 25
<PAGE>
SCHEDULES AND APPENDICES
SCHEDULE "A" LEGAL DESCRIPTION
SCHEDULE "B" FLOOR PLAN
SCHEDULE "C" LANDLORD'S AND TENANT'S IMPROVEMENTS
SCHEDULE "D" RULES AND REGULATIONS
SCHEDULE "E" SPECIAL CONDITIONS
SCHEDULE "F" STATUS STATEMENT
SCHEDULE "G" INDEMNITY AGREEMENT
SCHEDULE "L" CLEANING SCHEDULE
<PAGE>
THIS LEASE is made as of the 1st day of December, 1997.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT between the Landlord, Tenant and
Indemnifier, if any, listed below.
ARTICLE I
FUNDAMENTAL PROVISIONS
1.1 Landlord: PENYORK PROPERTIES I INC., a company having a mailing address
for the purposes of this Lease at 4 Eva Road, Suite 427, Etobicoke,
Ontario, M9C 2A8.
1.2 Tenant: IT STAFFING INC.
1.3 Building: 55 University Avenue, Toronto, Ontario and situate upon the
lands described in Schedule "A' of this Lease, and constructed with the
base building standards set forth on Schedule "C" annexed hereto.
1.4 Leased Premises: (Section 2.1)
The space outlined in red on Schedule "B" of this Lease, located on the
5th floor of the Building and having a Rentable Area of approximately four
thousand, four hundred (4,400) square feet.
Term: (Section 3.1)
Ten (10) years having a Term Commencement Date of December 1, 1997 and
ending November 30, 2007.
<PAGE>
1.6 Basic Rent: (Section 4.2)
Forty Six Thousand, Two Hundred dollars ($46,200.00) per annum, computed
at the annual rate of $10.50 per square foot of Rentable Area, and payable
monthly in advance in the amount of Three Thousand, Eight Hundred and
Fifty dollars and Zero cents ($3,850.00) per month commencing on the Basic
Rent Commencement Date and Fifty Five Thousand dollars ($55,000.00) per
annum, computed at the annual rate of $12.50 per square foot of Rentable
Area, and payable monthly in advance in the amount of Four Thousand, Five
Hundred and Eighty Three dollars and Thirty Three cents ($4,583.33) per
month commencing December 1 2002.
1.7 Additional Rents: The following additional payments are payable as of and
from the Additional Rent Commencement Date:
(a) Realty Taxes for Leased Premises (Section 4.4)
(b) Proportionate Share of Operating Costs (Section 4.5)
(c) Utilities for Leased Premises (Section 4.6)
(d) Additional Services, if any (Section 4.7)
1.9 Basic Rent Commencement Date: December 1, 1997 (Section 4. 1)
1.10 Additional Rent Commencement Date: December 1, 1997 (Section 4.1)
<PAGE>
1.11 Fundamental Provisions: Each reference in this Lease to any of the
Fundamental Provisions listed above shall be read as having the same
dates, quantities and other meanings as specified in this Article I.
ARTICLE II
LEASED PREMISES
2.1 Lease: In consideration of the Rent to be paid, the landlord hereby leases
to the Tenant the premises outlined in red on Schedule "B" of this Lease, (the
"Leased Premises") described in Section 1.4 hereof, together with the rights and
privileges as contained in this Lease, and the Tenant hereby leases and
1
<PAGE>
accepts the Leased Premises from the Landlord, to have and to hold during the
Term, subject to the terms, covenants and conditions set out in this Lease.
The area of the Leased Premises will be measured by the Landlord's
Architect, and the Basic Rent will be adjusted in accordance with the certified
area. The Landlord will advise the Tenant in writing of the Architects
measurements, and the parties agree to be bound thereby,
2.2 Use: The Tenant covenants to use the Leased Premises for general office
purposes only in accordance with the standards of a first class office building
of similar age and in a similar location, and subject in any event to the
limitations on use set forth in Section 14.17 hereof. The Tenant shall take
possession of the Leased Premises no later than the Term Commencement Date,
unless the Landlord otherwise consents in writing, which consent shall not be
unreasonably withheld.
2.3 Rules and Regulations: The Tenant covenants to abide by the Rules and
Regulations as set out in Schedule "D" annexed hereto, and to cause those for
whom it is responsible to observe such Rules and Regulations. The Landlord,
acting reasonably, may make changes to the Rules and Regulations, and shall
endeavour to cause the tenants in the Building to observe such Rules and
Regulations from time to time, provided that the Landlord shall not be liable in
any way for either a failure to enforce such observance, or a failure on the
part of other tenants to so observe.
2.4 Observance of Law:
(a) The Tenant covenants to comply with all laws and directives issued
by governing authorities and which affect the Tenanfs use and
occupancy of the Leased Premises or any Leasehold Improvements of
the Tenant or any use of other parts of the Lands or Building.
<PAGE>
(b) To the extent necessary for the Landlord to comply with its
covenants in this Lease, the Landlord shall during the Term, with
respect to the Lands and Building, comply with all provisions of law
including, without limitation, federal and provincial legislative
enactments, building by-iaws and any other governmental or municipal
regulations which relate to the equipment, operation and use of the
Lands and Building, and to the making of repairs, replacements,
alterations, additions, changes, substitutions or improvements of or
to the Lands and Building, and to comply with all police, fire and
sanitary regulations imposed by any federal, provincial or municipal
authorities or made by any fire insurance company by which the
Landlord may be insured at any time during the Term from time to
time in force and applicable to the Lands and the Building. The
costs of items referred to in this subsection 2.4(b) shall be
included as an Operating Cost of the Building except if the actions
required to cause such compliance are required because of the use
and occupancy by the Tenant of the Leased Premises, in which event
such costs shall be the sole responsibility of the Tenant.
2.5 No Waste or Nuisance: The Tenant shall not commit or permit any waste or
damage to the Leased Premises, or commit or permit anything which may disturb
the quiet enjoyment of any occupancy of the Building. The Tenant further
covenants to co-operate with the Landlord in any of its programmes to improve or
make more efficient the operation of the Lands and Building.
2.6 Common Areas: The Landlord agrees that the Tenant, in common with all
chhers entitled thereto including the general public in concourse areas, may use
and have access through the Common Areas for
<PAGE>
their intended purposes; provided however, that in an emergency or in the case
of the Landlord making repairs, the Landlord may temporarily close or restrict
the use of any part of the Common Areas, although the Landlord shall, in such
instances, endeavour not to restrict access to the Leased Premises.
2.7 Easements: The Tenant acknowledges that the Landlord and any persons
authorized by the Landlord may install, maintain and repair pipes, wires and
other conduits through the Common Areas and the Leased Premises. Any such
installing, maintaining and repairing shall be done as quickly as possible and
in a manner that will least inconvenience the Tenant.
ARTICLE III
TERM - POSSESSION
3.1 Term: This Lease shall be for the period of five (6) years (the "Term"),
commencing on the lst day of December, 1997 (the "Term Commencement Date"), and
ending on the 30th day of November, 2007 unless earlier terminated as provided
in this Lease, and nothing hereafter contained in this Article III shall
postpone the Term Commencement Date, or extend the Term.
3.2 Tenant Fixturing: Should the Tenant take possession of the Leased Premises
for purposes of fixturing or installing its Leasehold Improvements prior to the
Term Commencement Date, then all of the terms and conditions of this Lease,
except for payment of Rent, shall be in full force and effect as of the date the
Tenant took such possession, and the Tenant shall reimburse the Landlord for the
cost of any special
2
<PAGE>
services provided during the Fixtuhng Period, as set out in Schedule "C"
including the cost of cleaning and rubbish removal, and any utilities consumed
in the Leased Premises; and should the Tenant commence conducting its business
prior to the Term Commencement date, Rent shall be payable as of and from such
date of business commencement.
3.3 Delay In Possession: Should the Tenant be delayed by fault of the Landlord
in taking possession of the Leased Premises on the Term Commencement Date, then
and only then shall the payment of Rent be postponed for the same number of days
that the Tenant is delayed in taking possession of the Leased Premises. The
Tenant hereby acknowledges and agrees that such postponement of the payment of
Rent shall be full settlement for any claims it might have against the Landlord
for being delayed in its taking possession of the Leased Premises
3.4 Surrender: The Tenant shall surrender possession of the Leased Premises
upon termination of this Lease by either effluxion of time or operation of the
terms hereof.
3.5 Overholding: If the Tenant remains in possession of the Leased Premises
following termination of this Lease by either effluxion of time or operation of
the terms hereof, with or without the consent of the landlord, which consent may
be arbitrarily withheld, the Tenant shall be deemed to be a monthly tenant upon
the same terms and conditions as are contained in this Lease except as to the
Term, and except as to Rent which shall be equal to the then prevailing rate
charged by the Landlord in the Building, or as may be stipulated in such
consent, as the case may be.
ARTICLE IV
RENT
4.1 Payment: From and after the lst day of December, 1997 (the "Basic Rent
Commencement
<PAGE>
Date") the Tenant shall pay to the Landlord the Basic Rent as set out in Section
4.2 below and from and after the Ist day of December, 1997 (the "Additional Rent
Commencement Date"), the Tenant shall pay to the Landlord the Additional Rents
as set out in this Lease.
4.2 Basic Rent: The Tenant shall pay basic rent in the amount of Forty Six
Thousand, Two Hundred dollars and Zero cents ($46,200.00) per annum (the "Basic
Rent"), which shall be payable in advance in equal consecutive monthly
instalments of Three Thousand, Eight Hundred and Fifty dollars and Zero cents
($3,850.00) per month commencing on the Basic Rent Commencement Date and Fifty
Five Thousand dollars and Zero cents ($55,000.00) per annum (the "Basic Rent"),
which shall be payable in advance in equal consecutive monthly instalments of
Four Thousand, Five Hundred and Eighty Three dollars and Thirty Three cents
($4,583.33) per month commencing December 1, 2002. This is subject to adjustment
upon certification of the Rentable Area of the Leased Premises.
4.4 Realty Taxes:
(a) The Tenant shall pay to the Landlord, Realty Taxes assessed against
(or allocated in respect to) the Leased Premises on the basis of the
assessment for realty tax purposes of the Leased Premises as
indicated on the realty tax assessment(s) for the Building, or as
reasonably allocated by the Landlord, commencing on the Additional
Rent Commencement Date. On or before the Term Commencement Date and
the commencement of any Fiscal Year in which the Term fails, the
Landlord shall estimate the Realty Taxes to be assessed (or
allocated against the Leased Premises). The Tenant shall pay to the
Landlord in equal monthly instalments in advance on the first day of
each month a sum on account of its Realty Taxes based on the
landlord's
<PAGE>
estimates.
(b) The Landlord may from time to time re-estimate the amount of
projected Realty Taxes for the then current year and for the
remainder of the Fiscal Year and the Tenant shall change its monthly
instalments to conform with the revised estimates.
(c) After the end of each Fiscal Year the Landlord shall determine the
actual Realty Taxes with respect to the Leased Premises and the
difference between such actual determination and the amount already
billed to the Tenant in instalments. If the aggregate of the
Tenant's instalments for the Fiscal Year in question were less than
the actual determination, then the Tenant shall pay the difference
to the Landlord forthwith, or if the aggregate of such instalments
were more than the actual determination, the Tenant shall deduct the
difference from its next payment of Basic Rent.
4.5 Proportionate Share of Operating Costs:
<PAGE>
(a) The Tenant shall pay to the Landlord its Proportionate Share of
Operating Costs commencing on the Additional Rent Commencement Date.
On or before the Term Commencement Date and the commencement of any
Fiscal Year in which the Term falls, the Landlord shall estimate the
Operating Costs and the Tenant's Proportionate Share thereof The
Tenant shall pay to the Landlord in equal monthly instalments in
advance on the first day of each month a sum on account of its
Proportionate Share of Operating Costs based on the Landlord's
estimates.
(b) The Landlord may from time to time re-estimate the amount of
projected Operating Costs for the then current year and re-estimate
the Tenant's Proportionate Share thereof for the remainder of the
Fiscal Year and the Tenant shall change its monthly instalments to
conform with the revised estimates.
(c) After the end of each Fiscal Year the Landlord shall determine the
actual Tenant's Proportionate Share of Operating Costs and the
difference between such actual determination and the amount already
paid by the Tenant. If the aggregate of the Tenant's instalments for
the Fiscal Year in question were less than the actual determination,
then the Tenant shall pay the difference to the Landlord with its
next payment of Basic Rent, or if the aggregate of such instalments
were more than the actual determination, the Tenant shall deduct the
difference from its next payment of Basic Rent.
4.6 Utilities-Light Fixtures: The Tenant shall pay to the Landlord the cost of
utilities supplied to the Leased Premises commencing on the Additional Rent
Commencement Date, as reasonably determined
<PAGE>
by the Landlord, and billed monthly, in advance. The amount of such cost shall
be based on the Landiord's reasonable estimates for the quantities of utilities
supplied multiplied by the average unit costs to the Lahdford for such
utilities. The Tenant may have installed (at its own expense) meters to measure
the amount of any utility supplied and the Landlord shall employ the resulting
metered quantities in lieu of estimated consumption. The Tenant shall also pay
to the Landlord the reasonable cost of cleaning, maintaining and servicing all
electric light fixtures in the Leased Premises, including the cost of replacing
light bulbs, tubes, starters and ballasts.
4.7 Additional Services: The Tenant may from time to time request Additional
Services from the Landlord, and where the Tenant requests any Additional
Services and the Landlord provides same, the Tenant shall pay to the landlord a
reasonable charge for such Additional Services, payable forthwith upon receipt
of the Landford's invoice therefor.
4.8 General Provisions:
(a) No Delay in Payment of Rent: Nothing contained in this Lease shall
suspend or delay the payment of any money at the time it becomes due
and payable. The Tenant agrees that the Landlord may, at its option,
apply any sums received against any amounts due and payable under
this Lease in such manner as the Landlord sees fit.
(b) Interest on Arrears: If any amount of Rent is in arrears it shall
bear interest at the Interest Rate.
(c) Partial Periods: If either the Basic Rent Commencement Date or the
Additional Rent Commencement Date is any day other than the first
day of a calendar month, or if the
<PAGE>
Term ends on a day other than the last day of a calendar month, then
Basic Rent and Additional Rents, as the case may be, will be
adjusted pro rata based on a 366 day year.
(d) Estimated Amounts: Where the Landlord estimates or re-estimates the
costs of Rea@ Taxes, Operating Costs and the amount of utilities
supplied, it shall do so acting reasonably and shall provide the
Tenant with statements of such estimates in reasonable detail.
(e) Audited Statement: Invoices for the actual determination of the
Tenant's Proportionate Share of Operating Costs shall be accompanied
by an audited statement of such Operating Costs.
General: All amounts payable by the Tenant to the Landlord in
accordance with this Lease shall be deemed to be Rent. All Rent
shall be paid in advance on the first day of each month without
deduction or abatement, except as expressly provided in this Lease,
and without set-off, and where payments due have been invoiced, such
invoiced amounts shall be paid within ten (10) days of receipt of
such invoice. All Rent shall be paid in lawful money of Canada.
ARTICLE V
TAXES
4
<PAGE>
5.1 Taxes Payable by the Landlord: The Landlord shall pay before delinquency
all Realty Taxes. The Landlord covenants that at all appropriate times it shall
declare itself a public school supporter for purposes of determining the amounts
of any Realty Taxes payable.
5.2 Business and Other Taxes Payable: The Tenant shall pay before delinquency
all business taxes, Rental Taxes, if applicable, and any other taxes, charges,
rates, duties and assessments levied, rated, imposed, charged or assessed
against and in respect of any use or occupancy of the Leased Premises or in
respect of the personal property, trade fixtures, fixtures and facilities of the
Tenant or the business or income of the Tenant on or from the Leased Premises,
and the Tenant shall indemnify the Landlord from and against costs or charges
resulting from the Tenant not paying these amounts and the Tenant shall, upon
request of the Landlord supply receipts for such taxes paid. The Tenant shall
pay to the Landlord any increase or incremental amount of Realty Taxes or other
taxes which the Landlord, acting reasonably, has determined to be attributable
to an act by the Tenant (for example declaring itself a separate school
supporter) or attributable to the Leasehold Improvements.
5.3 Contesting Taxes:
(a) The Tenant may, at its expense, appeal or contest the taxes,
assessments and other amounts payable as described in Section 5.2
hereof, provided it first gives the Landlord written notice of its
intention to do so, and consults with the Landlord, and obtains the
Landiord's prior written approval, which approval shall not be
unreasonably withheld, delivers to the Landlord such security for
the payment of such taxes, assessments and other charges as the
Landlord deems advisable, diligently prosecutes any such appeal or
contestation to a speedy resolution and keeps the Landlord advised
of its progress
<PAGE>
from time to time; and provided that the Landlord may withhold its
approval of such appeal or contestation if the Landlord, acting
reasonably, considers that the effect thereof will be detrimental to
the Landlord or other tenants within the Building.
(b) The Landlord reserves the right to appeal or contest any taxes
payable by the Landlord so long as it does so in a diligent manner
and does not interfere with the quiet enjoyment granted to the
Tenant in this Lease.
5.4 Alternate Methods of Taxation: If, during the Term, the method of taxation
shall be altered, so that the whole or any part of the Realty Taxes now levied,
rated, assessed or imposed on real estate and improvements are levied, assessed,
rated or imposed wholly or partially as a capital levy or on the rents received
or reserved or otherwise, or if any tax, assessment, levy, imposition or charge
in lieu thereof, shall be imposed upon the Landlord, then all such taxes
assessments, levies, impositions and charges shall be included when determining
the Realty Taxes. If, during the Term, the method of taxation shall be altered,
so that the whole or any part of the business taxes ordinarily (and formerly)
payable in respect of any use or occupancy of the Leased Premises is merged into
a comprehensive realty tax, the Landlord shall have the right to allocate (and
collect) such component of the comprehensive realty tax (as would have been
formerly business taxes payable by the Tenant) in the manner (or on the same
basis) as would have been employed or used in taxation practice by the taxing
authority.
ARTICLE VI
MAINTENANCE, REPAIRS AND ALTERATIONS
6.1 General Statement: The landlord and Tenant agree to carry out their
respective responsibilities
<PAGE>
for maintenance and repair as detailed in this lease in accordance with general
standards for a first class office building in the City of Toronto, of similar
age and in a similar location.
6.2 Responsibilitv of Tenant: Without notice or demand from the Landlord, the
Tenant shall:
(a) Maintain and keep in a good state of repair the Leased Premises and
the Leasehold Improvements.
(b) Decorate and redecorate the Leased Premises including the interior
faces of any demising walls and permanent building walls, columns
and covers for heating units along the exterior walls.
(c) Keep the Leased Premises in a clean and tidy condition, and not
permit wastepaper, garbage, ashes, waste or objectionable material
to accumulate thereon or in or about the Building, other than in
areas designated by the Landlord.
(d) Repair all damage in the Leased Premises resulting from any misuse,
excessive use or installation, alteration, or removal of Leasehold
Improvements, fixtures, furnishings or equipment.
6.3 Tenant Not responsible: Notwithstanding Section 6.2 hereof, the Tenant
shall not be responsible for:
(a) Reasonable wear and tear which does not affect the proper use and
enjoyment of the Leased Premises.
(b) Damage by fire, lightning, tempest or other casualty for which the
Landlord is indemnified under any policy of insurance (unless the
damage was caused by the
<PAGE>
negligence of the Tenant or those for whom the Tenant is In law
responsible).
(c) The obligations of the Landlord as set out in Section 6.4 hereof
6.4 Responsibility of Landlord: The Landlord shall maintain and keep in a good
state of repair
(a) The Building structure, roof, and permanent building walls (except
for interior faces facing into the Leased Premises).
(b) Equipment installed by the Landlord to heat, ventilate, and air
condition the Building.
(c) Elevators.
(d) Systems installed by the Landlord for the distribution of utilities.
(a) The Common Areas.
The Landlord's Improvements in both the Common Areas and the Leased
Premises which have been installed by the Landlord.
6.5 Inspection, Entry and Notice:
(a) The Landlord, or its agents, may, from time to time, acting
reasonably and where practical in a manner that will not disrupt the
Tenant's business, enter the Leased Premises and inspect the state
of maintenance, repair and decoration, and upon reasonable prior
notice to the Tenant, show the Leased Premises to prospective
purchasers, tenants and existing or prospective mortgagees.
(b) The Landlord may give notice to the Tenant requiring it to perform
in accordance with Section 6.2 hereof, and the Tenant shall commence
to remedy any such failure to
<PAGE>
perform within fifteen (15) days following receipt of such notice.
Should the Tenant fail to commence such remedy within the allotted
time, or having so commenced, fail to diligently continue such
remedy to conclusion, the Landlord may carry out such remedy without
further notice to the Tenant, and charge the Tenant for such remedy
as if it were an Additional Service requested by the Tenant.
(c) If the Tenant is not present to open and permit any entry into H the
Leased Premises when for any reason an entry shall be necessary in
the case of emergency, the Landlord or its agents may, using
reasonable force, enter the same without rendering the Landlord or
such agents liable therefor, and without affecting the obligations
and covenants of this Lease.
(d) Nothing in this Lease shall make the Landlord liable for any,
actions, notices or inspections as described in this Section 6.5,
nor is the Landlord required to inspect the Leased Premises, give
notice to the Tenant or carry out remedies on the Tenant's behalf,
nor is the Landlord under any obligation for the care, maintenance
or repair of the Leased Premises, except as specifically provided in
this Lease.
6.6 Notify the Landlord: The Tenant covenants to immediately notify the
Landlord of any defect, damage or malfunction affecting the Leased Premises or
other parts of the Building of which the Tenant is aware.
6.7 Alterations or Improvements:
(a) The Tenant agrees to accept the Leased Premises in their present
"as-is"
<PAGE>
condition. The Landlord shall however, install at the Landiord's
cost, (1) a new double entry door to the suite; and (ii) replace
ceiling tiles where required.
(b) The Tenant following approval by the Landlord shall install its
initial Leasehold Improvements in accordance with the provisions of
Schedule "C" annexed hereto and the "Design Criteria Manual" (if
applicable) prepared by the Landlord and provided to the Tenant.
(c) Following installation of such initial Leasehold Improvements as
aforesaid, the Tenant shall not make any alterations, repairs,
changes, replacements, additions, fixturing, installations or
improvements to any part of the Leased Premises or Leasehold
Improvements without the Landiord's prior written approval, which
approval shall not be unreasonably withheld, unless the request is
in respect of a structural matter or will
affect the basic mechanical, electrical, air control or other basic
systems of the Building or the capacities thereof, in which instance
the Landiord's approval may be arbitrarily withheld. The Tenant
shall submit to the Landlord details of any proposed work, including
complete working drawings and specifications prepared by qualified
designers and conforming to good engineering practice, and the
Tenant shall provide such indemnification against liens, costs,
damages and expenses as the Landlord shall reasonably require, and
evidence satisfactory to the Landlord that the Tenant has obtained
all necessary consents, permits, licences and inspections from all
governmental authorities having jurisdiction.
<PAGE>
(d) All Leasehold Improvements shall:
be performed expeditiously and at the sole cost of the
Tenant, be performed by competent workmen whose labour
union affiliations, if any, are compatible with others
employed by the Landlord and its contractors, and who will
not interfere unreasonably with work being performed by the
Landlord,
be performed in a good and workmanlike manner and in
accordance with the drawings and specifications which the
Landlord has approved,
be performed in compliance with the applicable requirements
of all regulatory authorities, and be subject to the
reasonable supervision and direction of the Landlord.
(e) Any Leasehold Improvements made by the Tenant without the prior
written consent of the Landlord or which are not in accordance with
the drawings and specifications approved by the Landlord shall, if
requested by the Landlord, be promptly removed by the Tenant at the
Tenant's expense, and the Leased Premises shall be restored to their
previous condition.
The Tenant shall reimburse the Landlord for the cost of technical
evaluation of the plans and specifications and shall revise such
plans and specifications as the Landlord deems necessary.
<PAGE>
(g) In carrying out work in accordance with subsection (b) hereof, the
Tenant, at its expense, shall pay to the Landlord with respect to
such work the reasonable cost to the Landlord of all utilities
supplied to the leased Premises with respect to such work and any
special or additional services provided to the Tenant for the
conduct of such work, including the cost of any Additional Services,
the cost of any necessary cutting or patching of or repairing of any
damage to the Building or the Leased Premises, any cost to the
landlord of removing refuse or material and of cleaning as a result
of such work, any cost to the Landlord for hoisting of materials
used in the Tenant's work, any cost to the Landlord for changes
required by the Tenant for the use of the Leased Premises, all other
costs incurred for the accommodation of such work (including delays
caused by the conduct of such work), and any other costs of the
Landlord which can be reasonably allocated as a direct expense
relating to the conduct of such work.
(h) If a request is made by the Tenant with respect to structural
matters or matters which affect the basic mechanical, electrical,
air control or other basic systems of the Building or the capacities
thereof, which is approved by the Landlord, the landlord may require
that such work be designed by consultants designated by it and that
it be performed by the Landlord or its contractors. If the Landlord
or its contractors perform such work, it shall be at the Tenant's
expense in an amount equal to the Landford's total cost of such work
or the contract price therefor plus ten (10%) per cent, payable
following completion upon demand. Notwithstanding the foregoing, if
the Tenant requests the
<PAGE>
Landlord to alter or install any Leasehold Improvements such work
will be considered as an Additional Service.
(i) No Leasehold Improvements by or on behalf of the Tenant shall be
permitted which may adversely affect the condition or operation of
the Building or Leased Premises or diminish the value thereof or
restrict or reduce the Landiord's coverage for municipal zoning
purposes.
During construction and installation of Leasehold Improvements the
Tenant shall keep the Building clean from any debris related
thereto, and in any event after construction is completed do an
adequate "first clean" to the Leased Premises.
(k) The Tenant shall promptly pay all its contractors and suppliers and
shall do all things necessary to prevent a lien attaching to the
Lands or Building for failure to pay its contractors and suppliers
and should any such lien be made or filed, the Tenant shall
discharge or vacate such lien immediately. If the Tenant fails to
discharge or vacate
<PAGE>
any lien, then in addition to any other right or remedy of the
Landlord, the Landlord may discharge or vacate the lien by paying
into Court the amount required by statute to be paid to obtain a
discharge, and the amount so paid by the Landlord together with all
costs and expenses including solicitors fees (on a solicitor and his
client basis) incurred in connection therewith shall be due and
payable by the Tenant to the Landlord on demand.
6.8 Removal and Restoration:
(a) The Leasehold Improvements shall immediately upon installation
become the property of the Landlord without compensation to the
tenant.
(b) The Tenant shall repair and make good any damage to the Leased
Premises or to the Building caused either in the installation of
Leasehold Improvements.
6.9 External Changes: The Tenant agrees that it shall not erect, affix or
otherwise attach to any roof, exterior walls or surfaces of the Building any
antennae, sign, fixture or attachment of any kind, nor shall it make any opening
in or alteration to the roof, walls, or structure of the Leased Premises, or
install in the Lepsed Premises or Building free standing air-conditioning units,
without the prior written consent of the Landlord which may be arbitrarily
withheld.
6.10 Trade Fixtures: The Tenant may, during or at the end of the Term, if not
in default, remove its trade fixtures, and the Tenant shall, in the case of
every installation or removal of trade fixtures, make good any damage caused to
the Leased Premises or the Building by such installation or removal. Any trade
fixtures and equipment belonging to the Tenant, if not removed at the
termination or expiration of this Lease,
<PAGE>
shall, if the Landlord so elects, be deemed abandoned and thereupon become the
property of the Landlord without any compensation to the Tenant. If the Landlord
shall not so elect, the Landlord may remove such fixtures or equipment from the
Leased Premises and store them at the Tenant's risk and expense and the Tenant
shall save the Landlord harmless from all damage to the Leased Premises caused
by such removal, whether by the Tenant or by the Landlord.
6.11 Lien on Trade Fixtures: If at any time the Tenant shall be in default
under any covenant herein contained, the landlord shall have the right to
distrain on all stock in trade, inventory and fixtures, equipment and facilities
of the Tenant as security against loss or damage resulting from any such default
by the Tenant, and the stock in trade, inventory, fixtures, equipment or
facilities shall not be removed by the Tenant until such default is cured,
unless otherwise so directed by the Landlord.
6.12 Tenant's Signs: The Tenant shall not at any time cause or permit any sign,
picture, advertisement, notice, lettering, flag, decoration or direction
(hereinafter collectively called "Signs") to be painted, displayed, inscribed,
placed, affixed or maintained in or on any windows or the exterior of the Leased
Premises, nor anywhere else on or in the Building, without the prior and
continuous consent of the Landlord which consent may be arbitrarily withheld.
The Landlord may at any time prescribe a uniform pattern of identification signs
for tenants to be placed on the outside of the interior doors leading into the
Leased Premises and other premises. Any breach by the Tenant of this provision
may be immediately rectified by the Landlord at the Tenant's expense. The Signs
shall remain the property of the Tenant and shall be removed by the Tenant, at
its sole cost, at the earlier of the expiration of the Term or termination of
this Lease. Upon such removal, the Leased Premises shall be restored to their
original condition. The Tenant shall indemnify the Landlord against any loss or
damage caused to any person or property as a
<PAGE>
result of placing, use or removal of any Sign on or in the Building.
6.13 Directory Board: The Landlord may erect and maintain (as an Operating
Cost) a directory board in the main lobby of the Building which shall indicate
the name of the Tenant and the location of the Leased Premises within the
Building. The Tenant shall pay the Landiord's cost of changes thereto, and any
other signage with respect to the Leased Premises. Should sufficient space exist
on the directory board, the Landlord may provide to the Tenant, at the Tenants
expense, additional entries as requested. The directory board shall be for
identification only and not for advertising. The Landlord's acceptance of any
name for listing on the directory board will not be deemed, nor will it
substitute for, Landford's consent, as required by this Lease, to any sublease,
assignment or other occupancy of the Leased Premises.
6,14 Landlord's Signs: In addition to the Landiord's right to install general
information and direction signs in and about the Building as would be customary
for a first-class office building in the City of Toronto, the Landlord shall
have the right at any time during the Term to place upon the Building a notice
of reasonable dimensions, reasonably placed so as not to interfere with the
Tenant's business, stating that the Building is for sale, or that areas of the
Building are for lease, as the case may be, and at any time during the last six
(6) months of the Term, that the Leased Premises are for rent and the Tenant
shall not remove such notice, or permit the same to be removed.
ARTICLE VII
STANDARD SERVICES
7.1 Heating and Air-Conditioning:
(a) The Landlord shall provide heat to the leased Premises and interior
Common Areas (excluding any areas below concourse and in the
penthouse) sufficient to maintain
<PAGE>
reasonable temperatures for the Tenant's comfort during Normal
Business Hours. It is understood and accepted by the Tenant that the
Landlord may reduce the degree of heating provided after Normal
Business Hours in a manner comparable to other first class office
buildings in the City of Toronto of a similar age and in a similar
location.
(b) The Landlord shall provide ventilation and air-conditioning to the
Leased Premises and interior Common Areas (excluding any areas below
concourse and in the penthouse) during Normal Business Hours. The
systems furnished and operated by the Landlord for air-conditioning
and ventilation to the Leased Premises are designed for a reasonable
density of persons and for general office purposes based on window
shading being fully closed where windows are exposed to direct
sunlight. Arrangement of partitions, equipment or special purpose
areas, or the installation of equipment with high levels of heat
production by the Tenant may require alteration of the portion of
the air-conditioning and ventilation systems located within the
Leased Premises. Any alterations that can be accommodated by the
Landiord's equipment shall be made at the Tenant's expense and in
accordance with Section 6.7 hereof. The Tenant acknowledges that
alterations made from time to time whether inside the leased
Premises or in other areas of the Building, may temporarily cause
imbalance of air-conditioning and ventilation, and the Tenant shall
allow a reasonable amount of time for readjustment and rebalancing.
(c) Should the Landlord fail to provide sufficient heat or
air-conditioning at any time it shall
<PAGE>
not be made liable for direct, indirect, or consequential damages,
for personal discomfort or illness.
7.2 Cleaning: The Landlord shall provide janitorial services to the Leased
Premises at such times and in such manner as is consistent with the prevailing
practices in similar first class office buildings in the City of Toronto of
similar age and in a similar location. The Landlord shall periodically clean
both sides of exterior windows so as to maintain the Building to the standard of
a first class office building in the City of Toronto of similar age and in a
similar location. The Tenant acknowledges that the Landlord may clean the
windows during Normal Business Hours and the Tenant agrees to allow the
Landlord, its employees and contractors entry into the Leased Premises for this
purpose. The Landlord shall keep those portions of the Common Areas accessible
to the public in a clean and orderly fashion, and keep the sidewalks and
driveways located on the Lands clear of snow.
7.3 Elevators: The Landlord shall provide operatoriess elevator passenger
service at all times. The Landlord may reduce the number of elevators in service
after Normal Business Hours. The Landlord retains the right to regulate the use
of elevators for the purpose of carrying freight.
7.4 Security and lnformation: The Landlord may provide a security guard or
receptionist in the main lobby of the Building to provide general information to
visitors and to control traffic in and out of the Building. The Landlord may
from time to time elect to substitute such services with automated systems and
other devices that may from time to time seem appropriate for a first class
office building in the City of Toronto. It is acknowledged by the Tenant that
such services are intended for the general benefit of the Building and are not
intended to specifically protect or otherwise serve the Tenant or the Leased
Premises.
7.5 Utilities:
<PAGE>
(a) Electrical Power The landlord will supply to the Leased Premises
sufficient electrical power to operate the standard lighting
fixtures supplied by the Landlord plus circuits sufficient to
deliver power to the Leased Premises as set out in Schedule "C" of
this Lease. If the Tenant requires electrical power at a
different.voltage or at a greater capacity than the Landiord's
system can deliver, then any additional systems required shall be
installed and maintained at the Tenant's cost.
(b) Water and Sewage Connections: The Landlord shall provide to the
floor(s) on which the Leased Premises is located chilled water for
drinking fountains, hot and cold water for washroom facilities and
the necessary sewer connections. Any connections made to Leasehold
Improvements or special facilities by the Tenant shall be made at
the Tenant's cost and in accordance with Section 6.7 hereof
(c) The obligation of the Landlord to furnish utilities as set out in
this Section 7.5 shall be subject to the rules and regulations of
the supplier of such utility andior municipal or other governmental
authority regulating the business or providing any of these
utilities.
7.6 Interruption or Delay of Services: The Landlord may slow down, interrupt,
delay, or shut down any of the services outlined in this Article VII on account
of repairs, maintenance or alterations to any equipment or other parts of the
Building so long as where practical, it schedules such interruptions, delays,
slow downs, or stoppage so as to minimize any inconvenience to the Tenant. The
Landlord shall not be held responsible for any direct or indirect damages,
losses, or injuries caused.
7.7 Landlord's Alterations: Notwithstanding anything contained in this Lease,
the Landlord shall
<PAGE>
have the right, at any time, to add buildings and parking structures on the
Lands and to make any changes in, additions to, subtractions from,
rearrangements of or relocations to any part of the Common Areas, the Lands or
the Building (including the Leased Premises, provided that the premises, as
rearranged or relocated shall in all material respects be comparable to the
Leased Premises as herein defined) and to enclose any open area, and to grant,
modify or terminate easements and other agreements pertaining to the use and
maintenance of all or any part of the Building or the Lands, and to close all or
any part of the Lands or the Building to such extent as the Landlord or the
Landiord's counsel considers reasonably necessary to prevent accrual of any
rights therein to any persons at any time during the Term, and to make changes
to the parking areas and to make any changes or additions to the pipes,
conduits, utilities and other building services in the Leased Premises which
serve any premises in the Building (which acts are herein collectively called
the "Changes"); provided that in so doing (a) the costs of any such activities
which are not properly Operating Costs, shall be at the sole expense of the
Landlord, and (b) access to the Leased Premises will at all times be available
from the elevator lobby of the Building; and provided that in so doing any of
the foregoing, the Landlord shall have the right to enter upon the Leased
Premises. The Landlord shall not be liable for any damage caused to the Tenant's
property, except if due to negligence or wilful misconduct of the Landlord or
those for whom the Landlord is in law responsible. No claim for compensation
shall be made by the Tenant by reason of inconvenience, nuisance or discomfort
arising from such Changes. The Landlord shall make such Changes as expeditiously
as is reasonably possible. All Common Areas shall at all times be subject to the
exclusive control and management of the Landlord or as the Landlord may direct
from time to time.
ARTICLE VIII
<PAGE>
ASSIGNMENT AND SUBLETTING
8.1 Assignment, Subletting: The Tenant shall not assign this Lease, nor
sublet all, or any part of the Leased Premises without the prior consent in
writing of the Landlord, which consent shall, subject to Section 8.2 hereof,
not be unreasonably withheld; provided however, such leave 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. If this Lease is
assigned or any part of the Leased Premises is occupied by any person other
than the Tenant, the Landlord may collect Rent or sums on account of Rent
from the assignee, subtenant or transferee of possession, and apply the net
amount collected to the Rent and other amounts payable hereunder but no such
assignment, subletting, transfer of possession or collection or the
acceptance of the assignee, subtenant or transferee as tenant shall be deemed
a waiver of this covenant.
8.2 Landlord's Consent: If the Tenant desires to assign this Lease, or tg
sublet the Leased Premises, then and so often as such event shall occur, the
Tenant shall make its request to the Landlord in writing, and the Landlord
shall, within ten (10) business days after receipt of all information
requested, notify the Tenant in writing either that; (a) the Landlord
consents or does not consent, as the case may be, or (b) the Landlord elects
to cancel and terminate this Lease if the request is to assign the Lease or
to sublet all of the Leased Premises, or if the request is to sublet a
portion of the Leased Premises only, to cancel and terminate this Lease with
respect to such portion. If the Landlord elects to cancel this Lease as
aforesaid, and so advises the Tenant in writing, the Tenant shall then notify
the Landlord in writing within fifteen (15) days thereafter of the Tenant's
intention either to refrain from such assigning or subletting or to accept
the
<PAGE>
cancellation of the Lease (in whole, or in part). Failure of the Tenant to
deliver notice to the Landlord within such fifteen (15) day period advising
of the Tenant's desire to refrain from such assigning or subletting, shall be
deemed to be an acceptance by the Tenant of the Landlord's cancellation of
this Lease (in whole, or in part, as the case may be). Any cancellation of
this Lease pursuant to this Section 8.2 shall be effective on the later of
the date originally proposed by the Tenant as being the effective date of
transfer or the last day of the month sixty (60) days following the date of
the Landlord's notice to cancel this Lease.
8.3 Requests for Consent: Requests by the Tenant to assign this Lease or
sublet all, or part of the Leased Premises shall be in writing to the
Landlord accompanied with such information as the Landlord may reasonably
require and shall include an original copy of the proposed assignment or
sublease, as the case may be, and the Landlord shall, within ten (1 0)
business days thereafter, notify the Tenant in writing either that it
consents or does not consent to such proposal as set out in Section 8.2
hereof. Prior to any consent being given by the Landlord to the Tenants
request, the Landlord shall be satisfied as to the following, inter alia: (a)
that the liability of the Tenant in fulfilling the terms, covenants and
conditions of this Lease shall remain, (b) the nature of the business to be
carried on, the financial ability and good credit rating and standing of the
proposed assignee, subtenant or transferee, as the case may be, (c) that the
Tenant has regularly and duly paid Rent and performed all the covenants and
provisos contained in this Lease, (d) that
10
<PAGE>
any mortgagee (including a trustee for bondholders) of the Landlord will consent
to such request, and (e) that the proposed assignee or subtenant has, or will
enter into an agreement with the Landlord agreeing to be bound by all of the
terms, covenants and conditions of this Lease. All expenses incurred by the
Landlord in connection with the review by the Landlord and/or its solicitors of
the Tenant's request pursuant to this Article Vill, and in the preparation and
review of any documentation in connection therewith, shall be the responsibility
of the Tenant and shall be paid forthwith upon demand. If the Tenant receives
consent pursuant to this Section 8.3 it shall be conditional on the Tenant
paying to the Landlord as Additional Rent, any profit (net of all reasonable
costs incurred by the Tenant in connection therewith) earned by the Tenant in
assigning this Lease or subletting all or any part of the Leased Premises.
8.4 Assicinment by Landlord: In the event of the sale or lease by the
Landlord of its interest in the Lands or Building or any part or parts
thereof and in conjunction therewith the assignment by the Landlord of this
Lease or any interest of the Landlord hereunder, the Landlord shall be freed
and relieved of any liability under this Lease.
ARTICLE IX
INSURANCE AND INDEMNIFICATION
911 Tenant's Insurance: The Tenant shall, at its sole cost and expense,
take out and maintain in full force and effect at all times throughout the
Term the following insurance:
(a) "All Risks" insurance upon property of every description and kind
owned by the Tenant, or for which the Tenant is legally liable, or
which is installed by or on behalf of the Tenant, within the Leased
Premises, including, without limitation, stock in trade,
<PAGE>
ftjmiture, fittings, installations, alterations, partitions,
fixtures and anything in the nature of a tenant's leasehold
improvement in an amount of not less than the full replacement cost
thereof from time to time. In the event that there shall be a
dispute as to the amount of full replacement cost, the decision of
the Landlord or the Mortgagee shall be conclusive;
(b) General liability and property damage insurance, including personal
liability, contractual liability, tenants' legal liability,
non-owned automobile liability, lease agreement contractual coverage
and owners'and contractors'protective insurance coverage with
respect to the Leased Premises and the Common Areas, which coverage
shall include the business operations conducted by the Tenant and
any other person on the Leased Premises. Such policies shall be
written on a comprehensive basis with coverage for any one
occurrence or claim of not less than Five Million Dollars
($5,000,000.00) or such higher limits as the landlord or the
Mortgagee may reasonably require from time to time;
(c) Any form or forms of insurance as the Tenant, the Landlord or the
Mortgagee may reasonably require from time to time in amounts and
for insurance risks against which a prudent tenant would protect
itself.
9.2 Policy Requirements: Each policy of insurance taken out by the Tenant
in accordance with this Lease shall be taken out with insurers, and shall be
in such form and on such terms as are satisfactory to the Landlord, and each
such policy shall name the Landlord and any others designated by the Landlord
as additional named insureds, as their respective interests may appear, and
each of such policies shall contain,
<PAGE>
in form satisfactory to the Landlord:
(a) the standard mortgage clause as required by the Mortgagee;
(b) a waiver by the insurer of any rights of subrogation or indemnity or
any other claim over, to which such insurer might otherwise be
entitled against the Landlord, its agents, employees or those for
whom it is in law responsible;
(c) an undertaking by the insurer to notify the Landlord and the
Mortgagee in writing not less than thirty (30) days prior to any
proposed material change, cancellation or other termination
thereof.,
(d) a provision that the Tenant's insurance is primary and shall not
call into contribution any other insurance available to the
Landlord;
(e) a severability of interests clause and a cross-liability clause,
where applicable.
9.3 Proof of Insurance: The Tenant shall provide to the Landlord and the
Mortgagee on demand, and from time to time, satisfactory evidence that the
policies of insurance required to be maintained by the Tenant in accordance with
this Lease are in fact being maintained, which evidence shall be in the form of
certificates of insurance, or if required by the Landlord or the Mortgagee,
certified copies of each such insurance policy.
11
<PAGE>
9.4 Failure to Maintain: If the Tenant fails to take out or keep in force
any insurance referred to in this Article IX, or. should any such insurance
not be approved by either the Landlord or the Mortgagee and should the Tenant
not rectify the situation within forty-eight (48) hours following receipt by
the Tenant of written notice from the Landlord to the Tenant (stating, if the
Landlord or the Mortgagee do not approve of such insurance, the reasons
therefor), the Landlord shall have the right, without assuming any obligation
In connection therewith, to effect such insurance at the sole cost of the
Tenant and all outlays by the Landlord shall be payable by the Tenant to the
Landlord and shall be due on the first day of the next month following said
payment by the Landlord without prejudice to any other rights and remedies of
the landlord under this Lease.
9.5 Damage to Leasehold Improvements: In case of damage to the Leasehold
Improvements, or any material part thereof, the proceeds of insurance in
respect thereto shall be and are hereby assigned and made payable to the
Landlord, and such proceeds shall be released to the Tenant (provided that
the Tenant is not in default hereunder) upon the Tenant's written request for
progress payments, at stages determined by a certificate of the Architect
stating that repairs to each such stage have been satisfactorily completed
free of liens by the Tenant or by the Tenant's contractors. In the event the
Tenant defaults in making such repairs, the Landlord may, but shall not be
obliged to, perform the repairs and the proceeds may be applied by the
Landlord to the cost thereof.
9.6 Increase In Insurance Premiums/Cancellation: The Tenant shall not do or
permit anything to be done upon the Leased Premises which shall cause the
premium rate of insurance on the Building to be increased. Notwithstanding
the foregoing, if the premium rate of insurance on the Building shall be
increased by reason of any use made of the leased Premises or by reason of
anything done or omitted or
<PAGE>
permitted to be done by the Tenant or by anyone permitted by the Tenant to be
upon the leased Premises, the Tenant shall pay to the Landlord on demand the
amount of such premium increase. In the event of an actual or threatened
cancellation of any insurance on the Building or any adverse change thereto
by the indurer by reason of the use or occupation of the Leased Premises or
any part thereof by the Tenant or by anyone permitted by the Tenant to be
upon the Leased Premises, and if the Tenant has failed to remedy the
situation, use, condition, occupancy or other factor giving rise to such
actual or threatened cancellation or adverse change within twenty-four (24)
hours after notice thereof by the Landlord, then the Landlord may, at its
option, in addition to any other remedy it may have, either terminate this
Lease by notice in writing to the Tenant and thereupon Rent shall be
apportioned and paid in full to the date of such termination, the Tenant
shall immediately deliver up possession of the Leased Premises to the
Landlord and the landlord may re-enter and take possession of the same, or
the Landlord may remedy the situation, use, condition, occupancy or other
factor giving rise to such actual or threatened cancellation or change, all
at the cost of the Tenant to be paid forthwith on demand, and for such
purposes the Landlord shall have the right to enter upon the Leased Premises
without further notice.
9,7 Landlord's Insurance: The Landlord agrees to insure the Building and
the machinery, boilers and equipment contained therein and owned by the
Landlord (specifically excluding any property with respect to which the
Tenant is obliged to insure under this Article IX) against damage by fire and
extended perils coverage in such reasonable amounts as would be carried by a
prudent owner of a first-class office building in the City of Toronto of
similar age and in a similar location. The Landlord will also carry public
liability and property damage insurance with respect to the operation of the
Building in such reasonable amounts as would be carried by a prudent owner.
The Landlord may take out and carry any other form or
<PAGE>
forms of insurance as it or the Mortgagee may reasonably determine advisable.
Notwithstanding that the Tenant shall be contributing to the Landlord's costs
and premiums respecting such insurance pursuant to the terms of this Lease, the
Tenant shall not have any insurable or other interest in any of the Landiord's
insurance other than the rights, if any, expressly set forth in this Lease or in
any policy of insurance obtained by the Landlord, and in any event, the Tenant
shall not have any interest in, nor any right to recover any proceeds under any
of the Landlord's insurance policies.
9.8 Non-Liability for Loss, Injury or Damage: The Tenant acknowledges and
agrees that the Landlord shall not be liable for (a) any death or injury
arising from or out of any occurrence in, upon, at or relating to the Lands
or Building, and (b) damage to property of the Tenant or others located on
the Leased Premises, and (c) any loss or damage to any property of the Tenant
or others from any cause whatsoever (whether or not such property has been
entrusted to the Landlord, its agents, servants or employees) and, without
limiting the generality of the foregoing, the Landlord shall not be liable
for any injury or damage to persons or property resulting from fire,
explosion, steam, water, rain, snow or gas which may leak into or issue or
flow from any part of the Building or from the water, steam or drainage pipes
or plumbing works of the Building or from any other place or quarter, and (d)
any damage caused by or attributable to the condition or arrangement of any
electric or other wiring, and (e) any damage caused by anything done or
omitted to be done by the Landlord or by any other tenant of the Building,
and (f) any claim or demand in connection with any injury, loss or damage to
the Tenant, its agents, invitees or licensees, or to the property of the
Tenant, its agents, invitees or licensees, where such injury, loss or damage
arises out of the security services in force or the lack thereof in the
Building from time to time, and (g) in any event, any indirect or
consequential damages suffered by the Tenant. Without limiting the foregoing,
the Tenant hereby releases
<PAGE>
the Landlord, and those for whom the landlord is in law responsible, from all
losses, damages and claims of any kind in respect of which the Tenant is
required to maintain insurance or is otherwise insured.
9.9 Indemnification of the Landlord: The Tenant shall indemnify the Landlord
and also save it harmless from all losses, liabilities, damages, claims, demands
and actions of any kind or nature which the Landlord shall or may become liable
for or suffer by reason of any breach, violation or non-performance by
12
<PAGE>
the Tenant of any covenant, term or provision of this Lease and against any and
all losses, liabilities, damages, claims, demands, actions and expenses in
connection with loss of life, personal injury or damage to property arising from
any occurrence on the Leased Premises save where caused by the negligence or
wilful misconduct of the Landlord, or arising from the occupancy or use by the
Tenant of the Leased Premises, the Lands or Building by the Tenant, its agents,
contractors, employees, servants, licensees, concessionaires or invitees or
occasioned wholly or in part by any act or omission of the Tenant, its agents,
contractors, employees, servants, licensees or concessionaires whether on the
Leased Premises, lands or in the Building. In case the Landlord, without actual
fault on its part, is made a party to any litigation commenced by or against the
Tenant, 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 respect of such litigation.
9.10 Extension of Ri-qhts and Remedies: Every right, exemption from liability,
defence and immunity of whatsoever nature applicable to the Landlord under this
Lease shall also be available and shall extend to protect all other companies
owned, operated or controlled by or affiliated with the Landlord and to protect
its officers, directors and employees and for such purposes the Landlord is or
shall be deemed to be acting as agent or trustee on behalf of and for the
benefit of such companies and persons.
ARTICLE X
DAMAGE
10.1 Damage to Leased Premises: It is understood and agreed that,
notwithstanding the other provisions of this Lease, should the Leased Premises
at any time be partially or wholly destroyed or
<PAGE>
damaged by any cause whatsoever or should demolition of the Leased Premises be
necessitated thereby or bhould the Leased Premises become unfit for occupancy by
the Tenant:
(a) Subject as hereinafter provided in this Section 10.1, the Landlord
shall, to the extent of the insurance proceeds available for
reconstruction and actually received by the Landlord from its
insurers following an election by the Mortgagee to apply all or any
portion of such insurance proceeds against the debt owing to the
Mortgagee as the case may be, expeditiously reconstruct the Leased
Premises in accordance with the Laindlord's obligations to repair
under the provisions of Section 6.4 hereof. Upon substantial
completion of the Landiord's work, the Landlord shall notify the
Tenant, and the Tenant shall forthwith commence and expeditiously
complete reconstruction and repair of the Leased Premises in
accordance with the Tenant's obligations to repair under the
provisions of Section 6.2 hereof.,
(b) Rent shall not abate unless the Leased Premises are rendered wholly
or partially unfit for occupancy by such occurrence and in such
event Rent, as of the date of such occurrence shall abate
proportionately as to the portion of the Leased Premises rendered
unfit for occupancy, until thirty (30) days following receipt by the
Tenant of the Landiord's notice given to the Tenant as provided in
subsection 10.1 (a) hereof, at which time Rent shall recommence;
(c) If the Leased Premises, in the opinion of the Architect, such
opinion to be given to the landlord and the Tenant within thirty
(30) days of the date of such damage, cannot be repaired and made
fit for occupancy within one hundred and eidhty (180) days next
<PAGE>
following any occurrence, the Landlord may, by written notice to the
Tenant within thirty (30) days of receipt of such opinion of the
Architect, terminate this Lease.and Rent shall cease and be adjusted
as of the date of such occurrence, and the Tenant shall immediately
vacate the Leased Premises and surrender same to the Landlord;
(d) If, in the opinion of the Architect, such opinion to be given to the
Landlord and the Tenant within thirty (30) days of the date of such
damage, thirty per cent (30%) or more of the Leased Premises are at
any time destroyed or damaged in whole or in part by any cause
whatsoever or by demolition caused or necessitated thereby, then and
so often as such event occurs, the Landlord may, at its option, to
be exercised by notice in writing to the Tenant within sixty (60)
days of receipt of such opinion of the Architect, elect to terminate
this Lease and in the case of such election the Term and tenancy
hereby created shall expire on the thirtieth (30th) day following
the giving of such notice and in such event Rent shall cease and be
adjusted as of the date of the occurrence, and all rights and
obligations contained in this Lease shall thereupon also cease, save
and except for rights and obligations that may have accrued prior to
such termination and the Tenant shall within such thirty (30) day
period vacate the Leased Premises and surrender the same to the
Landlord with the Landlord having the right to re-enter and
repossess the Leased Premises discharged of this Lease and to remove
all persons therefrom; and
(e) In no event, including termination of the Lease in accordance with
the provisions of
<PAGE>
subsection 10.1 (c) or (d) hereof, shall the Landlord be liable to
reimburse the Tenant for damage to, or replacement or repair of any
Leasehold Improvements or any of the
13
<PAGE>
Tenant's property.
10.2 Damage to the Building: It is understood and agreed that,
notwithstanding the other provisions of this Lease, should the Building at
any time be partially or wholly destroyed or damaged by any cause whatsoever,
or should demolition of the Building, or any part thereof, be necessitated
thereby:
(a) Subject as hereinafter provided in this Section 10.2, the Landlord
shall, to the extent of the insurance proceeds available for
reconstruction and actually received by the Landlord from its
insurers following any election by the Mortgagee to apply all or any
portion of such insurance proceeds against the debt owing to the
Mortgagee as the case may be, expeditiously reconstruct and repair
the Building, and to the extent necessary, the Leased Premises, in
accordance with the Landlard's obligations to repair under the
provisions of Section 6.4 hereof. Upon substantial completion of the
Landiord's work the Landlord shall notify the Tenant, and the Tenant
shall forthwith commence and expeditiously complete reconstruction
and repair of the Leased Premises to the extent they are so
affected, in accordance with the Tenants obligations to repair under
the provisions of Section 6.2 hereof,
(b) Rent shall not abate unless the Leased Premises are rendered wholly
or partially unfit for occupancy by such occurrence, and in such
event, Rent, as of the date of such occurrence shall abate
proportionately as to the portion of the Leased Premises rendered
unfit for occupancy unfit thirty (30) days following receipt by the
Tenant of the Landlord's notice given to the Tenant as provided in
subsection 10.2(a) hereof, at which time Rent shall recommence;
<PAGE>
(c) If in the opinion of the Architect, such opinion to be given to the
Landlord and the Tenant within thirty (30) days of the date of such
damage, thirty per cent (30%) or more of the Total Rentable Area of
the Building is at any time destroyed or damaged in whole or in part
by any cause whatsoever, or by demolition caused or necessitated
thereby, notwithstanding that the leased Premises may be unaffected
by such occurrence, then and so often as such event occurs, the
Landlord may, at its option, by written notice to the Tenant, within
thirty (30) days of receipt of such opinion of the Architect, elect
to terminate this Lease and in the case of such election the Term
and the tenancy hereby created shall expire on the thirtieth (30th)
day following the giving of such notice and in such event, Rent
shall cease and be adjusted as of the date of such termination, and
all rights and obligations contained in this Lease shall thereupon
also cease, save and except for rights and obligations that may have
accrued prior to such termination and the Tenant shall within such
thirty (30) day period vacate the Leased Premises and surrender the
same to the Landlord with the Landlord having the right to re-enter
and repossess the Leased Premises discharged of this Lease and to
remove all persons therefrom. If the Landlord has not elected to
terminate this Lease within such period as aforesaid, and provided
such damage or destruction was not caused or contributed to by the
Tenant, its employees or those for whom the Tenant is in law
responsible, the Landlord shall, to the extent of the insurance
proceeds available for reconstruction and actually received by the
Landlord from its insurers
<PAGE>
following any election by the Mortgagee to apply any,portion of such
insurance proceeds against the debt owing to the Mortgagee, as the
case may be, let a contract for the repair and reconstruction of the
portion of the Building so damaged or destroyed (save that with
respect to the Leased Premises, the Landiord's obligation to repair
and reconstruct shall be in accordance with the provisions of
Section 6.4 hereoo within the twelve (12) month period following
such damage or destruction and shall continue thereafter to
expeditiously reconstruct and repair the Building, provided that the
Landlord shall not be responsible for the repair or replacement of
the Leasehold Improvements or the Tenant's property, the repair and
replacement of which shall be the obligation of the Tenant and in
this regard shall be governed by the provisions of Section 10.1
hereof,.
(d) In repairing, reconstructing or rebuilding the Building or any part
thereof, the Landlord may use designs, plans and specifications,
other than those used in the original construction of the Building,
and the Landlord may alter or relocate, or both, any or all
buildings, facilities and improvements, including the Leased
Premises, provided that the Leased Premises as altered or relocated
shall be substantially the same size and shall be in all material
respects reasonably comparable to the Leased Premises, as defined
herein; and
(e) In no event, including termination of this Lease in accordance with
the provisions of subsection 10.2(c) hereof, shall the Landlord be
liable to reimburse the Tenant for damage to, or replacement or
repair of any Leasehold Improvements or of any of the
<PAGE>
Tenants property.
10,3 Architect's Certit]cate: It is understood and agreed by the Tenant that
wherever a certificate of the Architect is required or deemed appropriate by the
Landlord, the certificate of the Architect shall bind the parties hereto as to
completion of construction of the Leased Premises and the availability of
services,
14
<PAGE>
the percentage of the Leased Premises or Building destroyed or damaged and the
number of days required to make repairs. or reconstruct and the state or tenant
ability of the Leased Premises, the state of completion of any work or repair of
either the Landlord or the Tenant, and the computation of the area of any
premises including the Leased Premises provided, however, the Landlord may elect
to furnish a certificate prepared by a qualified land surveyor for the purpose
of area measurement and such certificate shall be equally binding.
ARTICLE XI
UNAVOIDABLE DELAY
11.1 Unavoidable Delay: Whenever and to the extent that the landlord or Tenant
shall be unable to fulfil or shall be delayed or restricted in the fulfilment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfil such obligation or by reason of any strike, work
stoppage, statute, law or order in council or any regulation or order passed or
made pursuant thereto or by reason of the order or direction of any
administrator, controller or board, or any governmental department or officer or
other authority, or by reason of not being able to obtain any permission or
authority required thereby, or by reason of any other cause beyond its control
whether of the foregoing character or not, the Landlord or Tenant shall be
entitled to extend the time for fulfilment of such obligation by a time equal to
the duration of such delay or restriction and the Landlord or Tenant shall not
be entitled to any compensation for any inconvenience, nuisance or discomfort
thereby occasioned. The provisions of this Section 1 1. 1 shall not operate to
excuse the Tenant from prompt payment of all sums required to be paid pursuant
to the terms of this Lease.
<PAGE>
ARTICLE XII
LANDLORD'S REMEDIES
12.1 Landlord May Perform Tenant's Covenants: If the Tenant is in default of
any of its covenants, obligations or agreements under this Lease (other than its
covenant to pay rent) and such default shall have continued for a period of ten
(10) consecutive days after notice by the Landlord to the Tenant specifying with
reasonable particularity the nature of such default and requiring the same to be
remedied (or, if by reason of the nature thereof, such failure cannot be cured
by the payment of money and cannot with due diligence be wholly cured within
such ten (10) day period, if the Tenant shall fail to proceed promptly to cure
the same or shall thereafter fail to prosecute the curing of such failure with
due diligence), the landlord, without prejudice to any other rights which it may
have with respect to such default, may remedy such default and the cost thereof
to the Landlord together with Interest therean from the date such cost was
incurred by the Landlord until repaid by the Tenant shall be treated as
Additional Rent and added to the Rent due on the next succeeding date on which
Basic Rent is payable and such amount shall thereupon become due and payable as
Rent in addition to the regular payment of Basic Rent then due. The Landlord
shall be subrogated to the extent of such payment to all rights, remedies and
priorities of the payee to the extent of the amount paid by the Landlord to
remedy such default.
12.2 Re-Entry: When:
(a) the Tenant shall be in default in the payment of any Rent, whethjr
lawfully demanded or not, and such default shall continue for a
period of ten (10) consecutive days after notice by the Landlord to
the Tenant;
<PAGE>
(b) the Tenant shall be in default of any of its covenants, obligations
or agreements under this Lease (other than its covenant to pay
rent) and such default shall have continued for a period of ten
(10) consecutive days after notice by the Landlord to the Tenant
specifying with reasonable particularity the nature of such default
and requiring the same to be remedied;
(c) any property of the Tenant has been sold under a valid writ of
execution, or the Tenant shall have made an assignment for the
benefit of creditors, or shall make any assignment or have had a
receiving order made against it under the Bankruptcy Act, or if the
Tenant has become bankrupt or insolvent and shall have made
application for relief under the provisions of any statute now or
hereafter in force concerning bankrupt or insolvent debtors, or any
action whatever, legislative or otherwise, shall have been taken
with a view to the winding up, dissolution or liquidation of the
Tenant, or if a receiver of any of the Tenant's goods or chattels
has been appointed;
(d) any insurance policy is cancelled or not renewed by any insurer by
reason of any particular use or occupation of the Leased Premises;
or
(e) the leased Premises shall have been abandoned, or have become
vacant or shall have remained unoccupied for a period of five (5)
consecutive days without the consent of the Landlord (which consent
shall not be unreasonably withheld), or the
15
<PAGE>
Leased Premises shall have been used by any other person or persons
other than the Tenant or any person permitted by Article Vill
hereof.,
then, and in any of such cases, the then current month's Rent
together with the Rent for the three (3) months next ensuing shall
immediately become due and payable, and at the option of the
Landlord the Term shall become forfeited and void, and the Landlord
without notice or any form of legal process whatever may forthwith
re-enter the Leased Premises or any part thereof in the name of the
whole and repossess and enjoy the same as of its former estate,
anything contained in any statute or law to the contrary
notwithstanding. Such forfeiture shall be wholly without prejudice
to the right of the Landlord to recover arrears of Rent and damages
for any antecedent breach of the covenants, obligations or
agreements of the Tenant under this Lease. Notwithstanding any such
forfeiture, the Landlord may subsequently recover from the Tenant
damages for loss of Rent suffered by reason of this Lease having
been prematurely determined and it may recover from the Tenant all
damages it may incur with respect thereto, including the cost of
recovering the Leased Premises, and including the worth at the time
of such termination of the excess, if any, of the amount of Rent for
the remainder of the Term over the then reasonable rental value of
the Leased Premises for the remainder of the Term, all of which Rent
shall be immediately due and payable from the Tenant to the
Landlord. In determining the Rent which would be payable under this
Lease by the Tenant subsequent to default, the annual Rent for each
year of the unexpired portion of the Term shall be equal to the
average annual Rent payable by the Tenant (a) from the Basic Rent
Commencement Date to the time of default, or (b) during the three
(3) full calendar years preceding such default, whichever period is
shorter.
<PAGE>
12.3 Landlord May Relet: if the Landlord does not exercise its option under
Section 12.2 hereof to terminate this Lease, it may nevertheless in the events
set out in Section 12.2 hereof from time to time, re-enter the Leased Premises
without terminating this Lease, make such alterations and repairs as may be
neicessary in order to reset the Leased Premises, and relet the Leased Premises
or any part thereof as agent for the Tenant for such period or periods (which
may extend beyond the Term) and at such rental or rentals and upon such other
terms and conditions as the Landlord in its sole discretion may deem advisable.
Upon each such reletting all rentals received by the Landlord from such
reletting shall be applied, first, to the payment of any indebtedness other than
rent due from the Tenant to the Landlord; second, to the payment of any costs
and expenses of such reletting, including brokerage fees, solicitors' fees and
the costs of alterations and repairs performed in connection with such
reletting; third, to the payment of rent due and unpaid; and the residue, if
any, shall be held by the Landlord and applied in payment of future rent as the
same may become due and payable. The Tenant shall pay to the Landlord the amount
by which the rent received from such reletting during any month during the term
is less than the rent payable during that month by the Tenant. Notwithstanding
any such resetting without termination, the Landlord may at any time thereafter
elect to terminate this Lease. No such re-entry or taking of possession by the
landlord shall be construed as an election on its part to terminate this Lease
unless, at the time of or subsequent to such re-entry or taking of possession, a
written notice of such intention has been given to the Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
12.4 Right to Distrain: The Tenant waives and renounces the benefit of any
present or future statute purporting to limit or qualify the Landford's right to
distrain and agrees with the Landlord that if any of the events set out in
Section 12.2 hereof shall occur, the Landlord, in addition to the other rights
reserved to it,
<PAGE>
shall have the right to enter the Leased Premises as agent of the Tenant either
by force or otherwise without being liable for any prosecution therefor and to
take possession of any goods and chattels whatever an the Leased Premises, save
and except any such goods and chattels which are owned by any occupiers of the
Leased Premises other than the Tenant, and to sell the same at public or private
sag without notice and apply the proceeds of such sale on account of the Rent or
in satisfaction of the breach of any covenant, obligation or agreement of the
Tenant under this lease and the Tenant shall remain liable for the deficiency,
if any. Notwithstanding anything contained in the Landlord and Tenant Act,
R.S.O. 1980, or any successor legislation or other statute which may hereafter
be passed to take the place of the said Act or to amend the same, none of the
goods and chattels of the Tenant at any time during the continuance of the Term
shall be exempt from levy by distress for Rent and the Tenant hereby waives all
and every benefit that it could or might have under such Act. Upon any claim
being made for such exemption by the Tenant, or on distress being made by the
Landlord, this provision may be pleaded as an estoppel against the Tenant in any
action brought to test the right to the levying of distress upon any such goods.
12.5 Landlord May Follow Chattels: In case of removal by the Tenant of the
goods or chattels of the Tenant from the Leased Premises, the Landlord may
follow the same for thirty (30) days in the same manner as is provided for in
the Landlord and Tenant Act, R.S.O. 1980, or any successor legislation or other
statute which may hereafter be passed to take the place of the said Act or to
amend the same.
12.6 Rights Cumulative: The rights and remedies given to the Landlord in this
Lease are distinct, separate and cumulative, and no one of them, whether or not
exercised by the Landlord shall be deemed to be in exclusion of any other rights
or remedies provided in this Lease or by law or in equity.
<PAGE>
12.7 Acceptance of Rent Non-Waiver. No receipt of monies by the Landlord from
the Tenant after the cancellation or termination of this Lease in any lawful
manner shall reinstate, continue or extend the Term, or affect any notice
previously given to enforce the payment of Rent then due or thereafter failing
due or operate as a waiver of the right of the Landlord to recover possession of
the Leased Premises by proper suit, action, proceedings or other remedy; it
being agreed that, after the service of a notice to cancel this
16
<PAGE>
Lease and the expiration of the time therein specified, and after the
commencement of any suit, action, proceeding or other remedy, or after a final
order or judgment for possession of the Leased Premises, the Landlord may
demand, receive and collect any monies due, or thereafter failing due without in
any manner affecting such notice, suit, action, proceeding, order or judgment;
and any and all such monies so collected shall be deemed payments on account of
the use and occupation of the Leased Premises or at the election of the Landlord
on account of the Tenant's liability hereunder.
ARTICLE XIII
STATUS STATEMENT, A-RTORNMENT AND SUBORDINATION
13.1 Certification: The Landlord and Tenant respectively agree that within ten
(10) days after a written request therefor, they shall execute and deliver to
the other or to such person as may be identified in the written request (but in
no event more than twice in any year) a written statement certifying that this
Lease is unmodified and is in full force and effect (or if modified stating the
modifications and that this Lease is in full force and effect as modified), the
amount of the Basic Rent and the date to which it as well as all other charges
under this lease have been paid, whether or not there is any existing default on
the part of the Landlord or the Tenant of which the person signing the
certificate has notice and giving as well such further information as the person
requesting the certificate shall reasonably require.
13.2 Attornment: If proceedings are brought for foreclosure, or if there is
exercise of the power of sale or if there is an entry into possession of the
Building or any part thereof pursuant to any mortgage, charge, deed of trust or
any lien resulting from any other method of financing or refinancing made by the
Landlord covering the Leased Premises and the Building, the Tenant shall attom
to the mortgagee, chargee,
<PAGE>
lessee, trustee, other encumbrancer or the purchaser upon any such foreclosure
or sale and recognize such mortgagee, chargee, lessee, trustee, other
encumbrancer or the purchaser as the Landlord under this Lease.
13.3 Subordination: The Tenant shall postpone and subordinate its rights under
this Lease to the Mortgagee, and any mortgage or mortgages, or any lien
resulting from any other method of financing or refinancing, now or hereafter in
force against the Lands and Building or any part or parts thereof as it exists
from time to time, and to all advances made or hereafter to be made upon the
security thereof.
13.4 Timely Execution: The Tenant shall execute promptly such instruments or
certificates to carry out the intent of Sections 13.2 and 13.3 hereof as shall
be requested by the Landlord.
13.5 Rights of Mortgagees, Trustees: If at any time during the currency of any
mortgage or other charge on the interest of the Landlord in the Leased Premises,
notice of which has been given to the Tenant, any default shall occur in the
performance of any of the covenants, obligations or agreements of the Landlord
which would give rise to a right of the Tenant to terminate this Lease, then the
Tenant, before becoming entitled as against the holder of such mortgage or
charge to exercise any right to terminate this Lease, shall obtain from the
Landlord the address of such mortgagee or chargee and give to the holder of such
mortgage or charge notice in writing of such default. The holder of such
mortgage or charge shall thereupon have such period as may be reasonable in the
circumstances within which to remedy such default as agent of the Landlord (or
by such other means as will avoid the holder if a mortgagee, becoming a
mortgagee in possession of the Leased Premises by reason of effecting such
remedy) and if such default is remedied within such time the Tenant shall not by
reason thereof terminate this Lease.
<PAGE>
The rights and privileges granted to the holder of any such mortgage or charge
by virtue of this Section 13.5 shall not in any way be deemed to alter, affect
or prejudice any of the rights and remedies available to the Tenant against the
Landlord. Any notice to be given to the holder of such security shall be deemed
to have been properly given if mailed by registered mail to its most recent
address of which the Tenant shall have received notice by such holder or the
Landlord.
ARTICLE XIV
MISCELLANEOUS
14.1 Joint and Several Liability: If two or more individuals, corporations,
partnerships or other business associations (or any combination of two or more
thereo@ sign this Lease as the Tenant, the liability of each such individual,
corporation, partnership or other business association to pay Rent and to
perform all other obligations hereunder shall be deemed to be joint and several.
In like manner, 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 such member shall be joint and
several.
14.2 Landlord and Tenant Relationship: No provision of this Lease is intended
to nor creates a joint venture or partnership or any other similar relationship
between the Landlord and Tenant, it being agreed that the only relationship
created by this Lease is that of landlord and tenant.
14.3 Planning Act: It is an express condition of this Lease that the
provisions of section 49 of the Planning Act, 1983 (Ontario) and amendments
thereto be complied with.
17
<PAGE>
14.4 No Waiver: No condoning or waiver by either the Landlord or Tenant or any
default or breach by the other at. any time or times in respect of any of the
agreements, terms, covenants and conditions contained in this Lease to be
performed or observed by the other shall be deemed or construed to operate as a
waiver of the Landiord's or Tenant's rights under this lease, as the case may
be, in respect of any continuing or subsequent default or breach nor so as to
defeat or affect in any way the rights or remedies of the Landlord or the Tenant
under this Lease, as the case may be, in respect of any such continuing or
subsequent default or breach.
Unless expressly waived in writing, the failure of the Landlord or the
Tenant to insist in any one or more cases upon the strict performance of any of
the agreements, terms, covenants or conditions contained in this Lease to be
performed or observed by the other shall not be deemed or construed to operate
as a waiver of the future strict performance or observance of such agreements,
terms, covenants and conditions.
14.5 Expropriation: The Landlord and the Tenant shall co-operate in respect of
any expropriation of all or any part of the Leased Premises or the Lands and
Building so that the Tenant may receive the maximum award to which it is
entitled in law for relocation costs and business interruption and so that the
Landlord may receive the maximum award to which it is entitled in law for all
other compensation arising from or relating to such expropriation (including all
compensation for the value of the Tenant's leasehold interest expropriated and
for the reduction in value of the Tenant's remaining leasehold interest upon a
partial expropriation) which shall be the property of the Landlord, and to which
the Tenant waives all rights. If the whole or any part of the Leased Premises or
of the Lands and Building are expropriated, as between the parties hereto, their
respective rights and obligations under this Lease shall continue until the day
on
<PAGE>
which the expropriating authority takes possession thereof. If, in the case of
partial expropriation of the Leased Premises this Lease is not frustrated by
operation of governing law and such expropriation does not render the remaining
part of the Leased Premises untenantable for the purposes of this Lease, the
Tenant and the Landlord shall restore the part not so taken in accordance with
their respective repair obligations under the provisions of Article VI of this
Lease. In this Section the word "expropriation" shall include a sale by the
landlord to any authority with powers of expropriation, in lieu of or under
threat of expropriation.
14.6 Notice: Any notice required or contemplated by any provision of this
Lease shall be given in writing enclosed in a sealed envelope addressed, in the
case of the Landlord to:
PENYORK PROPERTIES INC,
4 Eva Road, Suite 427
Etobicoke, Ontario
M9C 2A8
Attention: Leasing Manager
in the case of notice to the Tenant: to it at the Leased Premises; and delivered
or sent in both cases by registered mail, postage prepaid, return receipt
requested. The time of giving of such notice if mailed shall be conclusively
deemed to be the fifth (5th) business day after the day of such mailing. If
regular mail service is interrupted on or before the fifth (5th) business day
following the mailing thereof by strikes or other irregularities, which are made
known to the public, then such notice shall be deemed to have been received when
it would have been received in the normal course following the resumption of
normal mail service. Such notice shall also be sufficiently given if and when
the same shall be delivered, in the case of notice to the Landlord, to an
officer or employee of the Landlord at the above address of the Landlord, and in
the case of notice to the Tenant, to an officer or employee of the Tenant at the
above address for the Tenant. Such
<PAGE>
notice, if delivered, shall be conclusively deemed to have been given and
received at the time of such delivery. If in this Lease two or more persons are
named as Tenant, such notice shall be delivered personally to any one of such
persons. Provided that either party may, by notice to the other, from time to
time designate another address in Canada to which notices mailed more than ten
(10) days thereafter shall be addressed.
14.7 Net Lease: It is the purpose and intent of the Landlord and the Tenant
that the Basic Rent shall be absolutely net and carefree to the Landlord, so
that this Lease shall yield, net and carefree to the Landlord, the Basic Rent
specified in each year during the Term without notice or demand, and free of any
charges, assessments, impositions or deductions of any kind and without
abatement, deduction or set-off and under no circumstances or conditions whether
now existing or hereafter arising whether beyond the present contemplation of
the parties is the Landlord to be expected or required to make any payment of
any kind whatsoever or to be subject to any other obligation or liability
hereunder. All expenses and obligations of every kind and nature whatsoever
relating to the Leased Premises which may arise or become due during the Term of
this Lease shall be paid by the Tenant and the Tenant shall indemnify and save
harmless the Landlord from all costs of same.
14,8 Non Merger: There shall be no merger of this Lease nor of the leasehold
estate created hereby with the fee estate in the Lands or any part thereof by
reason of the fact that the same person, firm, corporation or entity may acquire
or own or hold directly or indirectly:
(a) This Lease or the leasehold estate created hereby or any interest
in this Lease or any such leasehold estate, and
18
<PAGE>
(b) the fee estate in the Lands or any part thereof or any interest in
such fee estate, and no such merger shall occur unless and until
the landlord, the Tenant and the Landiord's Mortgagees (including a
trustee for bondholders) shall join in a written instrument
effecting such merger and shall duly record the same.
14.9 Lease Entire Agreement: 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 Leased Premises save as expressly set out in this Lease and this Lease
constitutes the entire agreement between the Landlord and the Tenant and may not
be amended or modified except by subsequent agreement in writing of equal
formality executed by the Landlord and the Tenant.
The submission of this Lease for examination does not constitute a
reservation of or option for the Leased Premises, and this Lease becomes
effective as a lease only upon execution and delivery thereof by both the
landlord and the Tenant.
14.10 Registration: The Tenant shall not register this Lease on the title to the
Lands; however, the Tenant may register a Notice of Lease on title to the Lands,
at its sole cost, provided such Notice of Lease shall describe only the parties,
the Leased Premises, the Term of this Lease, and any renewals. Such Notice of
Lease shall be prepared by the Tenant's solicitors, and shall be subject to the
prior written approval of Landlord and its solicitors, at the Tenant's expense,
and shall be registered at the Tenant's expense.
14.11 Name of Building: The Tenant shall not refer to the Building by any name
other than that, if any, designated from time to time by the Landlord, and the
Tenant may use such designated name of the Building
<PAGE>
for the business address of the Tenant but for no other purpose.
14.12 Exhibiting Premises: The Tenant agrees to permit the Landlord or its
agents to exhibit the Leased Premises to prospective tenants during the Normal
Business Hours for the last six (6) months of the Term.
14.13 Governing Law: This Lease shall be governed by and construed in accordance
with the laws of the Province of Ontario.
14.14 Survival of Tenant's Covenants: All agreements, covenants and
indemnifications in this lease made by the Tenant shall survive the expiration
or earlier termination of this Lease, anything to the contrary in this Lease
notwithstanding.
14.15 Quiet Enjoyment: The landlord agrees that upon the Tenant duly paying the
Rent hereby reserved and duly observing and performing the agreements, terms and
conditions herein on its part to be observed and performed, the Tenant shall and
may peaceably possess and enjoy the Leased Premises for the Term without any
hindrance, interruption or disturbance from the Landlord.
14.16 Binding on Successors: This Lease and everything herein contained shall
enure to the benefit of and be binding upon the respective heirs, executors,
administrators, successors, assigns and other legal representatives, as the case
may be, of each and every one of the parties hereto, subject to the granting of
consent by the Landlord to any assignment or sublease and every reference herein
to any party hereto shall include the heirs, executors, administrators,
successors, assigns and other legal representatives or such party, and where
there is more than one tenant or there is a mate or female party or where a
corporation is a party, the provisions hereof shall be read with all grammatical
chang6s thereby rendered necessary.
<PAGE>
14.17 Limitation-on Use: The Leased Premises shall be used continuously during
the Term for general office purposes and for no other use. The Tenant
acknowledges and agrees that it will not, nor will it permit the Leased Premises
(or any part thereof to be used for any purpose which is not generally permitted
in first class office buildings in the City of Toronto, and that it will not,
nor will it permit the Leased Premises (or any part thereo@ to be used by any
other trade or business without the prior written consent of the Landlord, which
consent may be unreasonably withheld.
14.18 Corporate Ownenship: In the event that the Tenant proposes to transfer, or
issue by sale, assignment, bequest, inheritance, operation of law, or other
disposition, or by subscription, any part or all of the corporate shares of the
Tenant, so as to result in any change in the present effective voting control of
the Tenant by the party or parties holding such voting control at the date of
commencement of this Lease, such transaction shall be deemed to be an assignment
of this Lease, and the provisions of Article Vill hereof shall apply mutatis
mutandis. The Tenant shall make available to the Landlord or to its lawful
representatives, such books and records of the Tenant for inspection at all
reasonable times, in order to ascertain whether there has, in effect, been a
change in control.
14.19 Assignment and Subletting: The use of the word "assignment", "subletting",
"assign", or "assigned" or "subfef'in this Lease shall include the mortgaging or
encumbering of this Lease, the Tenant's interest herein or the Leased Premises
or any part thereof and the occupation or parting with or sharing the possession
of all or any part of the Leased Premises by any person, firm, partnership, or
corporation, or any groups of persons, firms, partnerships, or corporations, or
any combination thereof other than in respect of bona tide third party financing
provided to the Tenant by a party with whom the Tenant deals at arm's length.
19
<PAGE>
An assignment or transfer shall be construed so as to include an assignment
or transfer by operation of law.
14.20 Several Liability: If two or more corporations, partnerships or other
business associations (or any combination of two or more thereof constitute
the Landlord in this Lease, the liability of each such corporation,
partnership or other business association hereunder is several. In the event
of default by the Landlord under this Lease, the Tenant agrees that should it
proceed against such corporations, partnerships or other business
associations, it shall do so only in accordance with their several interests,
as they may be from time to time.
14.21 Time of the Essence: Time shall be of the essence for this Lease and
for every part hereof.
ARTICLE XV
DEFINITIONS - INTERPRETATION
15.1 Definitions: In this Lease, unless there is something in the subject
matter or context inconsistent therewith:
(a) "Additional Rents" means the Realty Taxes, the Proportionate Share
of Operating Costs, payments for utilities and light fixtures, and
all other payments for additional services, and such other sums,
excluding Basic Rent, otherwise payable by the Tenant in accordance
with the terms of this Lease.
(b) "Additional Rent Commencement Date" is defined in Section 1.10
hereof.
I (c) "Additional Services" means any service and/or supervision
requested by the Tenant and supplied by the Landlord or by anyone
authorized by the Landlord and not
<PAGE>
o.therwise provided for as a standard service under this Lease; by
way of example steam cleaning of carpets, moving of ftjmiture,
alterations to Leasehold Improvements, or providing air-
conditioning or ventilation for periods in excess of Normal
Business Hours.
(d) "Architect" means the architect, surveyor or engineer from time to
time appointed by the Landlord.
(a) "Basic Rent" means the basic rent payable by the Tenant pursuant to
this Lease.
"Basic Rent Commencement Date" is defined in Section 1.9 hereof.
"Building" means the buildings, structures, and improvements from
time to time during the Term erected on the Lands together with all
fixtures, sprinklers, elevators, escalators, heating, ventilating,
air-conditioning and mechanical and electrical equipment and
machinery and water, gas, sewage, telephone and other communication
facilities and electrical power services and utilities comprised
therein, belonging thereto, connected therewith or used in the
operation thereof, and now or hereafter constructed, erected and
installed.therein and thereon, and all alterations, additions, and
replacements thereto, but excludes all Leasehold Improvements made,
constructed, erected or installed therein by or on behalf of an@
tenant of premises therein. The municipal address of the Building
is 55 University Avenue, Toronto, Ontario.
(h) "Capital Tax" means any tax or taxes payable by the Landlord to any
taxing authority
<PAGE>
based upon or computed by reference to the value of the Building, or
the paid-up capital or place of business of the Landlord. If the
system of capital taxation shall be altered such that any new
capital tax shall be levied or imposed in substitution for or in
addition to Capital Tax from time to time levied or imposed, then
any such new tax or levy shall be deemed to be Capital Tax or
included in Capital Tax.
(i) "Capital Tax for the Building" for any fiscal period means the
amount calculated by multiplying the aggregate book value to the
Landlord of the Lands and Building (and all equipment used in
connection therewith) by the applicable Capital Tax rate imposed,
from time to time, by the taxing authority having Jurisdiction.
Aggregate book value shall be net of depreciation and amortization,
for financial statement purposes and determined as at the end of
such fiscal period. The parties acknowledge that Capital Tax for the
Building is an approximation based upon the concept of Capital Tax,
and is not necessarily the actual Capital Tax paid or payable by the
Landlord in respect of the Building. If the calculation of Capital
Tax changes, then the Landlord may adjust its calculation of such
amount to reasonably reflect such change.
"Common Areas" means:
(i) all common areas and facilities within the Building from time
to time furnished
20
<PAGE>
or designated (and which may be changed) by the Landlord
for the use in common, in such manner as the Landlord may
permit, by tenants of premises in the Building and all
others entitled thereto including, without restricting the
generality of the foregoing, lobbies, corridors, together
with washrooms, fan rooms, janitors' closets, electrical
closets and other closets not situate within the demising
line of any premises in the Building, and excluding parking
spaces;and
(ii) all of the Lands described in Schedule "A" hereto, not for the
time being demised by the Landlord and not covered by any
building (other than service buildings) available for the
general benefit of all tenants of the Building and including
without restricting the generality of the foregoing, parking
areas, access roads, driveways, sidewalks and landscaped
areas.
(k) "Dominant Portion" means that portion of the inside finished surface
of the permanent outer building wall which is 50% or more of the
vertical dimension. If there is no dominant portion or if the
dominant portion is not vertical, the measurement for area shall be
to the inside finished surface of the permanent outer building wall
where it intersects the finished floor.
(1) "Fiscal Year" means the twelve (12) month period designated from
time to time by the Landlord.
(m) "Interest" means interest at a rate equivalent to three (3%) per
cent per annum in
<PAGE>
excess of the prime lending rate of The Canadian Imperial Bank of
Commerce, Main Branch, Toronto Ontario (or its successors) where the
prime lending rate of such bank means the rate of interest (now
commonly known as that Bank's "prime rate"), expressed as a rate per
annum, charged by such bank in Toronto on demand loans made by it in
Canadian dollars at such time.
(n) "Lands" means the lands described in Schedule "A'annexed hereto.
(o) "Landlord's Improvements" means improvements to be constructed or
installed in or to the Leased Premises by the Landlord in accordance
with the Landlord's working drawings prepared for the construction
of the Building; by way of example, and without limiting the
generality of the foregoing, Landlord's Improvements include:
ceilings, lighting, and window covering systems originally installed
by the Landlord and standard to the Building. Any Landiord's
Improvements from time to time modified by or on behalf of the
Tenant so as to no longer be standard to the Building shall be
considered Leasehold Improvements. Landlord's Improvements shall not
include any Leasehold Improvements installed by the Landlord on
behalf of the Tenant or a previous occupant of the Leased Premises.
(p) "Lease" means this document as originally signed, sealed and
delivered or as amended, from time to time, which amendments shall
be in writing, signed, sealed and delivered by both the Landlord and
the Tenant.
(q) "Leased Premises" means the premises leased to the Tenant described
in Section 1.4 hereof
<PAGE>
(r) "Leasehold Improvements" means all fixtures, improvements,
installations, alterations and additions from time to time made,
constructed, erected or installed in or to the Leased Premises by or
on behalf of the Tenant, including without limitation, all interior
partitions however affixed and all rugs, carpeting and floor
coverings attached in any way to the Leased Premises, and all water,
gas, sewage, telephone and other communication facilities located in
the leased Premises or which are for the exclusive use of the
Tenant, but excludes moveable trade fixtures, moveable partitions,
and furniture and equipment not affixed to the Leased Premises.
"Leasehold Improvements" shall include any Landiord's Improvements
modified by or on behalf of the Tenant.
(S) "Mortgagee" means the Landiord's mortgagee(s) from time to time with
respect to the Lands, the Building and/or this Lease, and includes a
trustee,for bondholders.
(t) "Normal Business Hours" means the hours from 8:30 a.m. to 6:00 p.m.
on Monday to Friday of each week only except any statutory holiday,
any day declared a civic holiday in the City of Toronto, or Province
of Ontario.
(U) "Operating Costs" means the total amounts incurred, paid or payable,
whether by the Landlord, or by others on behalf of the Landlord, for
the maintenance, operation, repairs and replacements to the Lands
and the Building, including without limiting the generality of the
foregoing:
21
<PAGE>
(i) the total annual costs of insuring the Building and the Lands
with such forms of coverage and in such amounts as the
Landlord, or its mortgagees (including a trustee for
bondholders) may, from time to time determine, including,
without limitation, costs and premiums paid for insurance
against any risks of physical loss or damage to property of
the Landlord on a replacement cost basis, boiler, pressure
vessels, air-conditioning equipment and miscellaneous
electrical apparatus insurance on a broad form blanket
coverage repair and replacement basis, loss of insurable gross
profits attributable to all perils reasonably insured against
by the landlord or commonly insured against by prudent
landlords, third party liability hazards including exposure to
personal injury, bodily injury and property damage on an
occurrence basis including insurance for all contractual
obligations and covering also actions of all authorized
employees, sub-contractors and agents while working on behalf
of the landlord, and any other form or forms of insurance as
the landlord or its mortgagees (including a trustee for
bondholders) may reasonably require from time to time for
insurable risks and in amounts against which a prudent owner
of a first-class office building in the City of Toronto would
protect himself,
(ii) costs and premiums paid for warranties and guarantees;
(ill) complete maintenance and janitorial service for the Building
and Lands,
<PAGE>
including snow removal, window cleaning, garbage and waste
collection and disposal, the cost of operating and maintaining
any merchandise holding and receiving areas and truck docks,
and the cost of interior and exterior landscaping;
(iv) elevator maintenance, lighting, public and private utilities
(net of the amounts chargeable under Section 4.5 hereo@,
together with the cost of energy management programmes and the
cost of maintaining any signs considered by the Landlord to be
part of the Common Areas;
(v) policing and supervision;
(vi) salaries of all personnel employed to carry out supervision,
maintenance and service operations, (including without
limitation contributions towards usual fringe benefits,
unemployment insurance, pension plan contributions and similar
contributions), and to the extent such personnel are not
engaged full time to perform such supervision, maintenance and
service operations, then only such portion of their salaries
as is attributable to such on-site performance;
(vii) the cost to the Landlord of the rental of any equipment and
signs, and the cost of building supplies, used by the Landlord
in the maintenance and operation of the Lands and the
Building;
(viii) costs of heating, air-conditioning and ventilation of the
Building;
<PAGE>
(ix) repair and replacement to and the maintenance and operation of
the Lands and the Building and the mechanical, electrical,
plumbing, heating and air-conditioning equipment appurtenant
thereto:
(X) costs of operating a parking garage;
(xi) all business taxes, if any, from time to time payable by the
Landlord, on account of its ownership or operation of the
Lands and Building but excluding income tax of the Landlord,
and taxes on Leasehold Improvements separately payable to the
Landlord by the Tenant pursuant to this Lease;
(Xii) legal fees as reasonably attributable to the daily operation
of the Lands and Building but excluding legal fees otherwise
recoverable and legal fees for lease enforcement and leasing
of the Lands and Building;
(xiii) all fees and expenses incurred by the Landlord in connection
with actions taken by the Landlord to appeal property
assessments for the Lands and Building;
(xiv) accounting services and audit fees in connection with the
calculations referred to in this Lease;
(xv) security services, if any, undertaken by or on behalf of the
Landlord;
(xvi) depreciation and amortization of capital costs as determined
in accordance
22
<PAGE>
with generally accepted accounting principles for:
A. the costs of all maintenance and cleaning equipment and
master utility meters;
B. the costs incurred for all other fixtures, furniture,
replacement of finishes in the Common Areas, equipment, and
facilities serving the Building; and
C. the costs, together with Interest, of equipment
modification of the Building, or improvements, properly
charged to capital account which the Landlord determines
may reduce Operating Costs, amortized over their useful
life, as determined by the Landlord; and
D. the costs incurred by the Landlord pursuant to Sections
2.4(b) and 6.4(b) - (f) hereof together with Interest;
(xvii) Capital Tax for the Building;
(xviii) a management fee which shall be an amount equal to three
(3%) per cent of the aggregate of basic rent received, or
receivable by the Landlord from all tenants in the Building,
Reafty Taxes, and all other Operating Costs; and
(xix) actual costs related to the operation of a regional or on-site
administrative office serving the Building, including the fair
rental value (having regard to rentals prevailing from time to
time for similar space) of space occupied by the Landford's
employees for day to day administrative and supervisory
purposes
<PAGE>
relating to the Building. In the case of a regional office,
the costs will be apportioned among the buildings served by it
on a pro rata basis.
Provided that if the Building is not fully occupied for any period within
the Term, the Operating Costs shall be adjusted to reflect full occupancy.
And provided further, and notwithstanding the foregoing provisions,
Operating Costs shall not include the following:
(1) commissions, advertising costs, or legal expenses, in
connection with leasing the Lands and Building or any
part thereof.
(2) the cost of painting, repainting, decorating, or
redecorating, or of providing special cleaning services
for any occupant of any space in the Building, other
than the Leased Premises;
(3) the cost of any insurance premiums for plate glass
insurance;
(4) the cost of any insurance premiums to the extent t hat
the Tenant is obliged to reimburse the Landlord for the
cost of such premiums pursuant to any provision of this
Lease and/or to the extent that any other tenant of the
Building would be obligated to reimburse the Landlord
@for the cost of such premiums pursuant to any provision
of such tenant's lease:
(5) the costs of any insurance premiums relating to risks or
amounts which are not normally insured against by
reasonably prudent owners of comparable first-class
office buildings in the City of Toronto;
<PAGE>
(6) the cost of any payment which the Landlord is obligated
to make solely pursuant to an agreement to indemnify and
hold harmless any person, firm, or corporation, except
to the extent that similar agreements are customarily
made by reasonably prudent owners of comparable
first-class office buildings in the City of Toronto;
(7) expenses incurred by the Landlord in respect of charges
directly chargeable to other tenants of the Building
including for electricity used by other tenants of the
Building for fighting or for the operation of business
equipment and machinery within such tenants'leased
premises, or with respect to the repair of damage to the
Building and Lands, all to the extent that the Landlord
received reimbursement therefor by other tenants of the
Building or from the proceeds of insurance;
(8) the expenses incurred by the Landlord in respect of
installation of other tenants' improvements;
(9) interest and principal on mortgages and capital cost
allowance on the
23
<PAGE>
Building;
(10) any costs relating to aerials, antennae, cables,
machinery, equipment, installations, or other forms of
communications equipment not part of the operation of
the Building as a first-class office building, or
installed at the request of and for the limited or
specific use of any person whether occupying space in
the Building or not;
(11) any payments relating to any agreement affecting title
to the Lands with respect to which the Tenant is not a
party or has not otherwise specifically agreed to have
such payments included in Operating Costs;
(12) any amounts directly chargeable to other tenants for
services, costs and expenses solely attributable to the
accounts of such tenants.
(v) "Proportionate Share" as it relates to Realty Taxes and Operating
Costs shall be determined by dividing the Operating Costs by the
Total Rentable Area of the Building and multiplying the quotient by
the Rentable Area of the Leased Premises. Where any component of
Operating Costs is attributable to only part of the Building, then
those costs shall be divided only by the Rentable Area to which
those costs are attributable. Should any component of Operating
Costs not be attributable to the Leased Premises, the Tenant shall
remain responsible for payment of its Proportionate Share as that
component of Realty Taxes or Operating Costs relates to non-leasable
areas.
(W) "Realty Taxes" means all real estate taxes (including local
improvement rates), levies, rates, duties, and assessments
whatsoever, and the cost of appealing such assessments, which may be
levied or assessed against the Lands and Building, or the Landlord,
or the owners of the Lands and Building, and any and all taxes which
may, in the future, be levied in lieu thereof;
(X) "Rent, rent, Rental or rental" means all payments and charges
payable by the Tenant pursuant to this Lease, including without
limitation the Basic Rent and the Additional Rents.
(Y) "Rentable Area" means:
(i) Rentable Area for Single Tenancy Office Floors The
Rentable Area of a single tenancy ofrice floor shall be
computed by measuring to the inside finished surface of
the Dominant Portion of the permanent outer building
walls, and shall exclude only major vertical
penetrations of the floor together with the walls
enclosing them. No deductions shall be made for columns
and projections necessary to the Building or for any
floor penetrations exclusively serving the Tenant,
(ii) Rentable Area for Multiple Tenancy Office Floors The
Rentable Area of Leased Premises on multiple tenancy
office floors shall be determined by multiplying the
Rentable Area of the whole floor (measured as a single
tenancy office floor in accordance with subparagraph
(y)(i) above) times a fraction, the numerator of which
is the Useab14 Area of the Leased
<PAGE>
Premises and the denominator of which is the Useable
Area for the whole floor.
(ill) Rentable Area for a Main Floor or Concourse level Leased
Premises The Rentable Area of a Leased Premises on the
main floor or the concourse level shall be calculated by
measuring from the Building standard storefront fine for
such floor, and from the inner surface of corridor and
other permanent walls and to the centre of partitions
separating the Leased Premises from adjoining leasable
area. No deductions shall be made for vestibules serving
the Leased Premises or for columns or projections
necessary to the Building.
(z) "Rental Taxes" means any tax or duty imposed upon the Landlord or
the Tenant which is measured by or based in whole or in part
directly upon the Rent payable under this Lease, whether existing at
the date hereof or hereinafter imposed by any governmental
authority, including without limitation value added tax, business
transfer tax, retail sales tax, federal sales tax, excise taxes or
duties, or any tax similar to any of the foregoing.
(aa) "Term" means the initial term of this Lease as set out in Section
1.5 hereof, any renewal term and any overholding period.
(bb) "Term Commencement Date"is defined in Section 1.5 hereof.
(cc) "Total Rentable Area of the Building" means the sum of Rentable
Areas for all office
24
<PAGE>
floors (measured in accordance with subparagraph (y)(i) hereoo
and the Rentable Area of all leased premises on the main floor
and concourse level.
(dd) "Useable Area for Multiple Tenancy Office Floors" means the area of
a Leased Premises on an office floor divided for multiple tenancy
and shall be computed by measuring to the finished surface of the
Leased Premises side of corridor and other permanent walls, to the
centre of partitions that separate the Leased Premises from
adjoining leasable areas, and to the inside finish of the Dominant
Portion of the permanent outer building walls. No deductions shall
be made for columns and projections necessary to the Building.
15.2 Interpretation:
(a) In this Lease "herein", "hereof', "hereunde?', "hereinaftee'and
similar expressions refer to this Lease and not to any particular
paragraph, section or other portion thereof, unless -there is
something in the subject matter or context inconsistent therewith,*
(b) 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 paragraph hereof,
(c) Should any provision or provisions of this Lease be illegal or
unenforceable, 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;
I (d) The captions appearing in 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
IN WITNESS WHEREOF the parties hereto have executed this Lease.
SIGNED, SEALED AND ACCEPTED BY THE TENANT This 5th day
of September 1997
IT STAFFING INC,
-------------------------------------------
Per Declan French
Title: President
Per:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
I/We have the authority to bind the Corporation.
SIGNED, SEALED AND ACCEPTED BY THE LANDLORD
This 8th day of September 1997
PENYORK PROPERTIES I INC,
Per
---------------------------------------
Name: Durham Stephens
Title: Leasing Manager
<PAGE>
Per:
--------------------------------------------------------
Name: Jean Louis Dube Name: David Hicks
Title: Senior Vice President, Title: Vice President,
Operations Operations
I/WE have the authority to bind the Corporation.
25
<PAGE>
SCHEDULE"A"
LEGAL DESCRIPTION
In the City of Toronto in the Municipality of Metropolitan Toronto being
Lots 13, 14 and 15 according to Plan D-37 registered in the land Registry Office
(No. 63) - Registry Division of Toronto, and those parts of lots 9 and 12
according to said Plan D-37; and the public lane lying in rear of said Lots 14
and 15 according to said Corporation of the City of Toronto registered in the
said Land Registry Office as Instrument CT-99023 (Toronto).
See A-487713, and Lot 5 according to Plan 724-E registered in the said
Land Registry Office, and that part of Town Lot 10 according to Town of York
Plan on the North Side of Wellington Street West, in the City of Toronto in the
Municipality of Metropolitan Toronto, designated as PARTS 1, 2 and 3 on a Plan
of Survey or record in the Land Registry Office (No. 66) - Land Titles Division
of Toronto and York, - at Toronto, as 66R-7968 and entered in the Register for
Section: A-D-37 as Parcel 9-1.
The Certificate of First Registration of Owner was registered in the Land
Registry Office (No. 63) for the Registry Division of Toronto on 14th of May
1975 as Number CT-1 19462.
I
<PAGE>
SCHEDULE"B"
55 UNIVERSITY AVE
TORONTO
FIFTH FLOOR
SCALE
<PAGE>
SCHEDULE "C"
LANDLORD'S AND TENANT'S IMPROVEMENTS
The Landlord and Tenant agree that the Premises are provided In an "as is"
condition and that the Landlord's work outlined below has been completed subject
to the provisions of Schedule "E", In the event that the Tenant requires
additional leasehold improvements, the Tenant shall complete at its cost, the
"Tenant's Work" as outlined below:
LANDLORD'S WORK
The Landlord shall. complete at its cost save where specifically provided
otherwise, the following (the "Landlord's Work"):
1. Ceilings
The Landlord's standard ceilings are suspended metal 'T'bar grid
with 2'x 5'lay-in acoustic panels fissured pattern. The ceiling
system is based on a 5' square module incorporating a 1' wide
fluorescent fixture strip. Locating partitions off the module will
necessitate modifications to the electrical and mechanical systems
at the Tenant's cost. Floor slab to finished ceiling measures
approximately 8'7Y2".
2. Underfloor Ducts
1201208 volt power distribution is available through an underfloor
duct system complete with companion raceway for telephone
distribution. The underfloor duct system runs north and south in
approximately 7'6" centres.
3. Heating
The perimeter zone of each floor from the mezzanine to the
eighteenth floor is served by a wall-fin heating unit system with a
continuous painted metal enclosure between the columns and one
shutoff valve per bay. On the mezzanine floor the physical
dimensions of the enclosures are approximately 6" wide by 1'2" high
standing 9" proud of the window frame. On the remaining floors the
enclosures are approximately 6" wide by 2'2" high against the inside
face of the outside wall with a 9 1/2" sill to the windows. The
temperature of the heating units is controlled by a central
inside/outside thermostat.
4. Ventilatina nd Air-Condi
The perimeter and interior zones, from the mezzanine to the 18th
floor are served by distribution through air-handling light
fixtures. Return air is drawn through other light fixtures to the
return air plenum above the ceiling. Each perimeter bay of
approximately 400 square feet is controlled by a thermostat located
on the face of the perimeter columns. The interior zohe is
sub-divided on each floor into two areas comprising the west and
north zone and the east and south zone, each separately controlled
by thermostats, one on the west, and one on the east care wall.
5. Sound Control
The Landlord will install sound baffles around corridor and demising
partitions.
6. Fire Hose Cabinets
Should additional fire hose cabinets be required or existing
cabinets relocated as a result of the Leased Premises' perimeter
and/or interior layout, such work will be performed by the Landlord
at the Tenant's expense.
7. Sprinklers
An overhead sprinkler system is provided on all floors on an open
floor basis. The Tenant must ensure that sprinkler coverage is
maintained throughout the Leased Premises in accordance with the
appropriate building codes, regulations, laws & by-laws. Should
additional sprinkler heads be required or existing sprinkler heads
relocated as a result of the configuration of the Leased Premises'
perimeter and/or interior layout, such work will be performed by the
Landlord at the Tenant's expense.
8. Floors
All floors are structural concrete slab.
<PAGE>
SCHEDULE "C" (CONT'D) LANDLORD AND TENANTS IMPROVEMENTS
9. Demising Walls
The Landlord's standard corridor and demising partition on multiple
tenancy floors shall be a slab-to-slab height drywall partition
constructed of 2 1/2" metal studs at 16" on centre, with one layer
of 1/2" gypsum board each side and 2 1/2" sound attenuation blankets
between; walls shall be taped, sanded and painted with one base and
two finish coats.
10. Demising Doors
The Landlord's standard Tenant entrance is a single 3' wide
full-height, solid core door with a natural finish, flat sliced red
oak veneer facing.
The Landlord will provide the Tenant with a standard entrance door
complete with frame and hardware, as required by the applicable
governmental or municipal authorities on an open floor basis.
Additional doors required by applicable governmental of municipal
authorities due to the Tenant's interior partition layout, or
required by the Tenant, will be at the Tenant's expenses. The
Landlord will provide the Tenant with two (2) keys. Additional keys
are available from the Landlord at the Tenant's expense.
The standard locksets are tulip, heavy duty type, dull, stainless
steel finish as manufactured by Dominion Lock Company Limited.
11. Plumbing
Two wet stacks consisting of one capped drain line and one capped
vent line are located at opposite corners of the Building on each
floor; capped cold water lines are located outside Men's and Women's
washrooms for future connection by the Tenant.
TENANT'S WORK
The Tenant shall complete at its cost, the following work (the "Tenant's
Work"):
1 . Electrical
All main disconnects, transformers, lighting panels, electric check
meters, power panels, branch wiring, lighting and electrical
fixtures including lamps, time clocks, exit signs, emergency
lighting and other equipment required in excess of that provided by
the Landlord, as well as any hook-up charge, fee or deposit required
by any appropriate authority.
Where the service capacity of three (3) watts per square foot of
Useable Floor Area is not adequate, the Tenant shall inform the
Landlord of the service required in amperes based on the service
voltage supplied, and if the Landlord is able to provide such
additional service capacity, the Tenant will pay for the increase in
cost for the said additional capacity.
All power poles and monuments in open areas, armoured cable and/or
conduits in partitions are fed from the underfloor duct system.
2. Mechanical
The Tenant shall install all sinks, toilets and any other plumbing
fixtures and equipment, including but not limited to water meters,
hot water tanks, instant hot taps, controls and appurtenances as
required, for the maintenance of required conditions throughout the
Leased Premises and as required by the Landlord.
3. Heating, Ventialating and Air-Conditioning
Any additional heating, ventilating or air-conditioning system
required by the Tenant beyond that provided by the landlord shall be
subject to the prior written approval of the Landlord and shall be
installed by the Landlord at the Tenant's expense. The Landlord
reserves the right to refuse to allow the Tenant to exceed a design
fighting load of three watts per square foot of Useable Floor Area.
4. Communications
When required by the Landlord, by any governmental or regulatory
authority having jurisdiction, or by the Tenant subject to the
Landiord's approval, the Landlord reserves the right, in its sole
discretion, to supply and install all parts and components of the
following systems: intercom, burglar and fire alarm, antenna and
cable at the Tenant's expense.
2
<PAGE>
SCHEDULE SCHEDULE "C" (CONT'D) LANDLORD'S AND TENANT'S IMPROVEMENTS
5. Interior Finishes
All other interior finishes and installations not provided for under
Landiord's Work.
6. Floor Finish
The flooring must be approved in writing by the Landlord and not be
of a lesser quality than the Landiord's standard as approved from
time to time.
7. Additiona!Reguirements
Any additional requirements of the Tenant are subject to the
Landiord's approval.
8. Procedures
Work Drawings - The Landlord shall submit an outline of the plan of
the Leased Premises to the Tenant and the Tenant shall within
sufficient time so as not to delay the commencement of the Term of
the Lease, prepare and submit to the landlord for approval (in
triplicate) working drawings and specifications for the Tenant's
Improvements, including sepias, as prepared by a qualified designer
and engineer, both to be approved by the Landlord. The Tenant's
submission shall include:
1 . Floor Plan - showing partition and interior decoration,
including wall assemblies, elevations and millwork.
Scale: 1/8" = l'0"
2. Electrical and Telephone Plan - showing electrical and
telephone outlets and power pole locations, including all
modifications and/or additions to the base building electrical
system required to suite the Tenant's interior design.
Scale: 1/8" = 1'0"
3. Reflected Ceiling Plan - showing any modifications to the
Landiord's base building ceiling system, including relocation of
existing or installation of new supply air diffusers, lights, and
fight switches, exit lights, emergency lights and sprinklers.
Scale: 1/8" = l'0"
4. Total Connected Electrical Loads in Leased Premises including:
(a) lighting (KW)
(b) receptacles (KW)
(c) special equipment including copiers, computers, etc.(KW)
(d) others (KW)
5. Mechanical Plan - showing any modification and/or addition to the
Landlord's base building heating, ventilating, air-conditioning and
plumbing systems required to suite the Tenants interior design.
Scale: 1/8" = l'0"
Approvals - No work for which drawings and specifications
are required shall be commenced by the Tenant until the said
drawings and specifications have been approved in advance in
writing by the Landlord and until the Tenant has secured approval
thereof from every governmental authority having jurisdiction and
submitted proof of such approval to the Landlord. Under no
circumstances shall the Tenant, its employees, its contractors or
its contractors' employees make any opening in the floors or
walls of the Building (other than the Tenant's interior
partitions) without the prior written approval of the Landlord.
Contractors - Prior to the commencement of the Tenant's
Improvements, the Tenant shall submit to the Landlord a liability
certificate from the Tenant's general contractor or from each of the
Tenant's independent sub-contractors, as the case may be, in an
amount not less than TWO MILLION DOLLARS ($2,000,000.00) per
occurrence, which liability insurance shall be on a comprehensive
form and shall cover all hazards related to any work performance by
any such general contractor or independent contractor, as the case
may be, in or on the Leased Premises.
Such policy or policies shall include the Owner as an
additional named insured and shall contain a cross-liability clause.
3
<PAGE>
SCHEDULE "C" (CONT'D) LANDLORD'S AND TENANT'S IMPROVEMENTS
Damage to leased Premises or Building - Any damage to the Leased
Premises or the Building caused by the Tenant or any of its employees,
contractors, or workers shall be repaired forthwith by the Landlord at the
TenanCs expense or by the Tenant with the Landiord's approval.
Tenanfs Contractors - All items or work undertaken by the Tenant
shall be performed by competent workers whose labour affiliations are
compatible with those of all other employed by the Landlord and its
contractors.
Unless the Landlord otherwise consents in writing, the Tenant shall
employ the landiord's interior contractor in the completion of the
Tenant's Improvements, except for all modifications required to the
landiord's mechanical and electrical systems.
Such mechanical and electrical modifications shall be carried out by
the Landlord at the Tenant's expense. Should the Tenant choose to engage
an interior contractor other than the Landiord's interior contractor, the
Tenant shall pay to the Landlord with respect to the execution of the
Tenant's work, a Tenant Coordination Fee, being the greater of $500.00 or
$1.00 per square foot of the Net Rentable Area of the Leased Premises.
This payment is in consideration of the Landiord's administration
services, disbursements, project security, temporary services and
utilities, washroom facilities, loading dock access, elevator service and
building operations co-ordination all being provided during the Tenant's
fixturing period.
Additional Work - All work carried out by the Landlord at the
Tenant's expense shall be invoiced to the Tenant as a "backcharge". The
amount so invoiced to the Tenant shall be the total cost to the
Landlord including architectural and engineering fees, where
applicable, plus a further Fifteen Per Cent (15%) for the Landiord's
administration and supervision, payable upon substantial completion and
upon demand.
State of Completion - The opinion in writing of the Landlord's
Architect shall be binding on both the Landlord and the Tenant on all
matters of dispute regarding state of completion and workmanship of the
Landlord's and the Tenant's Improvements.
Statutory Declaration - Upon completion of the Tenant's
Improvements, the Tenant shall forthwith furnish to the Landlord a
Statutory Declaration in a form satisfactory to the Landlord stating that
no liens against the Leased Premises exist on account of the Tenants
Improvements.
4
<PAGE>
SCHEDULE "D"
RULES AND REGULATIONS
The Tenant shall observe the following Rules and Regulations (as
amended, modified or supplemented from time to time by the Landlord as
provided in this Lease):
1 The Tenant shall not permit in the Leased Premises any cooking or
the use of any apparatus for the preparation of food or beverages
(except where the landlord has approved of the installation of
cooking facilities as part of the Tenant's Leasehold Improvements)
nor the use of any electrical apparatus likely to cause an
overloading of electrical circuits.
2. The sidewalls, entries, passages, corridors, lobbies, elevators and
staircase shall not be obstructed or used by the Tenant, his agents,
servants, contractors, invitees or employees for any purpose other
than ingress to and egress from the offices. the landlord reserves
entire control of the Common Area and all parts of the Building and
the Land employed for the common benefit of the tenants.
3. The Tenant, his agents, servants, contractors, invitees or
employees, shall not bring in or take out, position, construct,
install or move any safe, business machine or other heavy office
equipment without first obtaining the consent in writing of the
Landlord. In giving such consent, the Landlord shall have the right
in its sole discretion, to prescribe the weight permitted and the
position thereof, and the use and design of planks, skids or
platforms to distribute the weight thereof. All damage done to the
Building by moving or using any such heavy equipment or other
office equipment or furniture shall be repaid at the expense of the
Tenant. The moving of all heavy equipment or other office equipment
or furniture shall occur between 6:00 p.m. and 8:00 a.m. or any
other time consented to by the Landlord and the Persons employed to
move the same in and out of the Building must be acceptable to the
Landlord. Safes and other heavy office equipment will be moved
through the halls and corridors only upon steel bearing plates. No
deliveries requiring the use of an elevator for freight purposes
will be received into the Building or carried in the elevators,
except during hours approved by and scheduled through the Landlord.
Only elevators so designated by the Landlord shall be used for
deliveries of workmen and materials, furniture and other freight.
The Tenant shall pay, as Additional Rent, any costs incurred by the
Landlord in connection with the moving of the Tenant's equipment,
furniture, etc.
4. All persons entering and leaving the Building at any time other than
during Normal Business Hours shall register in the books kept by the
Landlord at or near the entrance or entrances and the Landlord will
have the right to prevent any person from entering or leaving the
Building unless provided with a key to the premises to which such
person seeks entrance and a pass in a form to be approved by the
Landlord and provided at the Tenant's expense. Any persons found in
the Building at such times without such keys or passes will be
subject to the surveillance of the employees and agents of the
Landlord. The Landlord shall be under no responsibility for failure
to enforce this rule.
5. The Tenant shall not place or cause to be placed any additional
locks upon any doors of the Leased Premises without the approval of
the Landlord, which approval shall @ot be unreasonably withheld, and
subject to any conditions imposed by the Landlord. Additional keys
may be obtained from the Landlord at the cost of the Tenant.
6. The water closets and other water apparatus shall not be used for
any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown
therein. Any damage resulting from misuse shall be repaired at the
cost of the Tenant by whom or by whose agents, servants or employees
same is caused. Tenant shall not let the water run unless it is in
actual use, and shall not deface or mark any part of the Building,
or drive nails, spikes, hooks or screws into the walls or woodwork
of the Building.
7. No one shall use the Leased Premises for sleeping apartments or
residential purposes, or for any illegal purpose, or for the storage
of personal effects or articles other than those required for
business purposes.
8. Canvassing, soliciting and peddling In the Building or Common Areas
are prohibited.
9. Any hand trucks, carry-ails, or similar appliances used in the
Building shall be equipped with rubber tires, side guards and such
other safeguards as the Landlord shall require.
10. No animals or birds shall be brought into the Building.
<PAGE>
SCHEDULE "D" CONTD. RULES AND REGULATIONS
11. The Tenant shall not install or permit the installation or use of
any machine dispensing goods for sale in the Leased Premises or the
Building or permit the delivery of any food or beverages to the
Leased Premises without the approval of the Landlord or in
contravention of any regulations fixed or to be fixed by the
Landlord. Only persons authorized by the Landlord shall be permitted
to deliver or to use the elevators in the Building for the purpose
of delivering food or beverages to the Leased Premises.
12. The Tenant shall not perform any acts or carry on any practice which
may damage the Building or the Common Areas or be a nuisance to any
tenant in the Building.
13. The Tenant shall keep all mechanical apparatus free of vibration and
noise which may be transmitted beyond the Leased Premises.
14. The Tenant shall not use or permit the use of any objectionable
advertising medium such as without limitation, loud speakers,
stereos, public address systems, sound amplifiers, radio broadcast
or television apparatus within the Building which is in any manner
audible or visible outside of the Leased Premises.
15. The Tenant shall not mark, drill into, bore or cut or in any way
damage or deface the walls, ceilings, or floors of the Leased
Premises. No wires, pipes, conduits, telephonic, telegraphic,
electronic wire service or other connections shall be installed in
the Leased Premises without the prior written approval of the
Landlord.
16. the Tenant shall not, except with the prior written consent of the
Landlord, install any blinds, drapes, curtains or other window
coverings in the Building and shall not remove, add to or change the
blinds, curtains, drapes or other window coverings installed by the
Landlord from time to time. So that the Building may have a uniform
appearance from the outside, the tenant shall co-operate with the
Landlord win keeping window coverings open or closed at various times
as the Landlord may reasonably, from time to time, direct.
17. The Tenant shall not use any janitor, telephone or electrical
closets for anything other than their originally intended purposes.
18. The Tenant shall abide and be bound by the Security Services in
force in the Building from time to time. For the purpose of this
clause, the term "Security Services" shall mean all aspects of
security for the Building and the Lands, including equipment,
procedures, rules and regulations pertaining to such security.
19. No public or private auction or other similar type of sale of any
goods, wares or merchandise shall be conducted in or from the Leased
Premises.
20. Nothing shall be placed on the outside of window sills or
projections of the Leased Premises, nor shall the Tenant place any
air-conditioning unit or any other equipment or projection so that
it will project out from the Leased Premises. The Tenant may not
install air-conditioning equipment of any kind in any part of the
Leased Premises without the prior written consent of the landlord.
21. All glass and trimmings in, upon or about the doors and windows of
the Leased Premises shall be kept whole, and whenever any part
thereof shall become broken, the same shall be immediately replaced
or repaired under the directions and to the satisfaction of the
Landlord and shall be paid for by the Tenant as Additional Rent.
22. No bicycles or other vehicles shall be brought within the Building
except as specifically designated by the Landlord.
23. No inflammable oils or other inflammable, dangerous or explosive
materials shall be brought into the Building or kept or permitted to
be kept in the Leased Premises.
24. In the event the Leased Premises are used for restaurant or food
handling purposes, the Tenant shall, at its expense:
a) carry out at least monthly a roach spraying program, and provide
evidence thereof to the Landlord, and
b) clean all exhaust ducts at least twice yearly, and provide
evidence thereof to the Landlord.
2
<PAGE>
SCHEDULE "E"
SPECIAL CONDITIONS
EARLY OCCUPANCY: To the extent that the Lease has been executed and the
leasehold improvements have been completed, the Tenant
shall have the right to occupy the premises on a gross
rent free basis until the Commencement Date. The Tenant
shall, however, during such period, be bound by all the
other terms of the lease.
LEASEHOLD
IMPROVEMENT
ALLOWANCE: The Landlord shall provide a leasehold improvement
allowance In the amount of $15.00 per square foot of
rentable area. Said allowance to be paid upon receipt of
paid invoices relating to the completion of such work
and receipt of a statutory declaration from the Tenant's
contractor that there are no lions on the building,
TENANT'S WORK: All plans, drawings and specifications for the
Tenant's leasehold Improvements and the Tenant's choice
of contractors shall be subject to the prior approval of
the Landlord, Alternatively, the Tenant may request the
Landlord to make said Improvements to a maximum cost of
$15.00 per square foot. To the extent that the cost of
leasehold improvements exceeds the above allowance, the
Landlord shall amortize the cost over the term to a
maximum of $25.00 per square foot using an interest rate
factor of 10%.
PARKING: The Landlord agrees to provide up to four (4) unreserved
parking spaces In the building's parking garage
throughout the term at the prevailing monthly charge.
Additional underground parking may be provided on a
month to month basis.
FREE RENT: The Landlord shall grant the Tenant rent free periods as
follows:
One (1) month (Dec.'97) gross free
Two (2) months (Jan.'98 - Feb.'98) net free
During said period, the Tenant shall be bound by all
other terms and conditions of the lease including the
payment of Additional Rent.
EXPANSION: The Tenant shall have the right to lease the adjacent
premises, being approximately 1,600 square feet as
outlined in blue on the attached Schedule "B".
Specifically, the Tenant shall have the option to lease
the premises at the same rental rate and with the same
allowance as outlined in this proposal, effective
December 1, 1998. Said option must be exercised in
writing no later than six (6) months after the
commencement of the Tern].
<PAGE>
SCHEDULE "F"
STATUS STATEMENT
PROPERTY 55 University Avenue
LANDLORD PenYork Properties I lnc,
TENANT IT Staffing Inc.
LEASE DATED December 1, 1997
TO: The Landlord or any Person who is or may become or
contemplates to become a Secured Lender as well as to
any prospective purchaser of the Property or any part
thereof.
THE UNDERSIGNED, the Tenant under the above Lease, hereby certifies
and represents that:
(i) The Tenant has accepted and is in possession and in
occupation of the Premises having I an Area of
approximately four thousand, four hundred square feet
(4,400 sq. ft.).
(ii) The Lease has been validly executed and delivered by the
Tenant (and the Guarantor, if any) pursuant to due
corporate action properly taken by the Tenant (and the
Guarantor, if any).
(ill) The Lease is presently in full force and effect and
unmodified.
(iv) All rent is now accruing under the Lease, and all
Minimum Rent, Percentage Rent and Additional Rent under
the Lease have been paid to this date.
(v) There is no existing default by either Tenant or
Landlord pursuant to the Lease for which a notice of
default has been given.
(vi) The Tenant has no defenses, counter claims, or claims of
offset, deduction or compensation under the Lease or
otherwise against rents or other charges due or to
become due under the Lease. Furthermore, the Tenant does
not have the right or option to terminate the
Lease prior to the expiry of the Term.
(vii) No rent under the Lease has been paid more than thirty
(30) days in advance of its due date.
(viii) The Premises are free from any construction
deficiencies.
(ix) All Landiord's Work has been completed to the
satisfaction of the Tenant.
The Tenant hereby certifies and represents that the above statements
including any exceptions which may have been added thereto are true
and complete and may be relied and acted upon.
DATED AT TORONTO THIS 5th DAY OF SEPTEMBER 1997.
IT STAFFING INC,
PER: Declan French
<PAGE>
SCHEDULE"G"
INDEMNITY AGREEMENT
PROPERTY 55 University Avenue
LANDLORD PenYork Properties I lnc,
TENANT IT Staffing lnc,
GUARANTOR(S) Declan French
LEASE DATED December 1, 1997
PREMISES 5th Floor
THE UNDERSIGNED party(ies), (singularly or collectively, "Guarantor'),
intervenes in the present Lease and having taken communication of the Lease,
declares itself to be fully satisfied with the contents thereof and furthermore
declares that in consideration of Landlord leasing the Premises to Tenant, the
sufficiency offwhich consideration Guarantor hereby acknowledges, Guarantor
binds itself to Landlord, jointly and severally with Tenant and with each other
if applicable, for the due performance of every obligation, condition and
agreement in the Lease Tenant has agreed to perform, observe or keep,
(collectively, "Obligations"), including without limitation, the prompt payment
of all Minimum Rent, Percentage Rent and Additional Rent which become due
pursuant to the Lease, as well as for any consequences resulting from Tenant's
default to fulfil any Obligations, including without limitation, any damages,
interest or penalties, which may be claimed as a result thereof, the Guarantor
making of the whole its own personal affair.
Guarantor waives acceptance of this guarantee by Landlord and the benefits of
division, discussion and subrogation.
Guarantor hereby consents to Landlord making any agreement or arrangement
whatever with Tenant, any other Guarantor, or any other Person with respect to
any one or more Obligations, including without limitation, extensions of time to
fulfil any Obligation, the release of Tenant, any other Guarantor, or any other
Person to fulfil all or any part of any Obligation, or the change or surrender
of any and ail security with respect to the Obligations. Guarantor agrees that
none of the foregoing will in any way, affect or impair the liability of
Guarantor hereunder.
Nothing shall release or satisfy the liability of the Guarantor until all
Obligations and all consequences of default to fulfil them are satisfied in
full. Without limitation, Guarantors liability hereunder will not be affected
or impaired by the bankruptcy, insolvency or winding-up of Tenant, any other
Guarantor, nor by any disclaimer or any other action taken by any trustee,
liquidator, referee or other officer appointed by any court or other body of
competent jurisdiction under any bankruptcy, insolvency or winding-up
legislation then in force, nor landiord's failure or delay to proceed to
litigation or to seek a remedy fool any default against Tenant, any other
Guarantor or any other Person, nor by any other act, omission or event
whatsoever which might otherwise lessen, affect or discharge a surety.
This guarantee is irrevocable by Guarantor and will continue in full force and
effect as long as there exists or may exist any Obligations or any unsatisfied
consequences thereof whether prior to, during or after the expiration of the
Term. Moreover, Guarantor waives notice of the taking effect of and coming into
force of any renewals or extensions of the Term.
This guarantee will be binding upon the Guarantoes successors, legal
representatives and assigns. Furthermore, this guarantee will remain in full
force and effect, notwithstanding any change of name, amalgamation, merger or
change of status of Landlord, Tenant, Guarantor, any other Guarantor, or any
other Person, notwithstanding any juridical acts or facts as a result of which
the entity which is the creditor of any of the Obligations, is or becomes
someone other than landlord and/or Landlord is replaced by any other entity as a
party to the lease and/or any party other than the Tenant or the Guarantor
becomes the debtor of any of the Obligations. Furthermore, if Landlord is
replaced by any other entity as a party to the Lease, then this guarantee will
remain in full force and effect in favour of that entity even as regards
obligations flowing from the Lease, and having their inception after such
replacement.
Guarantor acknowledges and confirms there are no representations, warranties,
inducements or undertakings made or given to it or to Tenant or to any other
Guarantor by Landlord in connection with this guarantee. Moreover, any
alteration or amendment to this guarantee or any future undertaking by
Landlord, in order to be binding upon Landlord, must be made in writing.
1
<PAGE>
SCHEDULE "G" (CONT'D) GUARANTEE
This guarantee shall be construed and governed by the laws of the Province of
Ontario. Guarantor hereby elects domicile at the Premises for the purpose of
service of any legal proceedings to be instituted as a consequence of this
guarantee.
TORONTO, THIS 5th DAY OF SEPTEMBER 1997.
Declan French
- ------------------------------------ ------------------------------------
Witness Guarantor
Address: 2045 Lakeshore Blvd.
Etobicoke, Ontario
Tel: 416-255-1277
- ------------------------------------
Witness
Telephone No.:
2
<PAGE>
SCHEDULE "L"
LANDLORD'S CLEANING SCHEDULE
<TABLE>
<CAPTION>
FREQUENCY
Daily Weekly Monthly Annually
<S> <C> <C> <C> <C>
ENTRANCE, MAIN LOBBY & SERVICE CORRIDORS
Granite floor will be swept with treated dust mop, damp mopped and burnished D
Scrubbed and recoated as necessary to maintain optimal appearance M
Stripped, seated and refinished with durathon finish 2X
All furniture, fixtures, walls, wall hangings, plants and ledges within
reach will be dusted and spot cleaned washed as necessary to maintain
optimal appearance D
Entrance door glass and door frames will be cleaned inside and out D
Glass partitions will be spot cleaned D
All waste containers will be emptied, refined and spot cleaned D
BASEMENT LOBBY & CORRIDORS
Vinyl tile floor will be swept and damp mopped D
Spray buffed 3X
Scrubbed and recoated M
Stripped and refinished as'necessary to maintain optimal appearance
Glass partitions and frames will be spot cleaned D
Ashtrays and waste receptacles will be emptied and cleaned, bright metal polished D
and sand sifted
Walls will be spot cleaned D
ELEVATOR LOBBIES AND CORRIDORS, TENANT FLOORS
Waste containers will be emptied, spot cleaned and_refined if applicable D
Elevator doors and frames will be cleaned and polished on all floors D
Elevator tracks and thresholds will be vacuumed and wiped -D
Baseboards and ledges will be dusted D
All walls will be spot cleaned D
Drinking Mountains will be cleaned and sanitized D
All bright work will be polished D
Fire hose cabinet doors will be cleaned and polished W
Fire hose cabinet doors will be cleaned inside and out M
Cigarette ums will be emptied and cleaned D
All carpets will be vacuumed and spot cleaned D
ELEVATORS
Elevator cab floors will be swept, washed and buffed D
All carpets or carpet mats will be vacuumed and spot cleaned D
Brightwork will be cleaned and polished to remove all finger marks and
smudges. Elevator tracks will be vacuumed and cleaned in cabs and
spot-checked for fitter in elevator lobbies D
Elevator doors and door frames on all floors will be cleaned and polished D
Walls will be spot cleaned D
Walls will be completely washed and polished W
Ceiling will be dusted and spot cleaned W
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FREQUENCY
Daily Weekly Monthly Annually
<S> <C> <C> <C> <C>
STAIRWAYS AND LANDINGS
Stairwells will be policed for litter and any spills or stains will be removed D
Frequently used portion of the stairways (parking to second floor) will be
swept and spot mopped D
Stairways will be swept and damp mopped from parking to the top floor W
Stairway doors and handrails will be spot cleaned D
Stairway doors and handrails will be wiped W
GENERAL & PRIVATE OFFICE, RECEPTIONS, MEETING ROOMSR
BOARDROOMS, MAIL & COPIER ROOMS, EQUIPMENT ROOMS, AND OTHER
TENANT AREAS
Waste containers will be emptied and spot cleaned and new liners installed
whenever needed D
Cleared office furniture will be dusted D
Exposed cleared office furniture vertical surfaces will be dusted W
Telephones will be Justed D
Telephones will be damp-wiped W
Desk tops will be kept free of finger marks and coffee spills D
Desk tops will be damp wiped and polished where applicable W
Wall hangings, door frames and baseboards will be dusted W
Walls around light switches, doors and door frames will be kept free of
finger marks D
Glass partitioning will be kept free of finger marks. Washed from both sides
2 times peryear W
Upholstered furniture will be whisked W
Upholstered furniture will be vacuumed M
leather, vinyl and leatherette upholstered furniture will be dusted W
Leather, vinyl and leatherette upholstered furniture will be damp-wiped M
Carpeted floor areas will be vacuumed D
Tile floors will be swept and damp mopped D-
Tile floors will be spray buffed W
Tile floors will be scrubbed and recoated 6X
Tile floors will be stripped and refinished y
Computer hardware and special equipment will be dusted only D
Venetian blinds will be dusted M
COMPUTER ROOMS
All cleaning in rooms or areas where sensitive equipment is used or where
regular nightly cleaning is not allowed due to security reasons will be
discussed individually with each particular tenant and cleaning schedules will
be made accordingly.
If no special attention is required while cleaning in those areas, cleaning
specifications for office areas will apply.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FREQUENCY
Daily Weekly Monthly Annually
<S> <C> <C> <C> <C>
KITCHENS, SERVERY AND COFFEE STATIONS
Waste baskets will be emptied, relined and spot cleaned D
Vinyl tile flooring will be thoroughly dust-mopped with a dust-
preventative method and washed D
flooring will be spray buffed W
Vinyl tile flooring will be scrubbed and recoated M
Vinyl tile flooring will be stripped and refinished 2X
Carpeted areas will be vacuumed and spot cleaned D
Walls and ledges will be kept free of dust and splash marks D
Sinks and counter tops will be cleaned with a germicidal agent and polished D
Finger marks and smudges will be removed from doors, walls, cupboards, etc D
The exterior of appliances will be wiped clean D
Table tops will be wiped clean D
Chairs will be thoroughly wiped or vacuumed depending on finish W
WASHROOMS, PUBLIC AND PRIVATE
Waste paper containers will be emptied, sanitized and new liners installed D
Toilet seats, toilet bowls and wash basins will be cleaned and sanitized D
Vanity counters will be cleaned D
Mirrors, metal dispensers, receptacles, faucets will be polished D
Toilet bowls and urinals will be descaled with non-acid bowl cleaner W
Tile floors will be swept and washed using germicidal detergent D
Tile floors will be machine scrubbed W
Washroom supplies such as toilet tissue, hand soap, hand towels, sanitary
napkins D and sanitary bags will be replenished . supplied by PenYork
Properties Inc.
Doors, kick plates, push plates and door handles will be cleaned D
</TABLE>
3
<PAGE>
LEASE AMENDING AGREEMENT
THIS AGREEMENT dated the 4th day of September, 1996.
BETWEEN:
<TABLE>
<CAPTION>
<S> <C> <C>
YONGE HILLCREST CORPORATION
(hereinafter called the "Landlord")
OF THE FIRST PART
- and -
INTERNATIONAL CAREER SPECIALISTS LTD.
(hereinafter called the "Tenant")
OF THE SECOND PART
- and -
JOHN A. IRWIN
(hereinafter called the "Indemnifiee')
OF THE THIRD PART
</TABLE>
WHEREAS by a lease made as of the 26th day of July, 1994 (the "Lease"), the
Landlord leased to the Tenant for a term of three (3) years, commencing on the
12th day of September, 1994 and ending on the 1 lth day of September, 1997,
certain premises comprising an area of approximately 2,037 square feet of
Rentable Area on the second floor of the building municipally known as 5075
Yonge Street, North York, and more particularly described in Schedule "A"
attached to the Lease (the "Leased Premises");
AND WHEREAS the Landlord and the Tenant have agreed that the Landlord will lease
to the Tenant and the Tenant will lease from the Landlord additional space of
approximately seven hundred and eight (708) square feet (the "Additional
Premises") from and including September 15, 1996 for the balance of the Term of
the Lease, at an annual rent of four dollars ($4.00) per square foot of
<PAGE>
Rentable Area of the Additional Premises upon the terms and conditions set out
in this Agreement, and which Additional Premises are known as Suite 203.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of Two
Dollars ($2.00) paid by each of the parties hereto to the other, the receipt and
sufficiency whereof is hereby by each acknowledged, and for other good and
valuable consideration, the Landlord and Tenant covenant and agree as follows:
1. The foregoing recitals are true in substance and in fact and form part
of this Agreement.
2. The Landlord hereby leases to the Tenant and the Tenant hereby leases
from the Landlord the Additional Premises from and including September
15, 1996 (the "Effective Date") to and including September 11, 1997
upon the terms and conditions set out in the Lease, as amended by this
Agreement.
3. The Lease shall be and the same is hereby amended to include the
Additional Premises in any reference to Leased Premises contained in
the Lease. The Landlord and the Tenant
<PAGE>
acknowledge and agree that the Leased Premises (including the
Additional Premises) contain a Rentable Area of two thousand, seven
hundred and forty five (2,745) square feet in the Building.
4. The Tenant acknowledges and agrees that from and after the Effective
Date, its Proportionate Share as defined in the Lease will be increased
to reflect the inclusion of the Additional Premises in the meaning
attributable to "Rentable Area of the Leased Premises" and the Tenant
will pay annual rent on the Additional Premises as provided for in
paragraph 5 of this Agreement, and will pay throughout the Term the
Tenant's Proportionate Share of Taxes and Operating Costs, as set out
in Article V of the Lease.
5. The Lease shall be and the same is hereby amended with respect to the
annual rent payable under the Lease to the extent that the first
paragraph of Section 2.3 of the Lease is deleted in its entirety and,
the following is inserted in its place:
'Base Rent: YIELDING AND PAYING therefor yearly and every year during
the period commencing on September 12, 1994 up to and including
September 14, 1996, a rent of SIXTEEN THOUSAND, TWO HUNDRED AND NINETY
SIX DOLLARS ($16,296.00) of lawful money of Canada, to be paid in equal
consecutive monthly instalments of ONE THOUSAND, THREE HUNDRED AND
FIFTY-EIGHT DOLLARS ($1,358.00) each on the first day of each month in
each year (calculated at the rate of eight dollars ($8.00) per square
foot of Rentable Area of the Leased Premises per annum).
YIELDING AND PAYING therefor yearly and every year for the period
commencing on September 15. 1996 up to and including September 11.
1997, a rent of NINETEEN THOUSAND, ONE HUNDRED AND TWENTY-EIGHT DOLLARS
($19.128.00) of lawful money of Canada to be paid in advance in equal
consecutive monthly instalments of ONE THOUSAND FIVE HUNDRED AND
NINETY-FOUR DOLLARS ($1,594. 00) each on the first day of each month in
each year (calculated at the rate of three dollars and fifty cents
($3.50) per square foot for 2,037 square feet of Rentable Area of the
Leased Premises per annum and at four dollars ($4. 00) per square foot
for 708 square feet of Rentable Area of the Leased Premises per annum).
6. The parties hereto agree that the Tenant is accepting the Additional
Premises "as is" but subject to the following work to be completed by
the Landlord;
(a) removal of demising wall between Suites 203 and 204;
(b) repair of hole in wail near door;
(c) removal of all existing walls; and
(d) cleaning and repair of carpet.
<PAGE>
The existing counter-top, cupboards and shelf units will remain in the
Additional Premises.
7. The lease to the Tenant of the Additional Premises is subject to
termination by the Landlord on sixty (60) days prior written notice
(the "Notice"). On the date specified in the Notice, the Tenant shall
return vacant possession of the Additional Premises to the Landlord,
8. The Taxes, Operating Costs and Hydro for 1996 are estimated to be
$13.83 per square foot of Rentable Area of the Leased Premises. This
amount is subject to adjustment by the Landlord once the actual costs
for 1996 are determined.
<PAGE>
9. Each of the Landlord and the Tenant covenants with the other that it
has in itself the absolute right, full power and authority to execute
this Agreement and amend the Lease as provided herein and that neither
party has taken any action whereby the Lease, the Leased Premises or
the unexpired residue of the Term is or may be charged, encumbered,
transferred or assigned.
10. The Lease as amended by this Agreement is hereby ratified and confirmed
and shall remain in full force and effect.
11. Each of the Landlord and the Tenant covenants and agrees with the other
that it will, and at all times hereafter, at the reasonable request of
the other, make or, procure to be made, done or executed, all such
further assurances as may be reasonably required from time to time to
give effect to the terms of this Agreement.
12. This Agreement shall enure to the benefit of and be binding upon the
Landlord and Tenant and their respective successors and assigns,
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of
the date and year first written above.
YONGE HILLCREST CORPORATION
Per: c/s
-------------------------------------------
Nbme: PETER MENKES
Title: VICE PRESIDENT
INTERNATIONAL CAREER SPECIALISTS LTD.
Per: c/s
-------------------------------------------
Name: John Irwin
Title: President cl
WITNESSF.. JOHN A. IRWIN
<PAGE>
Exhibit 10.3(c)
LEASE AGREEMENT
Between
SHIPP CORPORATION LIMITED
- and -
DANNIKTEL INC
Term: May 1, 1993 to April 30, 2000
Ten (1 0) Years
<PAGE>
THE MUTUAL GROUP CENTRE
THIS LEASE MADE THE 24th day of March, 1993
PURSUANT TO THE SHORT FORMS OF LEASES ACT
B E T W E E N:
SHIPP CORPORATION LIMITED
Acting as Manager for the Owner
a corporation incorporated under
the laws of the Province of Ontario
(the "Landlord")
OF THE FIRST PART;
- and -
DANNIKTEL INC.
a corporation incorporated under
the laws of the Province of Ontario
(the "Tenant")
OF THE SECOND PART
WITNESSETH that in consideration of the rents,
covenants and agreements contained in this Lease the
Landlord and the Tenant @gree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS
The parties hereto agree that, when used in this Lease or in any
Schedule or Appendix attached to this Lease, the following words or expressions
have the meaning hereinafter set forth.
1.01 "Additional Rent" means any and all SUMS of lnjury or
<PAGE>
charges required to be paid by Tenant under this Lease, without limitation such
items as the Tenant's Proportionate Share of Taxes and Costs of Operatiqn
(except Basic Rent) whether or not designated as Additional Rent" payable to
Landlord or to any other Person and is deemed to be accruing due on a day-to-day
basis
1.02 'Additional Services" means the services and supervision supplied by
the Landlord and referred to in this Lease as an Additional Service, and any
other services which from time to time the Landlord supplies to the Tenant or
Property other tenant or tenants of the Building, and includes janitorial and
cleaning services in addition to those, normally supplied, the provision of
labour and supervision in connection with deliveries, supervision in connection
with the moving of any furniture or equipment of any tenant and the making of
any repairs or alterations by any tenant and maintenance or other services not
normally furnished to tenants generally;
1.03 "Architect" means the architect from time to time named by Landlord.
The decision of the Architect whenever required hereunder and any certificate
related thereto shall be final and binding on the parties hereto. Where
appropriate, the Landlord may substitute an independent design consultant chosen
by the Landlord in the place of the Architect for the purpose of certifying Net
Area or Gross Area.
1.04 'Basic Rent,' means the annual rent payable by Tenant pursuant to and
in the manner set out in Section 4.02 hereof.
1.05 "Building" means the building situated on the Lands;
1.06 "Building Servicesu means the services defined in Article VI of this
Lease;
1.07 "Business Taxes" means all taxes, rates, duties, charges, levies and
assessments whatsoever, whether federal, provincial, municipal, school or
otherwise, levied, imposed, or assessed in respect of any and every business
carried on in the Premises by the Tenant, subtenants, licensees, or other
occupants of the Premises.
<PAGE>
1.08 "Capital Tax" means all taxes, charges, levies or assessments
whatsoever, whether federal, provincial, municipal, school or otherwise, levied,
charged, imposed or assessed against or upon the Landlord, the amount of which
is calculated by reference to, or based upon, the amount of any or all of the
share capital. assets, surpluses, reserves or indebtedness of the Landlord.
1.09 "Claims" means claims, losses, actions, suits, 46 proceedings, causes
of action, demands, damages (direct, indirect, 47 consequential or otherwise),
judgments, executions, liabilities, 48 responsibilities, costs, charges,
payments and expenses including, 49 without limitation, any professional,
consultant and legal fees (on so a solicitor and his own client basis).
1110 "Commencement Date" means the commencement date set out in Section
3.02 of this Lease.
1.11 'Cost of Additional Services" shall mean the Landlord'- total cost of
providing Additional Services to tenants of the Building or any particular
Additional Services to a tenant including salaries, wages and fringe benefits
and material and other direct expenses incurred, the cost of supervision and
other indirec, expenses reasonably allocated thereto and all other out-of-pockeo
expenses made in connection therewith. A certificate of the Landlord's
comptroller as to the amount of any Cost of Additional Services shall be
conclusive;
1.12 "Costs of Operation" means the total of all expenses incurred by or
on behalf of the Landlord in the complete maintenance nd operation of the Lands
and the Building. Costs of Operation without limiting the generality of the
foregoing) shall include the cost of providing cleaning, janitorial,
supervisory, maintenance and other services (including Additional Services). the
cost of operating elevators, cooling and ventilating
01
<PAGE>
all space including both rentable and non-rentable areas, the cost of
providing hot and cold water and other utilities including electricity and
gas to both rentable and non-rentable areas, the cost of all repairs,
including repairs to the Building or services including elevators, the cost
of replacing lights and ballasts, the cost of window cleaning and providing
security and supervision, the cost of insurance for liability or fire or
other casualties and loss of rental income insurance, accounting costs
incurred in connection with maintenance and operations including computations
required for the imposition of charges to tenants and audit charges required
to be incurred for the conclusive determination of any costs hereunder,
accounting costs incurred in connection with the preparation of statements
and opinions required by this Lease, and the reasonable costs of collecting
and enforcing payment of such charges, the cost of providing and operating a
management office in the Building, and management fees reasonable within the
industry, the amount of all salaries, wages and fringe benefits paid to
employees engaged in the maintenance or operation of the Lands and Building
or the supervision thereof and amounts paid independent contractors for any
services in connection with such maintenance or operation and all indirect
expenses to the extent allocable to the maintenance and operation of the
Lands and the Building and the capital cost (which )tray be amortized
according to generally accepted accounting principles) of such equipment as
may be installed by the Landlord to reduce Costs of Operation or improve the
efficiency of the management of the Building and the Lands and the cost of
consulting fees relating thereto.
In computing Costs of Operation there shall be credited as a
deduction the amounts of proceeds of insurance relating to Insured Damage and
other damage actually recovered, or which should have been recovered by the
Landlord where the cost was included in Costs of Operation, the cost of all
repairs, and replacements required as a result of faulty construction or
inherent defects in the Building, costs which are normally treated in accordance
with generally accepted accounting principles as being of a capital nature, any
sum paid by the Landlord to any tenant in the Building for any tenant allowance,
amounts recovered as a result of direct charges to the Tenant and other tenants
in respect of Additional Services, light bulb, tube and ballast replacement and
insurance premiums, in each case to the extent that the cost thereof was
included in Costs of Operation other than contributions of a Proportionate Share
by the Tenant pursuant to the provisions of this Lease. Any expenses that the
Landlord is not able to determine exactly may be estimated by the Landlord on a
reasonable basis. A certificate of the Landlordts auditor or other licensed
public accountant appointed by the Landlord for the purpose shall be conclusive
as to the amount of Costs of Operation for any period to Thich such certificate
relates.
2
<PAGE>
1.13 "Gross Area' of any premises and of the Building means the rentable
area as defined in-American National Standard z65.1-1980, computed by measuring
to the inside finished surface of the dominant portion of the permanent outer
Building walls, excluding any major vertical penetrations of the floor and
without any deduction made for columns and projections necessary to the
Building, and as determined by the Architect in a certificate which shall be
conclusive and binding on the Tenant;
1.14 "Insured Damage" means that part of damage occurring to the Premises
of which the entire cost of repair is actually or which should have been
recovered by the Landlord under a policy or policies of insurance from time to
time effected by the Landlord.
1.15 "Injury' means bodily injury, personal discomfort, mental anguish,
shock, sickness, disease, death, false arrest, detention or imprisonment,
malicious prosecution, libel, slander, defamation of character, invasion of
privacy, wrongful entry or eviction and discrimination, or any of them as the
case may be.
1.16 "Landlord" means.- Shipp Corporation Limited, acting as Manager for
the Owner, and its authorized representatives, agents, successors and assigns.
In any Section of this Lease that contains a release or other exculpatory
language in favour of Landlord, the term "Landlord" also means the directors,
officers, servants, employees and agents of Landlord.
1.17 "Lands" means the Lands described in Schedule B attached to this
Lease as such Lands may be changed, rearranged, altered, IIOdified, expanded or
reduced from time to time in accordance with tie terms of this Lease;
1.18 "Land Surveyor" means the accredited land surveyor from time to time
named by Landlord. The decision of the Land Surveyor whenever required hereunder
and any certificate related thereto shall be final and binding on the parties
hereto.
1.19 "Leasehold Improvements" means and includes all fixtures
(excluding Tenant's Trade Fixtures), equipment (excluding furniture and
equipment not in the nature of fixtures), installations, additions and
alterations from time to time made, constructed, erected, or installed by,
for or on behalf of Tenant or any previous occupant of the Premises in, on,
to, for or which serve, the Premises, whether or not easily disconnected or
movable, including, without limitation, all: (a) partitions (including
moveable partitions), doors, safes, vaults and hardware; (h) mechanical,
plumbing, electrical, sprinkler, fire detection, safety, utility, heating,
humidity, ventilating and air-conditioning systems, facilities,
installations, fixtures, controls, fittings and equipment; (c) wall to wall
carpeting, drapes and other floor, wall, ceiling and window coverings and
drapery hardware (d) light fixtures; (e) security or locking devices securing
all or any part of the Premises; (f) counters, cabinets, shelves and built-in
furniture and furnishing; (g) internal stairways, escalators, elevators and
any other transportation equipment or systems; (h) ceilings and ceilings
panels; and (i) items that would not normally be considered to be Tenant's
Trade Fixtures;
1.20 "Mortgagee" means any mortgagee, chargee, encumbrancer, hypothecary,
creditor, secured creditor or debenture holder (including any trustee for bond
holders or pursuant to a trust deed) of the Building or the Lands or any part
thereof.
1.21 "Net Area" of any premises on any floor or level means the "usable
area", defined in American National Standard 2.65.1-1980, computed by measuring
to the finished surface of the office side of the corridor and other permanent
walls, to the centre of partitions that separate the office from adjoining
usable area, and to the inside finished surface of the dominant portion of the
permanent outer building walls, and as determined by the Architect in a
certificate which shall be conclusive and binding on the Tenant;
1.22 "Person" if the context allows, includes any individual, firm,
association, Partnership or corporation, or any group of individuals, firms,
associations, partnerships or corporations or any combination thereof.
1.23 "Premises" means the premises in the Building leased to the Tenant
which are described in Section 3.01 of this Lease;
1.24 "Premises Work means the work described in Section 11.01 of this
Lease.
3
<PAGE>
1.25 "Proportionate Share, shall mean that share of Taxes and of Costs of
Operation which the Landlord determines on a reasonable basis to be payable by
the Tenant. The Landlord shall base its determination on that fraction the
numerator of which is the Gross Area of the Premises and the denominator of
which is the aggregate of the Gross Areas of all rentable premises in the
Building. The Landlord may also take into account any unusual requirements of
the Tenant or other tenants in the Building for electricity, air conditioning or
other Building Services and adjust the Tenant's Proportionate Share accordingly
and may allocate exclusively to space occupied by the Tenant or a group of
tenants those Taxes and Costs of Operation that the Landlord determines relate
predominantly to the Tenant or group of tenants. The Landlord may, on a
reasonable basis, allocate exclusively to any rentable premises any Costs of
Operation that do not, in the Landlord's reasonable opinion, relate to vacant
rentable space.
Where the Tenant has in the Landlord's opinion unusual requirements
for Building Services, the Landlord may install at the Tenant's expense such
meters or other equipment as may be reasonable in the circumstances to assist
with the determination of the Tenant's Proportionate Share.
1.26 "Rent" means all Basic Rent and Additional Rent payable pursuant to
this Lease.
1.27 "Rental Year' means a period of time, the first Rental Year
commencing on the first day of the Term hereof, and ending on the last day of
the month of December immediately following. Each Rental Year thereafter shall
consist of consecutive periods of twelve (12) calendar months, but the last
Rental Year of the Term shall terminate on the expiration or earlier termination
of this Lease. If, however, Landlord considers it necessary or convenient for
Landlord's purposes, Landlord may at any time and from time to time, by written
notice to Tenant, specify a date from which each subsequent Rental Year is to
commence, and in such event, the then current Rental Year shall terminate on the
day immediately preceding the commencement of such new Rental Year, and the
appropriate adjustments shall be made between the parties.
1.28 "Rules and Regulations" means the rules and regulations
attached hereto as Schedule C, adopted and promulgated by Landlord from time to
time.
1.29 "Security Deposit" means the security deposit paid by the Tenant
pursuant to Section 4.03 of this Lease.
1.30 'Storage Areas" means those areas designated by Landlord from time to
time as Storage Areas.
1.31 'Taxes" means all real property taxes, rates, duties, charges, levies
and assessments (including without limitation, local improvements, water, snow
and sewer rates) whether extraordinary general or special, foreseen or
unforeseen that are levied, rated, imposed or assessed (collectively "imposed")
against the Lands and the Building or upon the Landlord in respect thereof from
time to time by any taxing authority whether federal, provincial municipal,
school (including any taxes imposed by reason of t@e Tenant's religion) or
otherwise including those imposed for education, schools and local governments,
and including any portion of any Capital Tax reasonably allocable to the Lands
and Building and including all costs and expenses (including legal and other
professional fees and interest and penalties on deferred payments) incurred by
the Landlord in good faith in contesting, resisting or appealing any taxes,
rates, duties, charges, levies or assessments, but excluding taxes and license
fees in respect of any business carried on by tenants and occupants of the
Building and income or profit taxes upon the income of the Landlord to the
extent such taxes are not levied in lieu of taxes, rates, duties, charges,
levies and assessments against the Lands and Building or upon the Landlord in
respect thereof. Taxes shall include without limiting the above the reasonable
cost to the Landlord of making payments to any taxing authority in advance of
receipt from the Tenant of reimbursement for such taxes;
1.32 'Tenant" means the party of the Second Part and includes its
successors and assigns as permitted by this Lease and any Person mentioned as
Tenant in this Lease, whether one or more.
1.33 "Term" means the term of this Lease as more particularly described in
Section 3.02 of this Lease and any period of permitted overholding;
4
<PAGE>
1. 34 "Trade Fixtures" means the personal chattels installed by or on
behalf of the Tenant, in, on or which serve, the Premises, for the sole
purpose of Tenant carrying on its trade in the Premises pursuant to Section
7.01 hereof and which Trade Fixtures Tenant is permitted to remove only to
the extent permitted by the terms of this Lease, but Trade Fixtures do not
include Leasehold Improvements or any inventory of Tenant,
ARTICLE II
INTENT AND INTERPRETATION
2.01 Net Lease
(a) This Lease is a completely net lease to the Landlord.
Except as stated in this Lease, the Landlord is not
responsible for costs, charges, or expenses relating
to the Premises, their use and occupancy, their
contents, or the business carried on in them, and the
Tenant will pay the charges, impositions, costs and
expenses relating to the Premises except as stated
in this Lease. This Section will not be interpreted
to make the Tenant responsible for ground rentals
that may be payable by the Landlord, payments to
Mortgagees or, subject to Article IX, the Landlord's
income taxes. Capital Tax as defined in Section 1.08
is not considered as income tax.
(b)' Despite any other Section or clause of this Lease,
the Tenant shall pay to the Landlord an amount equal
to any and all goods and services taxes, sales taxes,
value added taxes, business transfer taxes, or any
other taxes imposed on the Landlord in respect of
Rent payable by the Tenant to the Landlord under this
Lease, or in respect of the rental of space under
this Lease, or in respect of any services or
Additional Services provided by the Landlord under
this Lease whether characterized as a goods and
services tax, sales tax, value added tax, business
transfer tax, or otherwise (herein called "Sales
Taxes"), it being the intention of the parties that
the Landlord shall be fully reimbursed by the Tenant
with respect to any and all Sales Taxes payable by
the Landlord. The amount of the Sales Taxes so
payable by the Tenant shall be calculated by the
Landlord in accordance with the applicable
legislation and shall be paid to the Landlord at the
same time as the amounts to which such Sales Taxes
!apply are payable to the Landlord under the terms of
this Lease or upon demand at such other time or times
as the Landlord from time to time determines.
Despite any other Section or clause in this Lease,
the amount payable by the Tenant under this paragraph
shall be deemed not to be Rent , but the Landlord
shall have all of the same remedies for and rights
of recovery of such amount as it has for recovery of
Rent under this Lease.
2.02 Landlord to Act in Good Faith
The Landlord, in making a determination, designation,
adulation, estimate, conversion, or allocation under this Lease,
will act reasonably and in good faith.
2.03 Entire Agreement
The Lease includes the Schedules and Appendices attached
to it and the Rules and Regulations adopted under Section 7.06.
There are no covenants, promises, agreements, conditions or
understandings, whether oral or written, between the parties
concerning this Lease, the Premises, the Building, the Lands or any
matter related to all or any of them, except those that are set out
in this Lease. No alteration, amendment, change or addition.to this
Lease is binding upon the Landlord unless it is in writing and
signed by the Tenant and two authorized representatives of the
Landlord.
2.04 General Matters of Intent and Interpretation
(a) Each obligation under this Lease is a covenant.
5
<PAGE>
(b) The captions, section numbers, article numbers and Table
of Contents do not define, limit, construe or describe
the scope or intent of the sections or articles.
(c) The use of the neuter singular pronoun to refer to the
Landlord or the Tenant is a proper reference even though
the Landlord or the Tenant is an individual, a
partnership, a corporation or a group of two or more
individuals, partnerships or corporations. The
grammatical changes needed to make the provisions of
this Lease apply in the plural sense when there is more
than one Landlord or Tenant, to corporations,
associations, partnerships or individuals, males or
females, are implied.
(d) If a part of this Lease or the application of it to a
person or circumstance, is to any extent held or
rendered invalid, unenforceable or illegal, the part:
is independent of the remainder of the Lease and
is severable from it, and its invalidity,
unenforceability or illegality does not affect,
impair or invalidate the remainder of this
Lease; and
(ii) continues to be applicable to and enforceable to
the fullest extent permitted by law against any
Person and circumstance except those as to which
it has been held or rendered invalid,
unenforceable or illegal.
No part of this Lease will be enforced against a Person,
'r to the extent that by doing so, the Person is
made to brppch a law, rule, regulation or enactment.
(e) This Lease will be construed in accordance with the laws
of Canada and the Province where the Lands are situate.
(f) Time jQ of the essence of this Lease.
(g) This Lease will not be registered by either.the Landlord
or the Tenant, but nevertheless if the Tenant desires to
register at its cost a notice of this Lease the Landlord
agrees to execute a notice or acknowledgement sufficient
for the purpose in such form as the Landlord shall have
approved
(h) In this Lpase, "hereinll,'Ihereofll,llhereby",
'hereunder", "hereto",'Ihereafter" and similar
expressions refer to this Lease and not to any
particular paragraph, clause or other portion thereof,
unless there is something in the subject matter or
context inconsistent therewith; "business day', means
any of the days from Monday to Friday inclusive of each
week unless such day is a holiday, and such additional
days as may be designated by the Landlord;
ARTICLE III
GRANT AND TERM
3.01 Lease
The Landlord hereby demises and leases to the Tenant the
Premises containing an area of approximately 1,610.51 square feet of Net Area,
being approximately 1,855 square feet of Gross Area. The approximate Net Area of
the Premises is as indicated in yellow on the floor plan attached to this Lease
as Schedule A, and the Premises are located on the Fifth (5th) Floor of The
Mutual Group Centre, 3300 Bloor Street West, West Tower, Etobicoke, Ontario (the
"Building').
3.02 Term
The Tenant shall have and hold the Premises for and during the Term which shall
be (unless sooner terminated pursuant to the other provisions hereof), the
period of ten (10) years, from and including the first day of May, 1993 to and
including the thirtieth day of April, 2003.
6
<PAGE>
3.03 Access
The Landlord agrees to permit the Tenant and its employees and
invitees to have the use in common with others entitled thereto of the common
entrances, lobbies, stairways and corridors of the Building giving access to the
Premises (subject to the Rules and Regulations attached to this Lease as
Schedule C and such other reasonable limitations as the Landlord may from time
to time impose).
3.04 Storage Areas
Clause intentionally deleted.
3.05 Parking SDaces
The Landlord will provide the Tenant with up to six (6) undercover
parking spaces. The Tenant shall pay as Additional Rent for the parking spaces
at a rate of $60.00 per space per month for years one (1) to three (3) and
$75.00 for years four (4) and five (5). Parking for years six (6) through ten
(10) will be at market rent and may be adjusted by the Landlord on an annual
basis provided that the Tenant will not be charged more than the going rate for
parking in the Building at the time for tenants in general.
The Tenant acknowledges that all Tenant employee parkings provided
solely during normal business hours and is not to be used for the purpose of
overnight parking, extended parking or the storage of vehicles.
ARTICLE IV
RENT
4.01 Covenant to Pay
The Tenant covenants and agrees to pay when due, all Rent in
accordance with the terms of this Lease in lawful money of Canada to the
Landlord at the address of the Landlord set out in Article
<PAGE>
XVIII of this Lease.
4.02 Basic Rent
The Tenant shall pay without any prior demand therefor and without
any set off whatsoever as Basic Rent the sum of $26.897.50. payable in equal
consecutive monthly instalments in advance of $2,241.46 each on the first day of
each and every month during years one (1) to five (5) of the Term and the sum of
$34,317.50, payable in equal consecutive monthly instalments in advance of
$2,859.79 each on the first day of each and every month during years six (6) to
ten (10). Basic Rent is calculated on an annual rate of $14.50 er sq'uare foot
of Gross Area for years one (1) to five (5) and 18.50 per square foot of Gross
Area for years six (6) to ten (10). Gross Area is measured in accordance with
Section 3.01 hereof. If the Gross Area is certified by the Architect the Basic
Rent and Additional Rent shall, if necessary be adjusted accordingly as of the
Commencement Date. If the Term commences on any day other than the first day of
a month or ends on any day other than the last day of a month, rent for such
fraction of a month shall be adjusted on a per diem basis, based upon a period
of 365 days.
The Landlord agrees to provide the Tenant with Basic Rent @ree as
follows:
Six (6) months from May 1, 1993 to October 31, 1993;
Six (6) months from May 1, 1994 to October 31, 1994;
Six (6) months from May 1, 1995 to October 31, 1995;
Six (6) months from May 1, 1996 to October 31. 1996;
Six (6) months from May 1, 1997 to October 31, 1997;
Three (3) months from May 1, 1998 to July 31, 1998.
During this Basic Rent Free Period the Tenant shall pay only
Additional Rent.
4.03 Security Deposit
Landlord acknowledges receipt from Tenant of $7.500.00 ('Security
Deposit,,) to be held by Landlord without interest and will shall be applied on
account of the rent first due as outlined in Section 4.02.
7
<PAGE>
4.04 Delay In Occupancy
If the Premises or any part thereof are not ready for occupancy
by the Tenant on the date of commencement of the Term due solely to the fault
of the Landlord and not as an act of force majeure, no portion of the Rent
hereby reserved, or only the proportionate part thereof if the Tenant shall
occupy a part of the premises, shall be payable for the period prior to the
date when the whole of the Premises are ready for occupancy, and the full
rental shall accrue only after such last mentioned date. The Tenant shall
have no claim for any damages as a result of such delay.
4.05 Landlord's Estimates
Prior to the commencement of each Rental Year, the Landlord
shall estimate the amount of the Tenant's Proportionate Share of the total of
all Costs of Operation and Taxes accrued, paid or payable or attributable
whether by or on behalf of the Landlord, for the ensuing Rental Year or, if
applicable, broken portion thereof and notify the Tenant in writing of such
estimate. For the purpose of determining Proportionate Share of Taxes the
Landlord shall take into account any separate assessments of the Premises which
Taxes are payable by the Tenant pursuant to Section 9.02. The amount so
estimated shall be paid by the Tenant with out set-off as Additional Rent in
equal monthly instalments in lawful money of Canada in advance over the Rental
Year (or broken portion thereof) in'question, each such instalment being payable
on the same day as the monthly payments of Basic Rent. From time to time during
a Rental Year the Landlord may re-estimate the amount of the Tenant's
roportionate Share of Costs of Operation or Taxes for such Rental @ear or broken
portion thereof, in which event the Landlord shall notify the Tenant in writing
of such re-estimate and re-adjusted monthly instalments shall be paid by the
Tenant.
4.06 Landlord's Final Determination
As soon as practicable after the expiration of each Rental Year
for which payments have been made in accordance with Section 4.05 the
Landlord shall provide a statement showing the Tenant7s Proportionate Share
of Costs of Operation and Taxes for such Rental Year or (if applicable)
broken portion thereof and shall notify the Tenant and the parties shall make
the appropriate re-adjustment in the following manner. If the amount the
Tenant has paid is less than the amount due the Tenant shall pay to the
Landlord the amount of such deficiency within fifteen (15) days of receipt of
a notice setting out the amount of such deficiency. If the Tenant has paid in
excess of the amount due, the Landlord shall have the option to apply the
excess against Rent payable or becoming payable by the Tenant. The Tenant may
not claim a re-adjustment in respect of the Tenant's Proportionate Share of
Costs of Operation or Taxes based upon any error of estimation, determination
or calculation thereof unless claimed in writing prior to the expiration nf
one year after the Rental Year to which the Costs of Operation uLoeaxes
@-wat-6-@ Notices by the Landlord stating the amount of any estimate, re -
estimate or determination of Tenant's Proportionate Share of Costs of
Operation and Taxes need not include particulars of Taxes, Costs of Operation
or the calculation of Tenant's Proportionate Share. The Tenant shall be
entitled however upon a specific request being made therefore to inspect a
statement disclosing in reasonable detail particulars of Taxes, Costs of
Operation and the calculation of Tenant's Proportionate Share.
4h.07 Leasehold Allowance
The Landlord agrees to pay the Tenant an allowance of $25.00 per
square foot of Gross Area as a contribution towards the improvel,ant of the
Premises. All improvements must be approved by the Landlord prior to
installation and comply with The Mutual Group Centre's Design Criteria Manual.
All tiiuriIL-@ f=rp, the Lan-(]],or,@ T-T.ill be payable upon completion of
construction pursuant to thf
"Completion,' clause on page 5 of the Design Criteria Manual.
ARTICLE V
COVENANTS
5.01 Landlord's Covenants
The Landlord covenants with the Tenant
(a) for quiet enjoyment; and
8
<PAGE>
(b) to observe and perform all covenants and obligations
of the Landlord herein.
5.02 Tenant's Covenants
The Tenant covenants with the Landlord to pay Rent and to
observe and perform all covenants and obligations of the Tenant
herein.
ARTICLE VI
BUILDING SERVICES
The Landlord covenants with the Tenant:
6.01 Air Conditioning and Ventilation
To provide to the Premises during hours to be determined by the
Landlord (but to be at least the hours from 7:30 a.m. to 7:00 p.m. from
Monday to Friday inclusive with the exception of public holidays) processed
air in such quantities, at such temperatures and of such humidity as shall
maintain in the Premises conditions of reasonable temperature and comfort in
accordance with good standards of interior climate control generally
pertaining at the date of this Lease applicable to normal occupancy of
premises for office purposes and consistent with the general standards of
first- class office buildings in the vicinity of the Building in the City of
Mississauga, but the Landlord shall have no responsibility for ny inadequacy
of performance of the said system if the Premises Gepart from the design
criteria for such system, namely that the occupancy will 'not exceed one
person for every 100 square feet of floor area, that the electrical power
consumed in the Premises for any purposes shall not exceed 3.5 watts per
square foot of floor area and that the Tenant shall not have installed
partitions or other installations in locations which interfere with the
proper operation of the said system. If the use of the Premises does not
accord with the said design criteria and changes in the systems are feasible
and desirable to accommodate such use the Landlord may, upon the written
request of the Tenant, make such changes and the entire expense of such
changes will be reimbursed by the Tenant to the Landlord plus a sum equal to
fifteen percent (15Z) of the cost thereof representing Landlord's overhead,
shall be paid to the Landlord as Additional Rent on demand. Upon reasonable
notice the Landlord shall provide as an Additional Service air conditioning
and ventilation to the Premises at the request of the Tenant during hours
which it is not otherwise obliged to provide such services under this Section.
6.02 Elevator Services
Subject to the supervision of the Landlord, to furnish for use
by the Tenant and its employees and invitees in common with other persons
entitled thereto passenger elevator service to the Premises, and to furnish for
the use of the Tenant in common with @thers entitled thereto at reasonable
intervals and at such hours aIs the Landlord may select, freight elevator
service to the Premises for the carriage of furniture, equipment, deliveries and
supplies,
6.03 Washrooms
To provide for the use of the Tenant and its employees and
invitees, in common with others entitled thereto, washrooms on each floor in
the Building upon which any part of the Premises (other than below-grade
Storage Areas and parking, if any) is located.
6.04 Janitor Service
To provide janitor and cleaning services to the Premises and to
the Building consisting of the services more particularly described in
Schedule D attached to this Lease to be rendered substantially in accordance
with the standards of modern office buildings of a similar type in the
vicinity of the Building at the date of this Lease; it being agreed by the
Tenant that any janitor or cleaning service which the Landlord shall arree to
provide to the Tenant in excess of those above specified (including those
extra services which the Landlord shall make available by demand or special
arrangement) shall be an Additional Service.
9
<PAGE>
6.05 Telephone and Water
To furnish appropriate facilities for bringing telephone services
to the Premises and hot and cold water to washrooms (if any) in the Premises
and to washrooms available for the Tenant's use in common with others
entitled thereto.
6.06 Electricity and Lighting
To furnish electricity to the Premises twenty-four (24) hours a
day for lighting and for office equipment capable of operating from the high
or low voltage circuits available and standard for the Building. The Landlord
shall Furnish lighting to the Premises during hours 4o be determined by the
@@ndlord (but to be at least the hours from 7:-tit-l :i m. t(, 7--,00 P.m
from Monday to Friday inclusive with the exception of holidays'. At the
request of the Tenant and upon reasonable notice the Landlord shall provide
as an Additional Service electricity to the Premises during the hours which
it is not otherwise obliged to provide such service under this Section.
6.07 Additional Services
The Landlord, if it shall from time to time so elect, shall have
the exclusive right, by way of Additional Services, to provide or have its
designated agents or contractors provide any janitor or cleaning services to
the Premises required by the Tenant which are additional to those required to
be provided by the Landlord under Section 6.04, and to supervise the moving
of urniture or equipment of the Tenant and the making of repairs or
Alterations conducted within the Premises, and to supervise or make
deliveries to the Premises. The Cost of Additional Services provided to the
Tenant shall be paid to the Landlord by the Tenant from time to time promptly
upon receipt of invoices therefore from the Landlord.
ARTICLE VII
USE AND OCCUPANCY OF LEASED PREMISES
The Tenant covenants with the Landlord:
7.01 Permitted Use
To use the Premises only for the purpose of an office for the
conduct of the Tenant's business, and Tenant will not use or permit or suffer
the use of the Premises or any part thereof for any other business or purpose.
7.02 Waste and Nuisance
Not to commit or permit, any waste or injury to the ?remises
including the Leasehold Improvements and trade fixtures therein, any
overloading of the floors thereof, any nuisance therein or any use or manner
of use causing annoyance to other tenants and occupants of the Building.
7.03 Energy Conservation
To comply with all reasonable requests of the Landlord in
conserving energy of all types in the Building, including complying at the
Tenant's own cost with all reasonable requests and demands @of thp Landlord
with the view to energy conservation. The Tenant agrees that any reasonable
capital expenditures made by the Landlord in ari effort to promote energy
conservation shall be amortized according to accepted accounting principles
and amortized amounts ,-6,ed to Costs of Operation in the relevant years.
7.04 Condition
Not to permit the Premises to become untidy, unsightly or
hazardous or permit unreasonable quantities of waste or refuse to accumulate
therein, and at the end of each business day to leave the Premises in a
condition such as reasonably required to facilitate the performance of the
Landlord's janitor and cleaning services described in Schedule D to this Lease.
10
<PAGE>
7.05 Compliance with Laws
To comply
(a) at its own expense with all municipal, federal, provincial,
sanitary, fire and safety laws, regulations and requirements
pertaining to the Premises, the Tenant's operation and use of
the Premises, the conduct of business in the Premises, the
condition of the Leasehold Improvements, trade fixtures,
furniture and equipment installed by the Tenant therein and the
making by the Tenant of any repairs, changes or improvements
therein; and
(b) with statutes, regulations, ordinances or other governmental
requirements relating to its ability to enter into and comply
with this Lease.
7.06 Rules and Regulations
To observe, and to cause its employees, invitees and others'-over
whom the Tenant can reasonably be expected to exercise control to observe,
the Rules and Regulations attached as Schedule S to this Lease, and such
further and other reasonable rules and regulations and amendments and changes
therein as may hereafter he made by the Landlord and applied to tenants in
general.
7.07 Parking
The Tenant shall be permitted to park automobiles Belonging to
the Tenant, its servants, agents and invitees on the Lands in the parking
spaces designated in Section 3.05.
7.08 Signs and Directory
Not to paint, display, inscribe, place or affix any sign, symbol,
notice or lettering of any kind anywhere outside the Premises (whether on the
outside or the inside of the Building) or within the Premises so as to be
visible from the outside of the Premises, without the written permission of
the Landlord. Building standard identification signs and a single line
directory listing shall be provided by the Landlord as an Additional Service.
The Landlord shall allow the Tenant, at its cost, to erect a
building standard sign on the outside of the Leased Premises provided that
the sign shall be in a design, size, location, and in all other respects
satisfactory to the Landlord and all Municipal and Governmental Authorities.
ARTICLE VIII
REPAIR AND D^GE
8.01 Landlord's Repair and Maintenance
The Landlord covenants with the Tenant:
(a) to maintain and keep in a good and reasonable state of repair,
the Building consistent with the general standards of first-class
office buildings in the vicinity of the Building in the City of
Mississauga, but subject to Section 8.04 of this Lease and with the
exception of reasonable wear and tear and damage caused by the act
or omission of the Tenant;
(b) to repair so far as reasonably feasible and as expeditiously as
reasonably feasible defects in construction performed or
installations made by the Landlord in the Premises and Insured
Damage therein : The Landlord shall in no event be required to make
repairs to Leasehold Improvements, except where installed by the
Landlord.
8.02 Tenants Repair and Maintenance
The Tenant covenants with the Landlord:
(a) at Tenant7s expense, at all times during the Term, to continuously,
actively and diligently keep, operate and maintain the Premises, as
would a careful and prudent owner, in a good and reasonable state of
repair as determined by the Landlord, and consistent with the
11
<PAGE>
general standards of first-class office buildings in the vicinity of
the Building, and promptly make, using first quality new material,
all needed repairs to the Premises including all Leasehold
Improvements and all trade fixtures therein and all glass therein
other than glass portions of exterior walls thereof, but with the
exception of structural members or elements of the Premises and
defects in construction performed by or installations made by the
Landlord:
(b) that the Landlord may enter and view the state of repair, and that
the Tenant will repair according to notice in writing, but failure
to give notice shall not relieve the Tenant from its obligation
contained in this Section 8.02;
(c) that notwithstanding any other terms, conditions and covenants
contained in this Lease, if any part of the Building including
without limitation the systems for interior climate control and for
the provision of utilities or any equipment, machinery, facilities
or improvements contained therein or made thereto require, repair,
replacement or alteration or become damaged or destroyed through
the negligence, misuse, fault, carelessness, neglect, omission,
misconduct or default of the Tenant or its employees, or those
for whom it is in law responsible, the expense of repairs or
replacements thereto, necessitated thereby, shall be reimbursed to
the Landlord promptly upon demand, (plus a sum equal to fi-fteen
percent (15Z) of the cost thereof representing -cxie Landoeordx
-o@head), shall be paid to the Landlord as Additional Rent on demand
save in respect of Insured -Damage.
8.03 Surrender of the Premises
At the expiration or sooner termination of the Term, the Tenant
shall at its expense peaceably surrender and yield up vacant possession of
the Premises to Landlord in as good condition and repair as Tenant is
required to maintain the Premises throughout the Term, surrender all keys for
the Premises to Landlord at the place then fixed for the payment of Basic
Rent and inform Landlord of all combinations of all locks, safes and vaults
of any kind in the Premises. If the Premises are not surrendered at the time
and in the manner set out in this Section 8.03, Tenant shall promptly
indemnify and hold harmless Landlord from and against any and all Claims
resulting from the delay by Tenant in so surrendering the Premises,
including, without limitation, any Claims made by any succeeding tenant or
occupant founded on such delay. Tenant's obligation to observe and perform
the provisions of this Section 8.03 shall survive the expiration or earlier
termination of this Lease.
8.04 Abatement and Termination
It is agreed between the Landlord and the Tenant that:
(a) in the event of damage to the Premises or to the Building or
to other portions of the Lands affecting access or services
essential to the Premises, and if the damage is such that the
Premises or any substantial part thereof is rendered not
reasonably capable of use and occupancy by the Tenant for the
purposes of its business for any one period of time in excess
of ten (10) days, then
(i) unless the damage was caused by the fault or negligence
of the Tenant or its employees, agents, invitees or
others under its control, from the occurrence of the
damage and until the Premises are again reasonably
capable of use and occupancy as aforesaid, Rent shall
abate in proportion to the part or parts of the Premises
not reasonably capable of such use and occupancy, and
(ii) unless this Lease is terminated as hereinafter provided,
the Landlord or the Tenant, as the case may be
(according to the nature of the damage and their
respective obligations to repair as provided in
Article VIII of this Lease) shall repair such damage
with all reasonable diligence, but to the extent that
any part of the Premises is not reasonably capable of
such use and occupancy
12
<PAGE>
by reason of damage which the Tenant is obligated to
repair hereunder, any abatement of Rent to which the
Tenant is otherwise entitled hereunder shall not extend
later than the time by which, in the reasonable opinion
of the Landlord, repairs by the Tenant ought to have
been completed with reasonable diligence; and
(b) if
(i) the Premises; or
(ii) premises whether of the Tenant or other tenants of the
Building comprising in the aggregate half or more of the
Net Area of the Building; or
(iii) portions of the Lands which effect access or services
essential thereto;
are substantially damaged or destroyed by any cause other than by
reason of the act of omission of the Tenant. To the extent that
in the reasonable opinion of the Landlord the damage cannot be
repaired within one hundred and eighty (180) days after the
occurrence of the damage or destruction, the Landlord may at its
option, exercisable by written notice to the Tenant given within
thirty (30) days of the occurrence of such damage or destruction,
terminate this Lease, in which event neither-the Landlord nor the
Tenant shall be bound to repair as provided in this Article VIII,
and the Tenant shall instead deliver up possession of the
Premises to the Landlord with reasonable expedition, but in any
event within sixty (60) days after delivery of such notice of
termination, and Rent shall be apportioned and paid +'o the date
upon which possession is so delivered up but subject to any
abatement to which the Tenant may 'Se entitled under Section 8.04
(a) of this Lease), but otherwise the Landlord and Tenant shall
repair according to their respective obligations.
ARTICLE IX
TAXES
9.01 Taxes Payable by Landlord
The Landlord covenants with the Tenant to pay all Taxes which are
imposed against the Lands or Building or any part thereof promptly when due
to the taxing authority or authorities having jurisdiction. However the
Landlord may defer payment of any Taxes, or defer compliance with any
statute, law, by-law, regulation or ordinance in connection with the levying
of any Taxes in each case to the fullest extent permitted by law, so long as
it diligently prosecutes any contest or appeal of any Taxes.
9.02 Taxes Payable by Tenant
The Tenant covenants with the Landlord:
(a) to pay promptly when due to the taxing authority or authorities
having jurisdiction all Business Taxes, including licence fees; and
(b) to pay promptly to the relevant taxing authority when due and when
requested deliver to the Landlord receipts for payments of all
taxes, rates, duties, charges, levies and assessments whatsoever
charged in respect of the facilities, Leasehold Improvements, Trade
Fixtures and all furniture and equipment made, owned or installed by
or on behalf of the Tenant in the Premises or on account of its
ownership of or interest in any of them; and
(c) for each Rental Year the Tenant's Proportionate Share of all Taxes
charged for the Lands and Building which do not relate to rentable
areas.
13
<PAGE>
9.03 Postponement of Payment of Taxes
The Landlord may postpone payment of any Taxes payable by it
pursuant to the Lease to the extent permitted by law and if prosecuting in good
faith any appeal against the imposition thereof.
9.04 Landlord's Determination
For all purposes of this Article IX, where the determination of
any Taxes depends upon an assessment or an apportionment of an assessment which
has not been made by the taxing authority or authorities having jurisdiction,
the Landlord acting reasonably may determine the same, and any determination so
made by the Landlord shall be binding upon the Tenant.
9.05 Tenant's Responsibility
The Tenant will:
(a) on the Landlord's request, promptly deliver to the
Landlord,
(i) receipts for payment of all Business Taxes payable
by the Tenant;
(ii) notices of any assessments for Taxes or Business
Taxes or other assessments received by the Tenant
that relate to the Premises or the Building; and
(iii) whatever other information relating to Taxes and
Business Taxes the Landlord reasonably requests from
time to time.
ARTICLE X
ASSIGNMENT AND SUBLETTING
10.01 Consent Required
(a) In this Article "Transfer" means, (i) an assignment, a
sublease, a mortgage, charge or debenture (floating or
<PAGE>
otherwise) or other encumbrance of this Lease or the Premises
or any part of them, (ii) a parting with or sharing of
possession of all or part of the Premises, and (iii) a
transfer or issue by sale, assignment, bequest, inheritance,
operation of law or other disposition, or by subscription of
all or part of the corporate shares of the Tenant or an
"affiliate" (as the term is defined on the date of this Lease
under the Canada Business Corporations Act) of the Tenant
which results in a change in the effective voting control of
the Tenant. In this Article "Transferor" and "Transferee' have
meanings corresponding to the definition of "Transfer" set out
above, (it being nderstood that for a Transfer described in
clause (iii) Mthe Transferor is the Person that has effective
voting control before the Transfer and the Transferee is the
Person that has effective voting control after the Transfer.)
-(b, The Tenant will not effect or permit a Transfer without the
consent of the Landlord wfiich consent will not be
unreasonably withheld. The Tenant will not assign, sublet or
part with all or any portion of the demised premises to an
existing tenant or subtenant in the lands and buildings known
as Mississauga Executive Centre, Mississauga, Ontario. In
deciding whether to give its consent to a Transfer, the
Landlord may refuse to give its consent if:
(i) covenants, restrictions or commitments given by the
Landlord to other tenants in the Building or to the
Mortgagees, or other parties regardless of when
given, prevent or inhibit,the Landlord from giving
its consent to the Transfer;
(ii) the Transferee, (1) does not have a history of
successful business operation in the business to be
conducted in the Premises, (2) does not have a good
credit rating and a substantial net worth, or (3)is
not able to finance the Trartsferee's acquisition of
its interest in the Premises and its operations in
the Premises without a material risk of defaulting
14
<PAGE>
under this Lease and in a manner that will enable the
Transferee to carry on business successfully in the
Premises throughout the Term;
(iii) there is a history of defaults under commercial
leases by the Transferee, or by companies or
partnerships that the Transferee was a principal
shareholder of or partner in at the time of the
defaults;
(iv) the Transfer is a mortgage, charge, debenture
(floating or otherwise) of, or in respect of, this
Lease or the Premises or any part of them.
Without limitation, the Tenant shall for purposes of this
Article X be considered to Transfer in any case where it permits the
Premises or any portion thereof to be occupied by persons other that the Tenant,
its employees and others engaged in carrying on the business of the Tenant, and
shall also include any case where any of the foregoing occurs by operation of
law. The Tenant shall also be considered to assign or sublet if the Tenant is a
corporation of which this Lease is, in the reasonable opinion of the Landlord, a
material asset or a material liability, and control of such corporation changes,
and the Tenant (if a corporation) covenants to notify the Landlord of any
proposed change of control.
10.02 Conditions of Consent
The Tenant shall not Transfer this Lease or the whole or qla-fl
part of the Premises unless it shall have received a bona fide yrDltten offer to
take an assignment or sublease, and it shall have first requested and obtained
the consent in writing of the Landlord thereto. Any request for such consent
shall be in writing and accompanied by a copy of such offer, and the Tenant
shall furnish to the Landlord all information available to the Tenant and
requested by the Landlord as to the responsibility, reputation, financial
standing and business of the proposed Transferee. Within fifteen (15) days after
the receipt by the Landlord of such request for consent and of all information
which the Landlord shall have requested hereunder the Landlord shall have the
right upon written notice to the Tenant, if the request is to assign this Lease
or sublet the whole of the Premises, to cancel and terminate this
Lease, or if the request is to sublet a part of the Premises only, to cancel and
terminate this Lease with respect to such part, in each case as of a termination
date to be stipulated in the notice 3f termination which shall be not less than
sixty (60) days or more than ninety (90) days following the receipt by the
Landlord of such request for consent, and in such event the Tenant shall
surrender the whole or part as the case may be of the Premises in accordance
with such notice and Rent shall be apportioned and paid to the date of surrender
and if a part only of the Premises is surrendered, Rent payable under Section
4.02 and 4.05 shall thereafter abate proportionately. The foregoing shall be
subject to the exception that the Tenant may, by notice delivered to the
Landlord within fourteen (14) days after receipt from the Landlord of a notice
of termination pursuant to the provisions of this Section 10.02, elect to
continue this Lease as to all of the Premises and not to assign or sublet, in
which event the notice of termination shall be void.
10.03 Assignment Effective
No assignment of the Lease shall be effective unless the
Transferee shall execute an appropriate instrument directly with the Landlord
assuming, as to the assigned premises, all the obligations of the Tenant
hereunder.
10.04 No Release
No assignment or subletting of this Lease shall release the
Tenant from its obligations under this Lease.
10.05 No Advertising
The Tenant shall not advertise the Premises, or any part of the
Premises, as being available for assignment or subletting unless the written
permission of the Landlord first having been obtained. In no event shall any
such advertising contain details of the amount of the Rent or other sums payable
by the Tenant in terms of this Lease.
10.06 Tenant's Obligation to Lease
In the event that this Lease is disaffirmed, disclaimed or
terminated by any trustee in bankruptcy of a Transferee, the
15
<PAGE>
original Tenant named in this Lease will be deemed upon notice by the Landlord
given within thirty (30) days of such disaffirmation, disclaimer, or termination
to have entered into a lease with the Landlord containing the same terms and
conditions as in this Lease with the exception of the Term which shall expire on
the date on which this Lease would have expired had such disaffirmation,
disclaimer or termination not occurred.
10.07 Publicly Traded Companies
Section 10.01 does not apply to a Transfer which occurs when the
Tenant is a corporation whose shares are traded and listed on a stock exchange
in Canada or the United States or is a subsidiary of such a corporation.
ARTICLE XI
TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS
11.01 Alterations and Installations
The Tenant will not make, erect, install or alter any Leasehold
Improvements or Trade Fixtures in the Premises ("Premises Work") without the
Landlord's prior written approval. The Landlord shall not unreasonably withhold
its approval to any such request, but approval will not be unreasonably
withheld, if the Tenant complies with the design criteria established by the
Landlord from time to time for the Building. The Tenant's request for any
approval hereunder shall be in writing and accompanied by an dequate description
of the contemplated work and, where Xppropriate, working drawings and
specifications thereof. Any out of pocket expense incurred by the Landlord in
connection with any such request for approval shall be deemed incurred by way of
an Additional Service. All work to be performed in the Premises shall be
performed by competent contractors and subcontractors of whom the )Landlord
shall have approved (such approval not to be unreasonably withheld, but provided
that the Landlord may require that the Landlord's contractors and subcontractors
be engaged for any mechanical or electrical work) and by workmen whose labour
union affiliations are compatible with those of workmen employed in the Building
by the Landlord and its contractors and subcontractors.
All such work shall be subject to inspection by and the reasonable supervision
of the Landlord as an Additional Service at a fee of ive (5Z) percent of the
total construction cost thereof and shall be performed in accordance with any
reasonable conditions or regulations imposed by the Landlord and shall be
completed in a good and workmanlike manner in accordance with the description of
the work approved by the Landlord.
11.02 Construction Liens
In connection with the making, erection, installation or
alteration of Leasehold Improvements and Trade Fixtures and all and other work
or installations made by and for the Tenant on the Premises, the Tenant shall
comply with all the provisions of the Construction Lien Act and other statutes
from time to time applicable thereto and except as to any holdback permitted by
law shall promptly pay all accounts relating thereto. The Tenant will not create
any mortgage, conditional sale agreement or other encumbrance in respect of its
Leasehold Improvements or Trade Fixtures or permit any such mortgage,
conditional sale agreement or other encumbrance including any lien to attach to
the Premises, or to the Lands or Building or any part thereof and the Tenant
shall within twenty (20) days after receipt of notice of registration of any
such encumbrance or lien procure the discharge of any such liens or encumbrances
failing which the Landlord may make such payments as may be required to secure
the discharge, which payments shall be reimbursed by the Tenant, and the
Landlord's right to reimbursement shall not be affected or impaired if the
Tenant shall then or subsequently establish or claim that any lien or
encumbrance so discharged was without merit or excessive or subject to any
abatement, set-off or defence.
11.03 Landlord's Property
All Leasehold Improvements in or upon the Premises shall
immediately upon their placement be and become the Landlord's property without
compensation therefor to the Tenant and shall become part of the Premises.
Except to the extent otherwise expressly agreed by the Landlord in writing, no
Leasehold Improvements, Trade Fixtures, furniture or equipment shall be removed
by the Tenant from the Premises either during or at the expiration or sooner
termination of the Term except that (1) the
16
<PAGE>
Tenant may at the end of the Term remove its Trade Fixtures; (2) the Tenant
shall at the end of the Term remove such of its Leasehold Improvements and Trade
Fixtures as the Landlord shall require to be removed, and (3) the Tenant may
remove its furniture and equipment at the end of the Term, and also during the
Term in the usual and normal course of its business. The Tenant shall, in the
case of every removal either during or at the end of the Term, make good any
damage caused to the Premises by the installation and removal.
ARTICLE XII
INSURANCE
12.01 Landlord's Insurance
The Landlord shall insure the Building. The insurance to be
maintained by the Landlord shall be in respect of perils and in amounts and on
terms and conditions which from time to time are insurable at a reasonable
premium and which are normally insured by reasonably prudent owners of
properties similar to the Building, as from time to time determined at
reasonable intervals (but which need not be determined more often than annually
and shall not be determined less often than every three years) by insurance
advisors selected by the Landlord, and whose written opinion shall be
conclusive. Unless and until the insurance advisors shall state that any such
perils are not customarily insured against by owners of properties similar to
the Building, and located in the vicinity of the Building, the perils to be
insured against by the Landlord shall include, without limitation, public
liability, boilers and machinery, fire and extended perils and losses suffered
by the Landlord in its capacity as Landlord through business interruptions but
shall not include any Leasehold Improvements in the Building. The Tenant shall
be entitled at reasonable times upon reasonable notice to the Landlord to
inspect copies of the relevant portions of all policies of insurance in effect
and a copy of any relevant opinions of the Landlord's insurance advisors.
12.02 Insurance Risks
The Tenant covenants not to do, omit or do-or permit to be done
or omitted to be done upon the Premises anything which would
cause the Landlord's cost of insurance (whether fire or liability) covering the
Lands and the Building to be increased or which shall cause any policy of
insurance covering the Lands and the Building to be subject to cancellation.
Should any such policy be subject to cancellation by reason of the Tenant's use
or occupation of the Premises, the Landlord shall be entitled to terminate this
Lease forthwith by leaving notice thereof on the Premises. If there is any
increase in premiums for the insurance carried from time to time by the Landlord
with respect to the Lands and/or the Building, the Tenant shall pay any such
increases as Additional Rent forthwith after invoices for such additional
premiums are rendered by the Landlord. In determining whether increased premiums
are caused by or result from the use or occupancy of the Premises, a schedule
issued by the organization computing the insurance rates for the Lands and/or
Buildings showing the various components of such rate shall be conclusive
evidence of the several items and charges which make up such rate.
12.03 Tenant's Insurance
(a) The Tenant shall take out comprehensive insurance of the type commonly
called general public liability which shall include coverage for
personal injury, blanket contractual liability, tenants legal
liability, non-owned automobile liability, bodily injury, broad form
property damage, death and property damage all on an occurrence basis
with respect to the business carried on, in or from the Premises and
in, on or from any other part of the Building, with coverage for any
one occurrence or claim of not less that $3,000,000 or such other
amount as the Landlord may reasonably require upon not less than one
(1) month's notice atlany time during the Term. which insurance shall
include the Landlord as a named Insured and shall protect the Landlord
in respect of c i aims Dy lane Tenant as if the Landlord were
separately insured and shall contain cross liability clauses;
(b) The Tenant shall purchase and maintain insurance on the Tenant's Trade
Fixtures and the furniture and equipment of the Tenant and all
Leasehold Improvements of the Tenant. Such insurance will also cover
all property of others which the Tenant has assumed responsibility for.
17
<PAGE>
This coverage shall be written on an All Risk blanket basis for not
less than eighty (80Z) percent of the full replacement cost. The
Landlord be named as a named insured with respect to Leasehold
Improvements and provided that any proceeds recoverable in the event of
loss to Leasehold Improvements shall be payable to the Landlord (but
the Landlord agrees to make available such proceeds toward the repair
or replacement of the insured property if this Lease is not terminated
pursuant to any other provision hereto);
(c) The Tenant shall take out insurance against such other perils and in
such amount as the Landlord may from time to time reasonably require
upon not less than ninety (90) days written notice such requirements to
be made on the basis that the required insurance is customary at the
time for prudent tenants of properties similar to the Building in the
vicinity of the Building.
12.04 Terms of Insurance
All insurance required to be maintained by the Tenant hereunder
shall be on terms and with insurers to which the Landlord has no reasonable
objection. Each policy shall contain a waiver by the insurer of any rights of
subrogation or indemnity or any other claim to which the insurer might otherwise
be entitled against the Landlord or the agents or employees of the Landlord and
shall also contain an undertaking by the insurer that no material change adverse
to the Landlord or the Tenant will be made, and the policy will not lapse or be
cancelled except after not less than thirty 30) days written notice to the
Landlord of the intended change, @apse or cancellation. The Tenant shall furnish
to the Landlord, if and whenever requested by it, certificates or other
evidences acceptable to the Landlord as to the insurance from time to time
effected by the Tenant and its renewal or continuation in force together with
evidence as to the method of determination of full replacement cost of the
Tenant's Leasehold Improvements, Trade Fixtures, furniture and equipment and if
the Landlord reasonably concludes that the full replacement cost has been
underestimated, the Tenant shall forthwith arrange for any consequent increase
in coverage required under this Lease, If the Tenant shall fail to take out,
renew and keep in force such Insurance, or if the evidence
submitted to the Landlord pursuant to the preceding sentence is unacceptable to
the Landlord (or no such evidence is submitted within a reasonable period after
request therefor by the Landlord), then the Landlord may give to the Tenant
written notice requiring compliance with this Article XII and specifying the
respects in which the Tenant is not then in compliance with this Article. If the
Tenant does not within seventy-two (72) hours (or such lesser period as the
Landlord may reasonably require having regard to the urgency of the situation)
provide appropriate evidence of compliance with this Article XII, the Landlord
may (but shall not be obliged to) obtain some or all of the additional coverage
or other insurance which the Tenant shall have failed to obtain without
prejudice to any other rights of the Landlord under this Lease or otherwise, and
the Tenant shall pay all premiums and other expenses incurred by the Landlord in
that connection as Additional Rent pursuant to Section 4.05 of this Lease.
ARTICLE XIII
LIABILITY
13.01 Landlord's-Liability
The Tenant agrees that the Landlord shall not be liable for any
bodily injury or death of, or loss or damage to any property belonging to, the
Tenant or its employees, invitees or licensees or any other persons in, or about
the Building and without limiting the foregoing the Landlord shall not be liable
for any damage which is caused by steam, water, rain, or snow which may leak
into, issue or flow from part of the Building or from the pipes or plumbing
works thereof, 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 wiring,
unless resulting from the negligence of the Landlord, and in no event shall the
Landlord be liable;
(a) for any damage caused by anything done or omitted to be done by any
other tenant;
(b) for any act or omission (including theft, malfeasance or negligence)
on the part of any agent, contractor or person from time to time
employed by it to perform janitor
18
<PAGE>
services, security services, supervision or any other work in or about
the Premises or the Building; or
(c) for loss or damage, however caused, to money securities, negotiable
instruments, papers or other valuables of the Tenant; and
13.02 Failure to SuT)ply Building Services
The Landlord shall have no responsibility or liability for the
failure to supply any Building Services when prevented from doing so by strikes,
the necessity of repair, any order or regulation of any body having
jurisdiction, the failure of the supply of any utility required for the
operation thereof or any other cause beyond the Landlord's reasonable control.
13.03 Release of Tenant
The Landlord releases the Tenant from all claims or liabilities
in respect of any damage which is Insured Damage, to the extent of the cost of
repairing such damage, but not from injury, loss or damage which arises
therefrom where the Tenant is negligent or otherwise at fault.
13.04 Tenant's Indemnification of Landlord
Except as provided in Section 13.03, the Tenant agrees to
indemnify and save harmless the Landlord in respect of all claims for bodily
injury or death, property damage or other loss or damage arising from the
conduct of any work by or any act or omission of he Tenant or any assignee,
subtenant, agent, employee, contractor, tnvitee or licensee of the Tenant, and
in respect of all costs, expenses and liabilities incurred by the Landlord in
connection with or arising out of all such claims, including the expenses of any
action or proceeding pertaining thereto, and in respect of any loss, cost,
expense or damage suffered or incurred by the Landlord arising from any breach
by the Tenant of any of its covenants and obligations under this Lease; and this
indemnity shall survive the expiry or earlier termination of this Lease, in
respect of any of the foregoing circumstances arising during the Term.
13.05 Notification of Landlord
The Tenant shall notify the Landlord promptly and in writing of
any accident or damage to or defect in the Premises, the Lands, the Building, or
any part thereof.
ARTICLE XIV
SUBORDINATION, ATTORNMENT AND CERTIFICATES
14.01 Subordination
The Tenant agrees that this Lease and all the rights of the
Tenant hereunder are subject and subordinate to all mortgages now or hereafter
existing (including deeds of trust and all instrument supplemental thereto)
which may now or hereafter affect the Lands and the Building and to all
renewals, modifications, consolidations, replacements and extensions thereof and
the Tenant whenever requested by any mortgagee or by the Landlord shall attorn
to such Mortgagee as a tenant upon all the terms of this Lease. The Tenant
agrees to execute promptly whenever requested by the Landlord or by such
Mortgagee an instrument of subordination or attorrunent, as the case may be, as
may be required of it; and
14.02 Execution of Certificates
The Tenant shall promptly whenever requested by the Landlord
from time to time execute and deliver to the Landlord and if required by the
Landlord, to any Mortgagee designated by the Landlord a certificate in writing
as to the then status of this Lease, including as to whether it is in full force
and effect, is modified or unmodified, confirming the rental payable hereunder
and the state of the accounts between Landlord and Tenant, the existence or
non-existence of defaults, and any other matters pertaining to this Lease as to
which the Landlord shall request a certificate.
14.03 Non-Disturbance Agreements
The Landlord agrees to use its reasonable, best efforts to
provide to the Tenant an acknowledgement of non-disturbance from every Mortgagee
to which this Lease has been subordinated upon a specific request therefore
being made by the Tenant.
19
<PAGE>
ARTICLE XV
ACCESS, FIRE DRILLS AND FORGE MAJEURE
15.01 Access of Landlord to Premises
The Landlord shall be permitted at any time and from time to
time to enter and to have its authorized agents, employees and contractors enter
the Premises for the purposes of inspection, window cleaning, maintenance,
providing janitor service, making repairs, alterations or improvements to the
Premises or the Building or to have access to utilities and services and the
Tenant shall provide free and unhampered access for the purpose, and shall not
be entitled to compensation for any inconvenience, nuisance or discomfort caused
thereby, but the Landlord in exercising its rights hereunder shall proceed so as
to minimize interference with the Tenant. The Landlord and its authorized agents
and employees shall be permitted entry to the Premises during the last six (6)
months of the Term during normal business hours for the purpose of exhibiting
them to prospective tenants.
15.02 Fire and Safety Drills
The Tenant acknowledges that it may be or become desirable or
necessary for the Landlord to organize and co-ordinate arrangements within the
Building for the safety of all tenants and occupants in the event of fire or
similar event, and the Tenant, it employees, servants, agents, and invitees
shall co-operate and anticipate in any fire drill, evacuation drill, and similar
@xercise as may be arranged or organized by the Landlord from time to time, and
agrees to hold the Landlord harmless from any personal or material loss, damage
or injury arising therefrom.
15.03 Force Majeure
Except as herein otherwise expressly provided, if and whenever
and to the extent that either the Landlord or the Tenant shall be prevented,
delayed or restricted in the fulfillment of any obligation hereunder in respect
of the supply or provision of any service or utility, the making of any repair,
the doing of any work or any other thing (other than the payment of Rent or
other moneys due) by reason of strikes or work stoppages, or being unable to
obtain any material, service, utility or labour required to fulfil such
obligation or by reason of any statute, law or regulation or inability to obtain
any permission from any governmental authority having lawful jurisdiction
preventing, delaying or restricting such fulfillment, or by reason of other
unavoidable occurrence, the time for fulfillment of such obligation shall be
extended during the period in which such circumstance operates to prevent, delay
or restrict the fulfillment thereof, and the other party to this Lease shall not
be entitled to compensation for any inconvenience, nuisance or discomfort
thereby occasioned and the Lease shall remain in full force and effect, but
nevertheless the Landlord will use its best efforts to maintain services
essential to the use and enjoyment of the Premises.
ARTICLE XVI
REMEDIES OF LANDLORD ON TENANTS DEFAULT
16.01 Landlord's Remedies
The Landlord shall:
(a) have the right at all times to remedy or attempt to remedy
any default of the Tenant, and in so doing may make any
payments due or alleged to be due by the Tenant to third
parties and may enter upon the Premises upon reasonable
notice to do any work or other things therein, and in such
event all expenses of the Landlord in remedying or
attempting to remedy such default shall be payable by the
Tenant to the Landlord as Additional Rent forthwith upon
demand; and
(b) have the same rights and remedies in the event of any non-
payment by the Tenant of any amounts payable by the Tenant
under any provision of this Lease as the Landlord would
have in the case of a non-payment of Basic Rent; and
20
<PAGE>
(c) if the Tenant fails to pay any Basic Rent, Additional Rent
or other amount from time to time payable by it to the
Landlord hereunder promptly when due, the Landlord shall
he entitled, if it shall demand it, to interest thereon
at a rate three percent (3%) per annum in excess of the
minimum lending rate to prime commercial borrowers from
time to time current at The Toronto-Dominion Bank in
Ontario from the date upon which the same was due until
actual payment thereof.
16.02 Non-compliance by Tenant
The Landlord may from time to time resort to any or all of the
rights and remedies available to it under this Lease or arising from statute or
general law in the event of any default hereunder by the Tenant or improper
compliance or non-compliance with any obligation arising under any provision of
this Lease, all of which rights and remedies are intended to be cumulative and
not alternative, and the express provisions hereunder as to certain rights and
remedies are not to be interpreted as excluding any other or additional rights
and remedies available to the Landlord by statute or the general law.
16.03 Landlord's Re-entry
It is expressly agreed by the Tenant that if and whenever the
Basic Rent or Additional Rent hereby reserved or other moneys payable by the
Tenant or any part thereof shall not be paid within five (5) days of the day
appointed for payment thereof, whether @lawfully demanded or not, or if the
Tenant shall breach or fail to observe and perform any of the covenants,
agreements, provisoes, conditions, rules or regulation and other obligations on
the part of the Tenant to be kept, observed or performed hereunder or if any
policy on the Building or any part thereof is cancelled or about to be cancelled
by the insurer by reason of the use or occupation of the Premises, then and in
every such case it shall be lawful for the Landlord to enter into and upon the
Premises or any part thereof in the name of the whole and to have again,
repossess and enjoy the Premises as of its former state, without terminating
this Lease, anything in this Lease contained to the contrary notwithstanding.
16.04 Termination
If and whenever the Landlord becomes entitled to re-enter the
Premises under any provision of this Lease the Landlord, in addition to all
other rights and remedies shall have the right to terminate this Lease forthwith
by leaving on the Premises notice in writing of such termination. Upon such
termination, Rent and other payments due under this Lease shall be computed,
apportioned and paid in full to the date of such termination and the Tenant
shall immediately deliver up possession of tne Premises to the Landlord.
16.05 Reletting Premises
Whenever the Landlord becomes entitled to re-enter the Premises
under any provision of this Lease the Landlord, in addition to all other rights
it may have, shall have the right as agent of the Tenant to enter the Premises
azid re-let them and to receive the rent therefor and as the agent of the Tenant
to take possession of any furniture or other property thereon and to sell the
same at public or private sale without lotice and to apply the proceeds thereof
and any rent derived from re-letting the Premises upon account of the Rent due
and to become due under this Lease and the Tenant shall be liable to the
Landlord for the deficiency if any. If the Landlord adopts this course of
action, the Tenant shall be liable for and the Landlord may recover the expenses
of re-letting the Premises, including but riot limited to the cost of recovering
possession of the Premises, expenses of re-letting, including real estate
commission, cost of renovations and legal fees.
16.06 Waiver of Distress
The Tenant waii;.es 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 Premises at any time during the Term shall be
exempt from levy by distress for rent in arrears
21
<PAGE>
ARTICLE XVII
ABANDONMENT OF PREMISES AND BANKRUPTCY OF TENANT
17.01 If the Premises shall be vacated or abandoned, or remain
unoccupied for fifteen (15) days or more while capable of being occupied, or if
any of the goods and chattels of the Tenant shall at anytime be seized in
execution or attachment, or if the Tenant shall make any assignment for the
benefit of creditors or any bulk sale, become bankrupt or insolvent or take the
benefit of any statute now or hereafter in force for bankrupt or insolvent
debtors or (if a corporation) shall take any steps or suffer any order to be
made for its winding-up or other termination of its corporate existence, then in
addition to the payment by the Tenant of Basic Rent and Additional Rent and
other payments for which the Tenant is liable under this Lease, Bqsic Rent and
Additional Rent for the current month and the rext ensuing three (3) months'
shall immediately become due and oe paid by the Tenant. In addition, if any of
the above-mentioned eventualities should occur the Landlord shall have the right
to terminate this Lease by leaving notice of such termination on the Premises.
ARTICLE XVIII
NOTICES
@8.01 Any notice required or contemplated by any provision of this
Lease shall be given in writing, and if to the Landlord, either a.plivered to an
executive officer of the Landlord or mailed by prepaid registered mail addressed
to the Landlord at Four Robert Speck Parkway, Suite 1600, Mississauga, Ontario,
L4Z 1S1 and if to thA Tenant delivered to the Tenant personally (or to a partner
or officer of the Tenant if the Tenant is a firm or corporation) or mailed by
prepaid registered mail addressed to the Tenant at the Premises, Every such
notice shall be deemed to have been given when delivered or, if mailed as
aforesaid, on the fourth business day next following the date of mailing. The
Landlord may-from time to time, by notice in writing to the Tenant, designate
another address in Canada as the address to which notices are to be mailed to
it.
ARTICLE XIX
OVERHOLDING
19.01 The Tenant shall, not less than six months before the expiration
of the Term of this Lease, give to the Landlord notice in writing of its
intention to vacate the Premises at the end of the Term. If no such notice is
given, the Landlord shall assume that the Tenant intends to vacate the Premises
at the expiration of the term of this Lease.
If the Tenant has not given notice of its intentions to vacate
six months before the expiration of the Term, and shall continue to occupy all
or part of the Premises after the expiration of this Lease without the consent
of the Landlord, and without any further written agreement, then the Tenant
shall be deemed to be overholding without any right to do so and the Landlord
may take immediate action to recover possession of the Premises and it will be
lawful for the Landlord to enter into and upon the Premises or any part thereof,
in the name of the whole and to have again, repossess and enjoy the Premises as
of its former state, anything in the Landlord and Tenant Act SRO 1990 or any
other statute or in this Lease contain to the contrary notwithstanding.
If the Tenant remains in possession of all or any part of the
Premises after the expiry of the Term with the consent of the Landlord and
without any further written agreement, or without the consent of the Landlord,
there shall be no deemed renewal or extension of this Lease and, despite any
statutory provision or legal presumption to the contrary, the Tenant shall be
deemed conclusively to be occupying the Premises as a monthly Tenant at will if
the Landlord consents to the Tenant remaining in possession or as a Tenant at
will if the Landlord did not consent to the Tenant remaining in possession, in
either case, on the same terms as set forth in this Lease including the payment
of all additional rents and percentage rents if applicable, so far as such terms
would be applicable to a monthly tenancy except that the monthly basic minimum
rent shall be equal to one sixth (1/6th) of the annual rent payable during the
last year of this Lease; one sixth (1/6th) of the amount of Additional Rents
and charges payable for the last year of this Lease and one sixth (116th) of
the annual Percentage Rent if any payable for the lease year immediately
proceeding the last year of this Lease and all, except as to link the tenancy.
The Tenant shall promptly indemnify and hold harmless the
Landlord from and against any and all claims incurred by the Landlord as a
result of the Tenant remaining in possession of all or any part of the Premises
after the expiry of the Term. The Tenant shall not interpose or raise any
counterclaim in any summary or other proceedings based on overholding by the
Tenant, and the Landlord shall be entitled to damages from the Tenant if the
Landlord suffers as a result of the Tenant's overholding, without setoff.
ARTICLE XX
RELOCATION
20.01 The Landlord may at any time during the Term of this Lease or
any extensions thereof, relocate the Tenant to substantially equivalent space
(the "New Premises") anywhere within the Building provided that
(a) Neither the Net Area nor the Gross Area of the New
Premises differ substantially from that of the Premises.
and
(b) The Landlord improves the New Premises at its expense to
a standard of fixturing and finishing that is at least as
good as the fixturing and finishing of the Premises, and
(n) The Landlord minimizes any interruption of the Tenant's
business during the relocation and pays reasonable
compensation in respect thereof and pays the Tenant's
reasonable business costs associated with the relocation,
and
(d) The Tenant shall be given at least 90 days notice of the
relocation, and
(e) For the purposes of this Article XX, the term "Building"
shall be deemed to include any building located within the
centre of which the Building forms a part.
ARTICLE XXI
WAIVER
21.01 If either the Landlord or the Tenant shall overlook excuse,
condone or suffer any default, breach or non-observance by the other of any
obligation hereunder, this shall not operate as a waiver of such obligation in
respect of any continuing or subsequent default, breach or non-observance, and
no such waiver shall be implied but shall only be effective if expressed in
writing.
ARTICLE XXII
EXTENT OF LEASE OBLIGATION
22.01 This Lease and everything herein contained shall enure to the
benefit of and be binding upon the respective heirs, executors, administrators,
successors, assigns and other legal representatives, as the case may be, of the
parties hereto,, subject to the granting of consent by the Landlord to any
assignment or sublease, and every reference herein to any party hereto shall
include the heirs, executors administrators, successors, assigns and other legal
representatives of such party, and where there is more than one tenant or there
is a male or female party the provisions hereof shall be read with all
grammatical changes thereby rendered necessary and all covenants shall be deemed
joint and several.
23
<PAGE>
IN WITNESS WHEREOF the parties have executed this Lease under
seal as of the day and year first above written.
SHIPP CORPORATION LIMITED
Acting as Manager for the Owner
Richard N. Thorlacius
President and Chief operating Officer
DANNIKTEL INC.
signature
print name and title
24
<PAGE>
SCHEDULE A
FLOOR PLAN
<PAGE>
SCHEDULE B
THE LANDS
THE MUTUAL GROUP CENTRE - WEST AND CENTRE TOWERS
3300 BLOOR STREET WEST - ETOBICOKE
ALL AND SINGULAR that certain parcel or tract of land and premises situate,
lying and being in the City of Etobicoke in the Municipality of
Metropolitan Toronto and Province of Ontario and being composed of the
whole of Lots, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 61, 62, 63, 64, 65,
66, 67, 68, 69, 70 and 71 and parts of Lots 57, 58, 59, 60 as shown on Plan
1922 registered in the Land Registry Office for the Registry Division of
Toronto Boroughs (No. 64).
SCHEDULE C
RULES AND REGULATIONS
1. The Tenant shall not permit any cooking in the Premises without the written
consent of the Landlord.
2. The sidewalks, entries, passages, elevators and staircases shall not be
obstructed or used by the Tenant, his agents, servants, contractors,
invitees or employees for any purpose other than ingress to and egress from
the Premises. The Landlord reserves entire control of all parts of the
Building employed for the common benefit of the tenants and without
restricting the generality of the foregoing, the sidewalks,
entries, corridors and passages not within the Premises, washrooms,
lavatories, air-conditioning closets, fan rooms, janitor's closets,
electrical closets and other closets, stairs, elevator shafts, flues,
stacks, pipe shafts and ducts and shall have the right to place such signs
and appliances therein as it may deem advisable, provided that ingress to
and egress from the Premises is not unduly impaired thereby.
3. The Tenant, his agents, servants, contractors, invitees or employees, shall
not bring in or take out, position, construct, install or move any safe,
business machine or other heavy office equipment without first obtaining
the consent in writing of the Landlord. In giving such consent, the
Landlord shall have the right in its sole discretion, to prescribe the
weight permitted and the position thereof, and the use and design of
planks, skids or platforms to distribute the weight thereof. All damage
done to the Building by moving or using any such heavy equipment or other
office equipment or furniture shall be repaired at the expense of the
Tenant. The moving of all heavy equipment or other office equipment or
furniture shall occur only between 6:00 p.m. and the following 8:00 a.m. or
any. other time consented to by the Landlord, and the persons employed to
move the same in and out of the Building must be acceptable to the
Landlord. Safes and other heavy office equipment will be moved through the
halls and corridors only upon steel bearing plates. No freight or bulky
matter of any description will be received into the Building or carried in
the elevators, except during hours approved by the Landlord.
4. All persons entering and leaving the Building at any time other than during
normal business hours shall register in the books kept by the Landlord at
or near the night entrance and the Landlord will have the right to prevent
any person from entering or leaving the Building unless provided with a key
and access card to the Premises to which such persons seek entrance or a
pass in a form to be approved by the Landlord. Any persons found in the
Building at such times without such keys or passes will be subject to the
surveillance of the employees and agents of the Landlord. The Landlord
shall be under no responsibility for failure to enforce this rule.
5. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the Premises without the approval of the Landlord and subject
to any conditions imposed by the Landlord. Additional keys may be obtained
from the Landlord at the cost of the Tenant.
6. The water closets and other water apparatus shall not be used for any
purpose other than those for which they were constructed, and no sweepings,
rubbish, rags, ashes or other substances shall be thrown therein. Any
damage resulting by misuse shall be borne by the Tenant by whom or by whose
agents, servants, or employees the same is caused. Tenants shall not let
the water run unless it is in actual use, and shall not deface or mark any
part of the Building, or drive nails, spikes, hooks, or screws into the
walls or woodwork of the Building.
7. No one shall use the Premises for sleeping apartments or residential
purposes, or for the storage of personal effects or articles other than
those required for business purposes.
8. The Tenant shall permit window cleaners to clean the windows of the
Premises during normal business hours.
9. Canvassing, soliciting and peddling in the Building are prohibited.
10. Any hand trucks, carryalls or similar appliances used in the Building shall
be equipped with rubber tires, sideguards and such other safeguards as the
Landlord shall require.
11. No animals or birds shall be brought into the Building 77 without the
express written consent of the Landlord.
12. Subject to the provisions of the Lease, the Tenant shall not install or
permit the installation or use of any machine dispensing goods for sale in
the Premises or the Building or permit the delivery of any food or beverage
to the Premises without the approval of the Landlord or in contravention of
any regulations fixed or to be fixed by the Landlord. Only persons
authorized by the Landlord shall be permitted to deliver or to use the
elevators in the Building for the purpose of delivering food or beverages
to the Premises.
13. The Tenant acknowledges, and will so inform all of their employees, that
all of the common areas, corridors, washrooms, stair-wells, elevator
lobbies and all areas of the parking garage have been designated by the
Landlord as no smoking areas and smoking is not permitted.
2
<PAGE>
SCHEDULE D
SHIPP CORPORATION LIMITED
JANITORIAL AND CLEANING SERVICE SCHEDULE
PART 1 - MAIN ENTRANCE
<TABLE>
<CAPTION>
Description of Service Interval
<S> <C> <C>
1. Dust all horizontal services. Nightly
2. Spot clean all walls, light
switches and doors. Nightly
3. Dust mop all hard surface floors
with treated dust mop. Nightly
4. Using wet mop, mop entire area. Nightly
5. Using a high speed machine spray
buff all tile areas. Nightly
6. Dust all high reach areas. Weekly
7. Dust all low reach areas. Weekly
8. Spot clean all walls, doors, partitions glass,
kick and push plates, and all other vertical
surfaces removing fingerprint and smudges,
paying particular attention to areas around
light switches, door knobs,
and door frames. Weekly
9. Machine scrub hard surface floor and apply one
coat of polish.
Allow to dry then buff. Monthly
10. Strip and refinish with three coats
of floor finish. Annually
11. Clean both sides of all glass doors. Nightly
12. Spat clean all partition glass. Nightly
PART 2 - ELEVATOR LOBBIES & CORRIDORS
Description of Service Interval
1. Empty and damp wipe ashtrays and
waste receptacles. Nightly
2. Dust all horizontal surfaces. Nightly
3. Spot clean all horizontal and vertical surfaces
removing finger-
prints, smudges, and stains. Nightly
4. Dust mop all hard surface floors
with treated dust mop. Nightly
5. Fully vacuum all carpets and walk
off mats. Nightly
6. Using wet mop, mop entire area. Nightly
7. Using a high speed machine spray
buff all tile areas. Nightly
8. Dust all high reach areas. Weekly
9. Dust all low reach areas. Weekly
1
<PAGE>
Lower Two Flights - Radial Rubber Flooring Main Lobby to
Lower Lobby.
Description of Service Interval
1. Dust mop with treated mop. Nightly
2. Using west mop, mop entire area. Nightly
3. Scrub floor and apply one coat of
polish, allow to dry and then buff. Monthly
4. Lay one coat of floor finish. 3/week
5. Strip and refinish with three coats
of floor finish. Semi-annually
PART 7 - RECEIVING AREA
Description of Service Interv-al
1. Dust mop all hard surface floors with
treated dust mop. Nightly
2. Using wet mop, mop entire area. Nightly
4
<PAGE>
10. Spot clean all walls, doors, partitions, glass,
kick and push plates, and all other vertical
surfaces removing fingerprints and smudges,
paying particular attention to areas around
light switches, door
knobs, and door frames. Weekly
11. Machine scrub hard surface floor and apply one
coat of polish.
Allow to dry then buff. Monthly
12. Strip and refinish with three
coats of floor finish. Annually
13. Directory board glass to be cleaned,
exterior only. Nightly
14. Drinking fountains to be cleaned. Nightly
15. Elevator threshold: - a) vacuum Nightly
b) wash Weekly
c) spillage Nightly
(if required)
PART 3 - ELEVATOR CABS
Description of Service Interval
1. VAT floors will be dust mopped,
washed and/or spray buffed. Nightly
2. Carpeted floors will be thoroughly
vacuumed. Nightly
3. Clean and polish elevator bright
work, walls, and doors. Nightly
4. Elevator door tracks vacuumed. Nightly
5. Ceilings of cabs to be vacuumed. Monthly
PART 4 - LEASED PREMISES
Description of Service Interval
1. Empty all waste receptacles, empty and damp wipe
ashtrays, dust all horizontal surfaces with a
chemically treated cloth. Spot clean all walls,
light switches, glass doors and frames. Nightly
2. Damp wipe waste baskets. Monthly
3. Dust all furniture, fixtures, equipment
and accessories. Nightly
4. Dust mop all hard surface floors with
treated dust mop. Nightly
5. Mop all stains and spills especially
coffee and drink spills from tile floors. Nightly
6. Using a high speed machine spray buff
and tile areas. Twice/week
7. Dust all chair and table legs and rungs,
baseboards, ledge moldings and other
low reach areas. Weekly
8. Clean and sanitize all telephone. Weekly
9. Clean and polish all bright metal work. Weekly
10. Dust all surfaces above normal reach
including sills, ledge molding, shelves,
door frames, pictures, and vents. Monthly
11. Dust all vertical surfaces (sides of
desks, tables, chairs, filing cabinets). Monthly
2
<PAGE>
12. Machine scrub hard surface floors and apply
one coat of polish. Allow to dry
then buff. Monthly
13. Strip and refinish hard surface floors
with three coats of floor finish. Annually
14. All carpeted traffic lanes will be
vacuumed and the balance of the carpeted
areas will be policed. Nightly
15. Collect and remove all trash. Nightly
COMPUTER VAT
Description of Service Interval
1. Empty and damp wipe ashtrays. Nightly
2. Empty all waste receptacles. Nightly
3. Dust all horizontal surfaces. Nightly
4. Dust all low reach areas. Weekly
5. Dust all high reach areas. Weekly
6. Clean and sanitize all telephones. Weekly
7. Dust mop all hard surface floors
with treated dust mop. Nightly
8. Mop all stains and spills especially
coffee and drink spills. Nightly
9. Using a damp mop, mop entire hard
surface area. Weekly
10. Machine scrub hard surface floor and apply
one coat of polish. Allow to
dry then buff. Annually
PART 5 - WASHROOMS
Description of Services Interval
1. Clean and sanitize all restroom units
including; toilets, urinals (including
undersides), sinks, damp wipe and polish
mirrors, polish chrome, wipe counters, sweep
and damp mop floors using a germicidal
cleaner. Refill all dispensers and empty
trash Nightly
2. Cubicle partitions and doors will be
spot cleaned Nightly
3. Wash all restroom partitions on both
sides and walls. Monthly
4. Machine scrub all hard surface floors
using mild detergent. Monthly
5. Dust and clean all return air vents. Monthly
PART 6 STAIRS AND LANDINGS
Description of Service Interval
1. Police stairs for litter. Nightly
2. Dust mop and clean stairs. Weekly
3. Wet mop and clean stairs. Weekly
</TABLE>
3
<PAGE>
SCHEDULE E
TENANTTS RIGHT TO EXTEND THE TERM
ONE ADDITIONAL FIVE YEAR PERIOD
The Tenant shall have the right at its option to extend the Term
for one further consecutive period of 5 years (herein called
"Extended Term"), such Extended Term commencing upon the date
following the date of expiration of the Term as provided in Section
3.02 of the Lease and ending upon the fifth anniversary of such date
of expiration, subject to the following terms and conditions;
(a) This option shall be exercised by notice in writing
given to the Landlord not less than six (6) months
nor more than twelve (12) months prior to the
expiration of the Term, provided that such notice
shall be validly given only if at the time it is
given the Tenant shall not be in breach of any of its
obligations under the Lease.
(b) The extension of the Term upon the exercise of the
Extended Term shall be upon the same terms and
subject to all the provisions of this Lease except
that:
(i) There shall be no further right to extend the
Term beyond the expiration of this Extended
Term, and
(il@) The Extended Term shall be as provided, and
(iii) The Basic Rent to be paid by the Tenant during
the Extended Term shall be the fair annual
rental value of the Premises as then
constituted, determined in accordance with sub-
paragraph (d) provided that it shall not be
less than the Basic Rent payable by the Tenant
in the last year of the Term, and
(iv) The Lease will be amended to include whatever
changes may have been made to the terms of the
Larldlord's standard form of lease subsequent
to the execution of this Lease.
(c) When this option has been exercised and the Basic
Rent to be paid by the Tenant during the Extended
Term has been determined, the Landlord and the
Tenant, shall enter into a Supplementary Lease
modifying this Lease and extending the Term as
provided.
(d) The expression of "fair annual rental value", for the
purposes of this paragraph, shall mean the annual
rental which could reasonably be obtained by the
Landlord for the Premises from a willing tenant
dealing at arms-length with the Landlord in the
market prevailing at a date six (6) months prior to
the date upon which the Extended Term is to commence,
having regard to all relevant circumstances including
the size and location of the Premises, the facilities
afforded, the terms of the intended lease thereof
(including its provisions for payments and other
contributions by the Tenant additional to rent) the
condition of the Premises and the value of
improvements therein (except that if the Tenant has
failed to repair in accordance with its obligations
under the Lease or has made- improvements in excess
of those which it was required to make at the
commencement of the Term, the disrepair and the
Improvements, and also the value of all the Tenant's
fixtures, shall be disregarded), and having regard
also to rentals currently being obtained for space
similarly located in the locality, and in particular
to any leases currently being made or recently made
by the Landlord of comparable space in the Building.
If the Landlord and Tenant have not agreed as to the
fair annual rental value of the Premises by a date three
(3) months prior to the date upon which the Extended
Term is to commence the fair annual rental value shall
be determined by arbitration and the following
provisions shall apply thereto; promptly upon this
provision for arbitration becoming applicable each of
the Landlord and Tenant shall give written notice to the
other appointing an arbitrator on behalf of the party
giving the notice. In the event that either party shall
fail to give such written notice within ten (10) days
the arbitrator named in the notice given by the other
party shall be the sole arbitrator. If the two
arbitrators are duly appointed they shall jointly
appoint a third, but if such appointment has not been
made by them within the (10) days after the appointment
of whichever of the two arbitrators was last appointed,
either party may on notice to the other apply to a Judge
of the District Court for the Judicial District where
the Premises are located, who shall have jurisdiction to
appoint a third arbitrator. The arbitrators or sole
arbitrator (as the case may be) appointed hereunder
shall govern their or its own proceedings and the
decisions of any two arbitrators (if three have been
appointed) or the sale arbitrator as the fair annual
rental value shall be conclusive and binding on the
parties. Each party shall pay the fees of the arbitrator
appointed by it, and the parties shall share eq 'ually
all other costs of the arbitration. In the event that
the fair annual rental value of the Premises has not
been determined by the date upon which rent therefor
commences to be payable by the Tenant, pending such
determination the Tenant shall pay rent therefor as
determined according to Article XIX of this Lease and
the parties shall readjust as of the date when rent
commenced to be payable promptly upon such determination
being made.
2
<PAGE>
SHIPP CORPORATION LIMITED
OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I Definitions 1 to 5
ARTICLE II Intent and Interpretation
Section 2.01 Net Lease 5
Section 2.02 Landlord to Act in Good Faith 5
Section 2.03 Entire Agreement 5
Section 2.04 General Matters of Intent and
Interpretation 5
ARTICLE III Grant and Term
Section 3.01 Lease 6
Section 3.02 Term 6
Section 3.03 Access 7
Section 3.04 Storage Areas 7
Section 3.05 Parking Spaces I 7
ARTICL@ IV Rent
Section 4.01 Covenant to Pay 7
Section 4.02 Basic Rent 7
Section 4.03 Security Deposit 7
Section 4.04 Delay in Occupancy 8
Section 4.05 Landlord's Estimates 8
Section 4.06 Landlord's Final Determination 8
Section 4.07 Leasehold Allowance 8
ARTICLE V Covenants
Section 5.01 Landlord's Covenants 8
Section 5.02 Tenant's Covenants98
ARTICLE VI - Building Services
Section 6.01 Air Conditioning and Ventilation 9
Section 6.02 Elevator Services 9
Section 6.03 Washrooms 9
Section 6.04 Janitor Service 9
Section 6.05 Telephone and Water 10
Section 6.06 Electricity and Lighting 10
Section 6.07 Additional Services 10
ARTICLE VII - Use and Occupancy of Leased Premises
Section 7.01 Permitted Use 10
Section 7.02 Waste and Nuisance 10
Section 7.03 Energy Conservation 10
Section 7.04 Condition 10
Section 7.05 Compliance with Laws 11
Section 7.06 Rules and Regulations 11
Section 7.07 Parking 11
Section 7.08 Signs and Directory 11
ARTICLE VIII - Repair and Damage
Section 8.01 Landlord's Repair and Maintenance 11
Section 8.02 Tenant's Repair and Maintenance 11
Section 8.03 Surrender of the Premises 12
Section 8.04 Abatement and Termination 12
ARTICLE IX Taxes
Section 9.01 Taxes Payable by Landlord 13
Section 9.02 Taxes Payable by Tenant 13
Section 9.03 Postponement of Payment of Taxes 14
Section 9.04 Landlord's Determination 14
Section 9.05 Tenant's Responsibility 14
1
<PAGE>
ARTICLE X Assignment and Subletting
Section 10.01 Consent Required 14
Section 10.02 Conditions of Consent III 15
Section 10.03 Assignment Effective 15
Section 10.04 No Release 15
Section 10.05 No Advertising 15
Section 10.06 Tenant's Obligation to Lease 15
Section 10.07 Publicly Traded Companies 16
ARTICLE XI - Trade Fixtures and Leasehold Improvements
Section 11.01 Alterations and Installations 16
Section 11.02 Constructions Liens 16
Section 11.03 Landlord's Property 16
ARTICLE XII - Insurance
Section 12.01 Landlord's Insurance 17
Section 12.02 Insurance Risks 17
Section 12.03 Tenant's Insurance 17
Section 12.04 Terms of Insurance 18
ARTICLE XIII - Liability
Section 13.01 Landlord's Liability 18
Section 13.02 Failure to Supply Building
Services 19
Section 13.03 Release of Tenant 19
Section 13.04 Ter-ant's Indemnification
of Landlord 19
Section 13.05 Notification of Landlord 19
ARTICLE XIV Subordination, Attornment and Certificates
Section 14.01 Subordination 19
Section 14.02 Execution of Certificates 19
Section 14.03 Non-Disturbance Agreements 19
ARTICLE XV - Access, Fire Drills and Force Majeure
Section 15.01 Access of Landlord to Premises 20
<PAGE>
Section 15.02 Fire and Safety Drills 20
Section 15.03 Force Majeure I.I 20
ARTICLE XVI - Remedies of Landlord on Tenant's Default
Section 16.01 Landlord's Remedies 20
Section 16.02 Non-compliance by Tenant 21
Section 16.03 Landlord's Re-entry I 21
Section 16.04 Termination 21
Section 16.05 Reletting Premises 21
Section 16.06 Waiver of Distress 21
ARTICLE XVII - Abandonment of Premises and Bankruptcy
of Tenant 22
ARTICLE XVIII - Notices 22
ARTICLE XIX . Overholding 22
ARTICLE XX . Relocation 23
ARTICLE XXT . Waiver 23
ARTICLE XXII . Extent of Lease Obligation 23
SCHEDULE A . FLOOR PLAN
SCHEDULE B - THE LANDS
SCHEDULE C - RULES AND REGULATIONS
SCHEDULE D - JANITORIAL AND CLEANING SERVICE SCHEDULE
SCHEDULE E - ONE ADDITIONAL FIVE YEAR PERIOD
</TABLE>
2
<PAGE>
Exhibit 10.3(d)
LEASE AGREEMENT
The following are the terms and conditions of the lease between ICS (the
"Tenant") and 1242531 Ontario Ltd. (the "Landlord").
1. Premises The area comprising approximately 6,000 square feet
of rentable area at 1041 McNicholl Avenue,
Scarborough, Ontario, M1W 3W6.
2. Term The term of the lease shall be for three (3) years
commencing on June 1st, 1998 and expiring on May
31st, 2001.
3. Basic Rent Sixty Thousand dollars ($60,000) per annum, payable
monthly in advance in the amount of Five Thousand
($5,000) commencing on the Term Commencement Date.
4. Additional Rent No additional rent is payable as the above amount of
$5,000 includes property taxes, basic insurance,
utilities and the tenant's proportionate share of
operating costs.
5. Condition of The Tenant agrees to accept the premises in their
Leased Premises present "as is" condition.
6. Leasehold The Tenant shall be responsible for all future
Improvements leasehold improvements.
7. Parking Unlimited parking in the common parking lot at 1041
McNicholl Avenue is included in the rent.
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of the Commencement Date (as defined
below) by and between IT STAFFING LTD., a corporation incorporated under the
laws of the Province of Ontario, (the "Company") and DECLAN A. FRENCH, an
individual residing in the Town of Mississauga in the Province of Ontario (the
"Executive").
FOR VALUE RECEIVED by each of the parties hereto, receipt and
sufficiency of which is hereby acknowledged by each of them, it is hereby agreed
as follows:
1. As from the date on which the Company's Registration Statement filed
with the U.S. Securities and Exchange Commission is declared effective
(the "Commencement Date"), the Executive shall be employed by the
Company under the terms of this Agreement.
(1) The Company shall employ the Executive and the
Executive shall continue to hold office and serve the
Company as President and Chief Executive Officer (the
"Appointment"). The Executive shall during the course
of his employment hereunder perform the duties and
exercise the powers consistent with the Appointment,
including the making (subject to the terms hereof) of
all management decisions affecting generally the
Company, and those specific matters which may from time
to time be reasonably assigned to or vested in him by
the Board of Directors of the Company (the "Board"),
and shall from time to time give to the Board all such
information regarding such matters as it shall require
and implement and apply the policy of the Company as
set forth by the Board from time to time,
(2) make any material change in the undertaking of the
business of the Company; or
(3) enter into any Agreements or other obligations with
any person otherwise than in the ordinary course of
the business of the Company.
2. The Appointment shall continue for a period of 2 years from the
Commencement Date (the "Contract Period"), during which the Company
shall not be entitled to terminate the Executive's employment except in
accordance with and upon the occurrence of any of the events or causes
specified in Section 9.
3. (a) The Company shall pay to the Executive during the
continuance of his employment hereunder a salary at the rate
of Cdn.$150,000 per annum, less applicable statutory
deductions, subject to adjustment as provided in Section 4(e)
(the "Salary"), but not exceeding a maximum of Cdn.$500,000
per annum, to accrue from day to day and be payable (by direct
deposit to the Executive's designated bank account) in equal
bi-weekly installments in arrears on the last day of each
bi-weekly period;
(b) the Company shall provide to the Executive during the
continuance of his employment hereunder:
(1) an automobile allowance of Cdn.$1,000 per month; and
<PAGE>
2
(2) a corporate credit card, to be used by the Executive
for business expenses;
(c) the Company shall pay to the Executive during the continuance
of his employment hereunder a bonus (the "Bonus") of 2% of
Production in respect of each of the Company's fiscal quarters
(a "Quarter"). The payment date for each Quarter shall be
within 15 days after the end of the Quarter. "Production" for
purposes of the Bonus, and in respect of any Quarter, shall
mean the aggregate of the following amounts:
(3) total full time placement fees (exclusive of GST),
before tax, billed by the Company in such Quarter;
and
(4) total spread, representing pre-tax profit to the
Company, for such Quarter, in respect of all bilabial
hours of contract placements and consulting fees;
in each case as determined (such determination to be
conclusive in the absence of manifest error) by the Company's
accountants in accordance with generally accepted accounting
principles, for each such Quarter, and within 7 days of the
end of any such Quarter;
(d) the Company shall pay to the Executive during the continuance
of his employment hereunder a commission (the "Commission") of
1% of every dollar increase over the immediately preceding
year in the combined total revenue of the IT Group per annum,
calculated as of the end of each fiscal year during the term
of this Agreement. "IT Group" for the purposes of the
Commission shall mean the Company, International Career
Specialists Ltd., Systemsearch Consulting Services Inc.,
Systems PS Inc., and any other corporation, partnership, joint
venture, or business division which becomes controlled by any
corporation or any such entity within the IT Group during the
term of this Agreement. The Executive's right to receive
Commission payments from the Company shall continue in full
force and effect for a period of one full year after the
date upon which his employment hereunder ceases, whether as
the result of the expiry of the term hereof or his earlier
resignation or termination, provided that such entitlement
shall cease and determine upon his becoming employed by or
otherwise directly or indirectly interested or concerned in
any business, corporation, partnership, joint venture, firm,
or any such entity carrying on a business in the Province of
Ontario or any other jurisdiction in which the Company may be
carrying on business which is competitive with the business
carried on by the Company (otherwise than through the
Executive's holding or being beneficially interested in any
class of securities in any company if such class of securities
is listed on any recognized stock exchange and the Executive
neither holds nor is beneficially interested in more than a
total of ten per cent of all securities of that class); and
(e) the Company shall, during the continuance of the Executive's
employment hereunder, increase the Salary payable to the
Executive in each fiscal year of the term of this Agreement,
retroactively to the first day of each such fiscal year, by
<PAGE>
3
an amount equal to the amount of the Commission paid to the
Executive in respect of each such fiscal year.
5. The Company shall also pay to the Executive (on production of such
evidence as the Company may reasonably require) the amount of all
hotel, traveling and other expenses reasonably and properly incurred
by him in the discharge of his duties contemplated hereunder.
6. Subject to Section 9 and to the production of satisfactory evidence
from a registered medical practitioner in respect of any period of
absence in excess of 90 consecutive days, the Executive shall be paid
all of the compensation to which he would otherwise be entitled to
under this Agreement during any period of absence from work due to
sickness or injury.
7. The Executive shall be entitled to 6 weeks holiday with pay in every
calendar year in addition to recognized public holidays. The
entitlement to holiday (and on termination of employment to holiday
pay in lieu of holiday) accrues pro rata throughout each calendar year
of employment.
8. (a) The Executive shall not, either during the continuance of his
employment hereunder except so far as is necessary in the
performance of his duties or thereafter, without the consent
in writing of the Board being first obtained, divulge to any
person, and shall use his best endeavors to prevent the
publication or disclosure of any information, concerning the
business, accounts, finances, dealings, transactions or
affairs of the Company which has or may come to his knowledge
during the course of his employment hereunder or during any
previous service with the Company;
(b) the Executive shall not, during the continuance of his
employment directly or indirectly be interested or concerned
in any business, corporation, partnership, joint venture,
firm, or any such entity carrying on a business in the
Province of Ontario or any other jurisdiction in which the
Company may, from to time, conduct business which is
competitive with the business carried on by the Company,
provided that nothing herein contained shall prevent the
Executive from being the holder of or from being beneficially
interested in any class of securities in any company if such
class of securities is listed on any recognized stock exchange
and the Executive neither holds nor is beneficially interested
in more than a total of ten per cent of all securities of that
class; and
(c) the Executive shall devote his full time and attention to the
affairs and business of the Company during the continuance of
his employment under the terms of this Agreement.
9. The Executive's employment is guaranteed for the entirety of the
Contract Period, without restrictions, provided however that if the
Executive shall:
(2) die;
(3) be adjudged or declared bankrupt or shall take advantage of
any statute for the time being in force offering relief for
insolvent debtors; or
<PAGE>
4
(4) become a person whose person or estate is liable to be dealt
with under the law relating to mental health;
(5) otherwise become or be unable substantially to perform his
duties hereunder for any reason whatsoever for a period or
periods aggregating at least 180 days in any period of 12
consecutive months; or
(6) commit either by commission or omission, any act giving rise
to cause for termination ("cause" shall include, without
limitation, any material breach of the terms of this Agreement
or any other cause recognized at law);
then the Company may in any such case by written notice to the Executive (or his
representative, as applicable) forthwith terminate his employment hereunder, but
no notice under subsection (d) of this Section shall be given by the Company to
the Executive after the expiration of three calendar months from the end of any
such periods or periods aggregating at least 180 days. Where the Agreement is
terminated pursuant to this Section 9, the Executive will be entitled to his
Salary and holiday vacation pay accrued up to the date of termination, and the
Company shall have no further obligation to make any payments to the Executive,
in particular, pursuant to Section 4 of this Agreement.
10. Any notice in writing required or permitted to be given to the Executive
hereunder shall be sufficiently given if delivered to him personally or if
mailed by registered mail to the Executive's last home address of which the
Company has notice. Any notice in writing required or permitted to be given to
the Company hereunder shall be sufficiently given if delivered or mailed by
registered mail to the Company at its head office c/o the President & Chief
Executive Officer, IT Staffing Ltd., 55 University Avenue, Suite 505, Toronto,
ON M5H 3L9. Any such notices mailed as aforesaid shall be deemed to have been
received on the fifth business day following the date of the mailing. Any
address for the giving of notices hereunder may be changed by notice in writing
in the manner provided in this Section for the giving of notices.
11. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario.
12. Any provision of this Agreement which is invalid or unenforceable shall
not affect any other provision and shall be deemed to be severable.
13. This Agreement shall enure to the benefit of and be binding upon the
heirs, executors, administrators and legal personal representative of the
Executive and the successors and assigns of the Company.
14. This Agreement constitutes and contains the entire and only Agreement
among the parties relating to the matters described herein and supersedes and
cancels any and all previous Agreements and understandings between all or any of
the parties relative hereto. Any and all prior and contemporaneous negotiations,
memoranda of understanding or position, and preliminary drafts and prior
versions of this Agreement, whether signed or unsigned, between the parties
leading up to the execution hereof shall not be used by any party to construe
the terms or affect the validity of this Agreement. There are no
representations, inducements,
<PAGE>
5
promises, understandings, conditions or warranties express, implied or
statutory, between the parties other than as expressly set forth in this
Agreement.
15. The Executive acknowledges that he has either obtained or waived
independent legal advice in respect of the subject matter of this Agreement.
<PAGE>
6
IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto on the ____ day of August, 1998, effective as at the
Commencement Date.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
)
) /s/ Declan A. French
- ---------------------------------- -------------------------------------
Witness: DECLAN A. FRENCH
IT STAFFING LTD.
Per: /s/ Declan A. French c/s
------------------------------
Name: Declan A. French
Title: President
<PAGE>
Exhibit 10.5
February 11th, 1998
John F. Wilson Enterprises Inc.
3300 Bloor St West
Toronto, Ontario
RE: Contract Agreement
Dear John,
This will serve to confirm our understanding that from January 2, 1997 to the
completion of a listing on a Public Exchange you have and will continue in the
capacity of President and Chief Executive
Officer of Systemsearch Consulting Services Inc. (hereinafter referred to as
Systems) and Systems PS Inc. (hereinafter referred to as PS).
During the interim period from January 2, 1997 until the closing of the share
purchase transaction contemplated in the share purchase agreement dated
February 1lth. 1998 you shall conduct the business in the ordinary course,
completely autonomously but you shall not make any material change in the
customary terms and conditions upon which Systems and PS historically did
Business unless otherwise agreed by IT. You shall use your best effort to
preserve the Business organization and Goodwill of the suppliers, :staff,
customers and Businesr, of Systems and PS and to continue to build the
Business. It is understood that Systems and PS currently operate from two
offices being located in Toronto and Tampa.
Subsequent to the closing of the share purchase agreement as aforesaid there
will be no change in your position and you will continue as President and Chief
Executive Officer. Your contract will be $120,000.00 per annum paid on a
bi-weekly basis by direct deposit into your bank. You will be entitled to a
$2,500.00 per month auto and cell phone allowance and the use of a corporate
American Express card for business expenses. You will also be entitled to the
following bonus plan:
A 10% Management Bonus on all permanent placements. This override/bonus
comprises the full management override bonus and may be distributed to
other managers at your sole discretion.
$1.00 per billed hour for each contractor signed after February 1st, 1998,
including renewals, providing the margin is a minimum of $10.00.
This employment is guaranteed for a period of 3 years without restrictions. In
the event that this employment contract is terminated by IT thereafter you
shall still be entitled to the above bonus of
$1.00 per contract hour for a further period of 1 year provided you do not get
involved with a competing business.
<PAGE>
Scope of Authority
It is understood and agreed that Syrtems and PS will continue ar. an
independently run organization, and that all day to day management decisions and
the overall management of the company will continue to be your sole
responsibility. Any capital expenditures exceeding $25,000, new hire exceeding
$75,000 per annum, new branch opening or any other out of the ordinary day to
day decision making will require board of directors approval.
I trust that you will find the terms and conditions set out above acceptable. On
behalf of IT Staffing Ltd., I am pleased that you have agreed to join us and
wish you a long and successful association.
/s/ Declan French
----------------------------- Date 2/11/98
Declan French -----------------------
By my signature below, I hereby accept the offer of contract outlined above and
acknowledge receiving a duplicate c s letter of agreement on the date indicated
below.
/s/ John Wilson
-----------------------------
John R. Wilson
Enterprise
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of January 1, 1998 by and between INTERNATIONAL
CAREER SPECIALISTS LTD., a corporation incorporated under the laws of the
Province of Ontario, (the "Company") and JOHN IRWIN, an individual residing in
the Tovn of Markham in the Province of Ontario (the "Executive").
FOR VALUE RECEIVED by each of the parties hereto, receipt and sufficiency
of which is hereby acknowledged by each of them, it is hereby agreed as follows:
As from January 1, 1998 (the "Commencement Date") the Executive shall
be employed by the Company under the terms of this agreement. This
Agreement shall be conditional, and shall become effective, as of the
Commencement Date, upon the completion of the purchase by IT STAFFING LTD.
("IT") of all the issued and outstanding shares in the capital of the
Company under that certain Share Purchase Agreement dated as of January 1,
1998.
2. The Company shall employ the Executive and the Executive shall continue to
hold office
and serve the Company as President and Chief Executive Officer (the
"Appointment"). The Executive shall during the course of his employment
hereunder perform the duties and exercise the powers consistent with the
Appointment, 'mcluding the making (subject to the terms hereof) of all
management decisions affecting generally the Company, and those specific
matters which may from time to time be reasonably assigned to or vested in
him by the Board of Directors of the Company (the "Board") and shall from
time to time give to the Board all such information regarding such matters
as it shall require and implement and apply the policy of the Company as
set forth by the Board firom time to time, provided that:
(a) during the period from the Conunencement Date to and including the
date on which the shares in the capital of IT are listed on a
recognized stock exchange or quoted on a national quotation system (a
"Public Offering"), the Executive shall not without the consent of IT
make any material change in the customary terms or conditions upon
which the Company has historically (i.e., prior to its acquisition by
IT) done business, and shall otherwise apply his reasonable best
efforts (consistent otherwise with the nature of the Appointment) to
preserve the business organization and the goodwill of the suppliers,
staff, customers and business of the Company and to continue upon such
terms and conditions to build such business; and
(b) the Executive cannot without obtaining the specific approval of the
Board, do any of the following on behalf of the Company:
(i) incur any single capital expenditure exceeding $25,000;
(ii) hire any employee at a salary exceeding $75,000 per annum;
(iii) open any new branch offices;
(iv) make any material change in the undertaking of the business of
the Company; or
(v) enter into any agreements or other obligations with any person
otherwise than in the ordinary course of the business of the
Company.
3. The Appointment shall continue for a period of 3 years from the
Commencement Date
<PAGE>
(the "Contract Period"), during which the Company shall not be entitled to
terminate the Executive's employment except in accordance with and upon the
occurrence of any of the events or causes specified 'M Section 9.
4. (a) The Company shall pay to the Executive during the continuance of his
employment hereunder a
salary at the rate of Cdn.$200,000 per annum (the "Salary"), to accrue
from day to day and be payable (by direct deposit to the Executive's
designated bank account) in equal bi-weekly mstahnents in arrears on the
last day of each bi-weekly period;
(b) the Company shall provide to the Executive:
(i) an automobile and cellular phone allowance of Cdn.$ 1,000 per month;
and
I
(i') a corporate American Express card, to be used by the Executive for
business expenses;
(c) the Company shall pay to the Executive a bonus (the "Bonus") of 2% of
Production in each of the Company's fiscal quarters (a "Quarter"). The
first payment date for purposes hereof shall be July 1, 1998, in
respect of the Quarter ending on June 30, 1998. "Production" for
purposes of the Bonus, and in respect of any Quarter, shall mean the
aggregate of the following amounts:
(i) total full time placement fees (exclusive of GST), before tax,
billed by the Company in such Quarter; and
(ii) total spread, representing pre-tax profit to the Company, for
such Quarter, in respect of all billable hours of contract
placements and consulting fees;
m each case as determined (such determination to be conclusive in the
absence of manifest error) by the Company's accountants in accordance
with generally accepted accounting principles, for each such Quarter,
and within 7 days of the end of any such Quarter. The Executive's
right to receive Bonus payments from the Company shall continue in
full force and effect for a period of one full year after the date
upon which his employment hereunder ceases, whether as the result of
the expiry of the tenn hereof or his earlier resignation or
termination, provided that such entitlement shall cease and determine
upon his becoming employed by or otherwise directly or indirectly
interested or concerned 'M any business, company or finn carrying on a
business in the Province.of Ontario or any other jurisdiction in which
the Company may be carrying on business which is competitive with the
business carried on by the Company (otherwise than through the
Executive's holding or being beneficially interested in any class of
securities in any company if such class of securities is listed on any
recognized stock exchange and the Executive neither holds nor is
beneficially interested in more than a total of ten per cent of all
securities of that class); and
(d) In order to induce him to enter into this Employment Agreement the
Company shall procure the granting to the Executive by IT,
contemporaneously herewith, by IT of an option to acquire additional
shares in the capital of IT, in the form attached as Schedule "A"
hereto.
o . The Company shall also pay to the Executive (on production of such
evidence as the Company
may reasonably require) the amount of all hotel, travelling and other expenses
reasonably and properly incurred by him in the discharge of his duties
contemplated hereunder.
6. Subject to Section 9 and to the production of satisfactory evidence from a
registered medical
<PAGE>
practitioner in respect of any period of absence in excess of 90 consecutive
days, the Executive shall be paid in fun during any period of absence from work
due to sickness or injury.
7. The Executive shall be entitled to 6 weeks holiday with pay in every
calendar year in addition to recognized public holidays. The entitlement to
holiday (and on termination of employment to holiday pay in lieu of
holiday) accrues pro rata throughout each calendar year of employment.
8 (a) Subject to his rights under the Share Purchase Agreement of even date
herewith between the
Executive, as vendor and IT, as purchaser of shares in the Company (the
"SPA"), the Executive shall not, either dur'mg the continuance of his
employment hereunder, except so far as necessary in the perfomiance of
his duties or thereafter, without the consent in wn't'mg of the Board
being first obtained, diulge to any person and shall use his best
endeavours to prevent the publication or disclosure of any information
concerning the business, accounts, fmances, dealings, transactions or
affairs of the Company which has or may come to his knowledge during the
course of his employment hereunder or during any previous service with
the Company; and
(b) the Executive shall not, during the continuance of his employment
directly or indirectly be mterested or concerned in any business,
company or firm carrying on a business in the Province of Ontario or any
other jurisdiction in which the Company may, from to time, conduct
busiess which is competitive with the business carried on by the Company
or IT, provided @t nothing he,,em contamed shall prevent the Executive
fom being the holder of or from being beneficially interested 'M any
class of securities in any company if such class of securities is listed
on any recognized stock exchange and the Executive neither holds nor is
beneficially interested in more than a total often per cent of all
securities of that class.
9. The Executive's employment is guaranteed for the entirety of the Contract
Period, without restrictions, provided however that is the Executive shall:
(a) die;
(b) be adjudged or declared bankrupt or shall take advantage of any statute
for the time being in force offering relief for 'msolvent debtors; or
(c) become a person whose person or estate is liable to be dealt with under
the law relating to mental health; or
(d) otherwise become or be unable substantially to perform his duties
hereunder by reason of ill-health, accident or otherwise for a period or
periods aggregating at least 180 days in any period of 12 consecutive
months;
than the Company may in any such case by written otice to the Executive (or his
representative, as applicable) forthwith temiinate his employment hereunder, but
no notice under subsection (c) of this Section shall be given by the Company to
the Executive after the expiration of three calendar months from the end of any
such periods or periods aggregating at least 180 days.
10. Any notice 'm writing required or permitted to be given to the Executive
hereunder shall be
suffic'ently given if delivered to him personally or if mailed by registered
mail to the Executive's last home address Of which the Company has notice. Any
notice in writing required or permitted to be given to the Company hereunder
shall be sufficiently given if delivered or mailed by registered mail to the
Company at its head office c/o Mr. Declan French, IT Staffing Ltd.,
55 University Avenue, Suite 505, Toronto, ON M5H 3L9. Any such
<PAGE>
notices mailed as aforesaid shall be deemed to have been received on the fifth
business day following the date of the mailing. Any address for the giving of
notices hereunder may be changed by notice in writing in the manner provided in
this Section for the giving of notices.
11. This agreement shall be governed by and constued in accordance with the
laws of the Province of Ontario.
12. This agreement shall ensure to the benefit of and be binding upon the
heirs, executors, administrators and legal personal representative of the
Executive and the successors and assigns of the Company.
13. Other than the other agreements contemplated expressly herein, each of even
date herewith (collectively, the "Transaction Agreements"), this agreement
constitutes and contains the entire and only
agreement among the parties relating to the matters described herein and
supersedes and cancels any and all previous agreements and understandigs between
all or ay of the parties relative hereto. Any and all prior and contemporaneous
negotiations, memoranda of understandig or position, and prelimiay drafts and
prior versions of this Agreement, whether signed or unsigned, between the
parties leading up to the execution hereof shall not be used by any party to
construe the terms or affect the validity of tli's Agreement. There are no
representations, inducements, promises, understandings, conditions or
waranties express, implied or statutory, between the parties other than as
expressly set forth in this Agreement or any of the Transaction Agreements.
IN WITNESS HEREOF this agreement has been executed by the paties hereto
on the day ofmay, 1998, effective as at the day and year first here'm above
set out.
SIGNED, SEALED AND DELIVERED
in the presence of..
/s/ John Irwin
JOHN IRWIN
INTERNATIONAL C- IR SPECIALISTS LTD.
<PAGE>
Exhibit 10.7
[Letterhead]
EMPLOYMENT AGREEMENT
between
IT STAFFING LTD.
and
JOHN SILVER
TERMS
- -----
It is agreed that IT Staffing is offering you employment as a Senior Vice
President under the following terms:
(a) Your starting salary will be $175,000 US per annum;
(b) You are entitled to a monthly car allowance of $750.00 US;
(c) You are granted 50,000 company stock options;
(d) You are entitled to a bonus equal to 4% of the net profit of the business
in your jurisdiction;
(e) You are entitled to four (4) weeks of paid vacation per year;
(f) Your employment is guaranteed for a period of 12 months from your
start date of August 10, 1998;
(g) A salary review will be performed after six (6) months;
(h) You will be a member of IT Staffing's executive committee effective August
10, 1998;
(i) In 1999, Declan French will propose to the Board of Directors that you be
considered for a seat on the Board.
EXCLUSIVITY
- -----------
During the term of your employment, you agree to serve IT Staffing Ltd.
diligently and faithfully and agree that you shall not, during the term, be
employed or engaged in any capacity, in promoting, undertaking or carrying on
any other business.
You shall be employed on a full time basis for IT Staffing Ltd. and it is
understood that the hours of work involved may vary and be irregular and are
those hours of work required to meet the
<PAGE>
objectives of the employment. You acknowledge that this paragraph
constitutes agreement to work hours above and beyond where the agreement is
required by legislation.
You agree that your duties, responsibilities, reporting relationships and the
location of your employment may be changed from time to time by IT Staffing Ltd.
as the company may deem appropriate, and that these changes will not effect or
change any other part of this agreement.
CONFIDENTIALITY
You acknowledge that as a Senior Vice President employed by IT Staffing Ltd. and
in other positions and responsibilities as you may hold from time to time, you
will acquire information about certain matters which are confidential to the
company, which information is the exclusive property of the IT Staffing Ltd. You
acknowledge that such information is the sole property of the IT Staffing Ltd.
and could be used to the detriment of the IT Staffing Ltd. Accordingly, you
undertake to keep all such information in the strictest confidence and agree not
to disclose it to any other person or entity either during or following your
term of employment, except as may be strictly necessary to perform your duties,
except with the written permission of the Chief Executive Officer of the company
or his designate.
TERMINATION
Subject to paragraph 2 above, your employment pursuant to this agreement may be
terminated in the following manner in the specified circumstances:
(a) By you, on the giving of three (3) months advance notice in writing to IT
Staffing Ltd. The company may waive notice, in whole or in part, but will
nonetheless continue to pay you for the three months in question.
(b) By IT Staffing Ltd., on the giving of three (3) months advance notice in
writing;
(c) By IT Staffing Ltd., without notice or payment in lieu thereof, for cause.
For the purposes of this agreement, "cause" shall mean:
i) any material breach of the provisions of this agreement by you;
ii) incompetence or failure to discharge any of the responsibilities set
out above to the satisfaction of the IT Staffing Ltd.;
iii) insubordination or dishonesty
iv) your absence from work for any reason which results in your
inability to perform your duties in accordance with this agreement
for a period of 20 regular or scheduled work days in any 180 day
period (excluding accident or injury);
v) all omissions which would have been cause at law, in addition to the
above.
The failure of IT Staffing Ltd. to rely on provision (c) at any time or times
shall not constitute a precedent or be deemed a waiver. The company may, in its
sole discretion, give notice of termination or payment in lieu thereof without
prejudice to its right to allege cause for termination.
2
<PAGE>
COMPETITION
It is agreed by you that;
(a) you recognise and acknowledge the competitive advantage that would be
provided by and the confidential nature of all material, including but
without limitation, non-public financial and business information and
documents, which have been made available to you during the course of your
employment by IT Staffing Ltd.
(b) you confirm and agree that, except as required by law, you will not
disclose, release, remove or retain any of the information or documents
made available to, or obtained by you, during the course of your
employment by IT Staffing Ltd. without the prior written consent of IT
Staffing Ltd.
(c) you will not, without the prior written consent of IT Staffing Ltd. for a
period of two years (2) from the date of your termination, directly or
indirectly, solicit for employment by you or any other person, firm or
corporation, any person who is at the date of termination employed by,
whether full time or part time or by any arrangement, IT Staffing Ltd.
and;
(d) you will not, without the prior written consent of IT Staffing Ltd., for a
period of six (6) months from the date of your termination, directly or
indirectly solicit any clients or candidates of IT Staffing.
I trust that you will find the terms and conditions set out above acceptable. On
behalf of IT Staffing Ltd., I am pleased that you have agreed to join us and
wish you a long and successful association.
/s/ Declan French 7/24/98
- ----------------------------------- ---------------------------------
Declan French Date
President
IT Staffing Ltd.
I have read and fully understood the provision of the letter of agreement set
out on the preceding pages above. I acknowledge having had an opportunity to
seek such advice with respect to its contents as I consider appropriate. By my
signature below, I hereby accept the offer of employment outlined outlined in
the attached letter and acknowledge receiving a duplicate copy of this letter of
agreement on the date indicated below.
/s/ John Silver
3
<PAGE>
Exhibit 10.8
[Letterhead]
CONSULTING SERVICES AGREEMENT
DATED THIS (DATE) DAY OF (MONTH), 1998
BETWEEN
IT STAFFING LTD.
(hereinafter referred to as the Company)
and
(CONTRACTOR NAME)
(ADDRESS)
(hereinafter referred to as the Independent Contractor)
Whereas, the COMPANY carries on the business of providing data processing
consulting services to Clients; and whereas, the INDEPENDENT CONTRACTOR is a
business independent of the Company and has agreed to enter into an agreement as
an Independent Contractor with the Company.
Therefore, in consideration of the foregoing recitals and the covenants and the
conditions set forth in this Agreement, the parties agree as follows:
1. The Independent Contractor hereby hires his/her services to the Company
at the total hourly rate of: $(#).
2. The parties hereto mutually agree that the term of this contract shall
be for the period beginning (start date) to (end date) or until
hereinafter set out.
3. The Independent Contractor agrees to attend at (CLIENT) (hereinafter
called the "Client"), commencing on the (#) day of (month), 1998 and to
attend regularly thereafter to perform services as directed by the
Client.
4. The Independent Contractor shall be paid bi-weekly fourteen (14) days
in arrears.
5. The Independent Contractor agrees to invoice the Company bi-weekly for
any hours worked and substantiate this with the Company's time sheet
duly signed by an authorized Client to whom the Independent Contractor
is assigned. The independent contractor further agrees to furnish
invoices and times sheets within three (3) days following the pay
period in order to be paid as set out in item 4. Invoices and time
sheets not received by the date specified will be processed the next
pay period.
6. The Independent Contractor agrees to be personally responsible for
Income Tax declaration, payment of the employee and employer portions
of CPP and UIC if applicable, GST Tax collection and payment,
Employer's Health Tax payment, and to indemnify and save harmless the
company from any claims made against it with respect to the foregoing.
7. It is mutually agreed that the company is not responsible for Annual
Vacation Pay and Statutory Holiday Pay to the Independent Contractor.
8. This agreement may be terminated
(i) by the Client giving notice to the Company that the Client no
longer wishes to utilize the services of the Independent
Contractor.
<PAGE>
(ii) by the Company giving notice either written or oral to the
Independent Contractor and such agreement shall then be
terminated on the date such notice is given or at such other
time or date mentioned in the notice.
9. The Independent Contractor shall, not less than seven (7) days prior to
the expiration of the period set out above, give the Company notice in
writing of his/her intention not to continue this agreement with the
Company, and if no such notice is given, this contract shall continue
automatically for periods of thirty (30) days unless and until the
Independent Contractor shall notify the Company in writing not less
than seven (7) days prior to the expiration of a thirty (30) day
period, of his/her intention to discontinue the agreement.
10. The Independent Contractor will faithfully serve the Company and its
Client and use his/her best efforts to promote the interest thereof and
shall carry out all lawful orders given by the Company or the Client.
11. The Independent Contractor hereby covenants and agrees that he/she will
not (without the prior written consent of the Company) until a period
of six (6) months has elapsed from the date of termination of the
Agreement either directly or indirectly
(a) Become an employee of the Client.
(b) Enter into an agreement as an Independent Contractor with the
Client.
(c) Perform any remunerative work for or on behalf of the Client.
(d) Enter into an arrangement with a competing "consulting" business
and perform work for the Client.
12. It is mutually agreed that the service provided by the Company in
introducing the Independent Contractor to the Client and entering into
an agreement with the Independent Contractor is a unique and valuable
service provided to the Independent Contractor by the Company and that
the Company has expended money and effort on the Independent
Contractor's behalf and the Company has a right to protect its interest
in maintaining the goodwill and business arrangements with the Client,
and the Company shall be entitled as a matter of right, in addition to
all other rights it may otherwise have in law to obtain an injunction
or other equitable relief to prevent the breach by the Independent
Contractor of this agreement and in particular Clause 11 hereof.
13. Independent Contractor agrees that all information, records or
materials in any form related to the Client, its affiliates or
associated Companies, their products, insureds, clients and
shareholders are confidential, and Independent Contractor shall not,
before or after the termination of this Agreement, disclose any such
confidential information to any person, firm or organization without
the prior written consent of the Company or Client. In no event shall
the Company be responsible for special, indirect or consequential
losses or damages arising from such a breach.
14. The Independent Contractor acknowledges receipt of a copy of this
agreement.
IT STAFFING LTD. INDEPENDENT CONTRACTOR
Per: Per:
---------------------------- -------------------------------
ACCOUNT MANAGER
- -------------------------------- -----------------------------------
Date Date
<PAGE>
Exhibit 10.9
{Letterhead]
AGREEMENT FOR CONSULTANT SERVICES
Made in duplicate this **** day of *****, 1998
between
**CLIENT**
(hereinafter referred to as the "Client")
and
IT STAFFING LTD.
(hereinafter referred to as the "Supplier")
IN CONSIDERATION of the mutual covenants hereinafter contained, the Client
and Supplier agree as follows subject to the acceptance of both parties as
evidenced by signatures of their duly authorized Officers.
1. SERVICING Supplier agrees to provide the Client the services of
**CONTRACTOR** (hereinafter referred to as the "Consultant") subject to the
terms and conditions set forth in this Agreement.
WORK SITE:
START DATE:
END DATE:
FEE FOR SERVICES:
2. PAYMENT TERMS
The Consultant will complete and submit to the Client's appropriate
representative, time sheets weekly. Invoices for services will be prepared
every two weeks by the Supplier and will be accompanied by copies of the
approved weekly time sheets. Invoices are payable by the Client upon receipt
thereof.
3. TAX LIABILITY
Supplier and Consultant hereby agree that they will be jointly and severally
liable to reimburse the Client for any income tax liabilities, penalties,
fines or legal expenses incurred by the Client with respect to withholding
tax in connection with the employment of the Consultant by the Supplier.
4. QUALIFICATIONS OF CONSULTANTS
Supplier represents that the Consultants have the technical qualifications
and capabilities required by the Client.
5. REPORTING
The Consultant will work under the general management and guidance of
**MANAGER**. Any information required for the carrying out of his/her duties
should be obtained from ****** or his/her designate. Any time off under this
Agreement must be pre-authorized by ***** or his/her designate.
<PAGE>
6. TRAVEL AND LIVING EXPENSES
The Client will reimburse Supplier pre-approved travel and related
out-of-pocket expenses. This reimbursement will not, in any case, exceed
travel expenses and allowances permitted to the Client's employees traveling
in accordance with the Client's travel policies as amended. All travel and
out-of-pocket expenses for which Supplier seeks reimbursement, shall be
submitted to the Client on vouchers, copies of which shall accompany the
invoices.
7. STANDARDS
The Consultant will adhere to all of the Client's standards and procedures
for systems development, progress reporting, safety and personnel matters.
The Consultant will also adhere to such other standards and procedures as may
be defined by the Client for specific projects. Noncompliance may give rise
to the Client's right to terminate.
8. CONFIDENTIALITY
Supplier agrees that all information, records or materials in any form
related to the Client, its affiliates or associated Companies, their
products, insureds, clients and shareholders acquired by Suppliers, its
employees, Officers and Agents are confidential, and Supplier shall not,
before or after the termination of this Agreement, disclose any such
confidential information to any person, firm or organization without the
prior written consent of the Client. Supplier shall indemnify and hold the
Client harmless from any loss, claim or damage arising from a breach of
Supplier's obligations in this paragraph. In no event shall Supplier be
responsible for special, indirect or consequential losses or damages arising
from such a breach.
9. TERMINATION OF SERVICES This Agreement may be terminated as follows:
(a) by either party immediately upon issuance of written notice to the
other party in the event of breach of any term of this Agreement;
(b) by the Client for any reason by giving Supplier at least 14 days
written notice.
(c) by the Client without notice in any one of the following circumstances:
(i) The Consultant's performance is unsatisfactory;
(ii) The Consultant is not legally entitled to work; or
(iii) The Consultant poses a threat to the Client's environment by
reason of Consultant's history of sabotage, malicious damage
or any other act which could harm the Client's materials,
property and staff.
(d) by Supplier without notice in the event of the death, resignation,
unforeseen accident to or illness of the Consultant.
In the event of termination and regardless of any dispute which may exist
between the Client and Supplier, all the Client's materials, property and
work in the possession of Supplier and its employees or agents shall be
delivered to the Client. In the event of termination due to (c) or (d) above,
or at the mutual agreement of Supplier and the Client, Supplier will provide
a replacement satisfactory to the Client, if the Client so wishes.
10. OWNERSHIP
The products of this Agreement, including all software developed by Supplier
and documentation relating thereto, shall be the sole and exclusive property
of the Client, free from any claim or retention of rights thereto by
Supplier. For greater certainty it is agreed that the Client's property
rights to the products of this Agreement shall include all copyrights,
patents or trade secrets in any of the work performed as a result of this
Agreement. Supplier further agrees to sign all assignments and other papers
necessary to vest the entire rights, title and interest in such products, at
the Client's request, and to do all lawful acts and sign all assignments and
other papers the Client may reasonably request relating to applications for
trade marks, patents and copyrights, both Canadian and foreign, and the
providing of protection of the Client's property interest in any said
products.
<PAGE>
11. DAMAGE TO THE CLIENT'S PROPERTY
Supplier shall be solely responsible for and shall hold the Client free and
harmless from any and all losses, damages, claims, demands, expenses or
costs, excepting those of a consequential or indirect nature, arising out of
or connected with injuries or damages occasioned by the negligence of
Supplier, its employees, servants, agents, contractors or other persons while
on the premises for the purpose of carrying out the terms of this Agreement.
12. CHANGES TO AGREEMENT
This Agreement may be changed by mutual agreement at any time prior to
completion. Such changes may be requested by either party and must be
confirmed in writing.
13. ENTIRE AGREEMENT
This Agreement, contains the entire agreement between Supplier and the Client
with respect to the subject matter thereof as of its date and supersedes all
prior agreements, negotiations, representations and proposals, written and
oral, relating to its subject matter.
14. ASSIGNMENT
This Agreement cannot be assigned by either party in any way except with the
written consent of the other party.
15. RELATIONSHIP OF PARTIES
It is expressly understood and agreed that the personnel furnished by
Supplier under this Agreement shall be and shall remain employees or agents
of Supplier. Under no circumstances are such employees to be considered
employees or agents of the Client. The Supplier and its employees or agents
shall be in an Independent Contractor relationship to the Client at all times.
16. SOLICITATION FOR EMPLOYMENT
The Client agrees that within the duration of this Agreement and for a period
of six months thereafter, it will not employ directly or indirectly
sub-contract any of the employees of the Supplier without obtaining the
Supplier's prior written consent. The Supplier agrees that within the
duration of this Agreement and for a period of six months thereafter, it will
not employ or directly or indirectly sub-contract any of the employees of the
Client without obtaining the Client's prior written consent.
17. PATENT & COPYRIGHT INFRINGEMENT
Supplier will defend or settle, at its own expense, any suit or proceeding
brought against the Client so far as based upon a claim that any product or
any part thereof furnished or developed by Supplier, or use thereof,
constitutes an infringement of any patent copyright, trade secret or trade
mark. If notified promptly in writing and given authority, information and
assistance for the defense or settlement of the same by the Client.
18. EXTENSION
This Agreement may be extended by mutual agreement of the Client and the
Supplier upon two (2) weeks written notice. The provisions of this Agreement
shall apply to all extensions.
19. SURVIVAL
The provisions of the paragraphs entitled "Patent & Copyright Infringement",
"Confidentiality", "Tax Liability", "Ownership" and "Solicitation for
Employment" shall survive termination of this Agreement.
20. SEVERABILITY
In the event that any provision hereof is found invalid or unenforceable
pursuant to judicial decree or decision, the remainder of this Agreement
shall remain valid and enforceable.
<PAGE>
21. NOTICES
Any notice provided hereunder shall be in writing and delivered or sent by
registered or certified mail, postage pre-paid, addressed to the party for
which it is intended at the address set forth below or to such other address
as either party shall from time to time indicate in writing . Said notice if
mailed shall be deemed to be effective upon receipt or three days from date
of mailing, whichever occurs first.
IT Staffing Ltd.
55 University Avenue, Suite 505, Toronto, Ontario M5J 2H7
22. GOVERNING LAW
This Agreement is made under and shall be governed by the law of the Province
of Ontario.
SUPPLIER: IT STAFFING LTD. CLIENT:
PER: PER:
TITLE: TITLE:
- ----------------------- ----------------------------
SIGNATURE SIGNATURE
- ----------------------- ----------------------------
DATE DATE
<PAGE>
Exhibit 10.10
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made effective as of the 1st day of January 1998.
AMONG:
IT STAFFING LTD., a corporation incorporated and subsisting under the
laws of the Province of Ontario (hereinafter called "IT")
AND:
JOHN IRWIN, an individual residing in the Town of Markham, in the
Province of Ontario (hereinafter called the "Vendor")
AND:
INTERNATIONAL CAREER SPECIALISTS LTD.,A corporation incorporated and
subsisting under the laws of the Prov'mce of Ontario (hereinafter
called "ics
AREAS:
The Vendor is the legal and beneficial owner of I 00% of the issued and
outstanding shares in capital stock of ICS.
IT desires to acquire, on the terms and conditions as set forth below,
100% of the issued and outstanding shares in the capital stock of ICS.
The Vendor desires to sell, on the terms and in the manner set forth
below, 100% of the issued and outstanding shares in the capital stock of ICS.
The Vendor, as a consequence of the payment of the purchase price will
become a significant shareholder of IT.
NOW THEREFORE THIS AGREEMENT SSES THAT in consideration of the premises
set forth above, the mutual covenants and agreements and such other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
DEFINITIONS
Capitalized terms defined in the Employment Agreement or the Share
Option Agreement, and not otherwise defused in this Agreement, shall have the
same meanings where used in this Agreement. Where used in this Agreement the
following terms shall have the following meanings:
(a) "Affiliate" means any person, firm or corporation (excepting the IT)
who, directly or indirectly through other corporations, fi= or trusts,
has any interest, other than by way of pledge, in any of the
outstanding shares of IT and any firm or corporation controlled,
directly or indirectly through other corporations, firm or trusts, by
any one or more of such persons and any person who is related by blood
relationship, marriage or adoption to any such person;
(b) "Closing Conditions" means, collectively, the IT Conditions and the
Vendor Conditions;
2 -
<PAGE>
(c) "Employment Agreement" means the Employment Agreement of even date
herewith between ICS, as employer, and the Vendor, as employee, in the
fortn attached as Schedule "A" hereto;
(d) "Issue D ate" means the date of completion of any Public Offering;
(e) "Public Offering" has the meaning ascribed thereto in the Share Option
Agreement;
(f) "Securities" means, collectively, the ICS Shares and the IT Shares;
(g) "Share Option Agreement" means the Share Option Agreement of even date
herewith between the Vendor, as optionee, and IT, as optionor;
(h) "Target Date" means the earliest of the following dates:
July 29. 1999; and
any date on which:
(A) IT ceases to carry on its business; or
(B) IT makes a general assignment for the benefit of its
creditors or a proposal under the Bankruptcy and
Insolvency Act or is declared banlaup@ or a receiver
is appointed for IT and such appointment is not
stayed with @ I 0 business clays thereof, or a
proposal or plan of arrangement or restructuring
under any applicable laws relating to bankruptcy
and/or insolvency, or any similar laws is made by or
for it; or
(C) an order is made, or an elective resolution is passed
by IT, for the winding-up, liquidation or dissolution
of IT.
2. PURCRASE OF SHARES
(a) Closing. Closing of the transactions contemplated under this
Agreement shall occur at the offices of IT on May 15, 1998, or
such later date as all the parties might agree in writing (the
"Closing Date"), provided, however, that closing shall not in
any event occur at any date later than May 26, 1998 1 after
which date this Agreement shall (if closing has not occurred)
be deemed tenti'mated and of no furdier force or effect and
the Deposit deemed forfeited.
(b) Purchase Price, in aggregate, is $ 1,000,000 paid as follows:
(i) the aggregate purchase price for 50% of the
issued and outstanding shares in the capital
stock of ICS is $500,000 and is to be paid
as follows:
(A) a non-refundable deposit (the "Deposit") in the sum
of $30,000, by cheque;and
(B) on closing, a further $470,000 by certified cheque.
3 -
<PAGE>
the aggregate price for 50% of the issued and outstanding
shares in the capital stock of ICS is 5500,000 and is to be
paid and satisfied:
(A) by IT's issuing to the Vendor on the Closing Date,
from treasury, I 00,000 common shares in the capital
stock of IT.
(c) Delively of share certification. On the Clos-mg Date: the
Vendor shall deliver to IT share certificates represent' 1
00% of the issued and outstanding shares in ICS (the M9
"ICS Shares"), duly endorsed in blank for transfer to IT; and
IT shall deliver to the Vendor share certificates
representing I 00,000 conunon shares in the capital of IT
(the "IT Shares"), duly authorized, issued and registered
in IT's corporate minute books/ledgers in the name of
the Vendor.
3. SPECLAL RIGHTS OF VENDOR.
At any time on or within 90 days follow'mg any Target Date, and if as
at such date no Public Offering has been completed, the Vendor may at his option
(exercised by written notice however to IT) exercise any one or more of the
following rights, hereby granted to it:
(a) to ,equire IT to purchase from the Vendor all its IT Shares,
in consideration of a purchase price of either (at the option
of IT):
the return to the Vendor, free and clear of all
encumbrances, charges or claims of any kind 50% of the
ICS Shares originally purchased by IT from the Vendor
pursuant to this Agreement; or
1 00,000, paid by certified cheque;
(b) to terminate his employment under the Employment Agreemen@ and
to require IT, and ICS to release and discharge the Vendor of
any obligations on its part to be performed or observed under
any of this Agreement, any Transaction Documents or any other
agreements binding on it, existing otherwise by law based on
any of the Vendor's employment, appointment as director or
officer or otherwise, or its status at any relevant time as a
fiduciary or as a holder or former holder of any shares in
either IT or ICS, or otherwise applicable to the Vendor in any
capacity whatsoever, to refrain from freely competing directly
or indirectly, in any manner, with ICS or IT, or from
soliciting third parties (including without limitation any
customers or former customers of ICS), to the fullest extent
as though the Vendor had never sold the ICS Shares to IT and
the tmmactions contemplated under the Transaction Documents
never occurred, and each of IT and ICS shall be deemed to have
consented to such matters upon the date of delivery by the
Vendor of any notice under this Section invoking this right;
in such event, IT and ICS shall be deemed further to have
consented to the Vendor's using thereafter in a competing
business any business name or style at any time previously
used by ICS, including without limitation the names
"International Cweer Specialists Ltd." and "ICS", and if so
requested by the Vendor, ICS and IT shall effect a change
(non-continuing) to ICS's corporate name and any required
business styles.
4. FILING ELECTIONS.
The Vendor and IT shall elect in prescribed form and manner to have
the provisions of subsection 85(1) of the Income Tax Act (Canada)
apply to the transfer of the ICS Shares, and shall deliver the same to
Revenue Canada, Taxation within the time period prescribed under
such Act.
4 -
<PAGE>
CONDUCT OF BUSINESS.
Interim Operation fom January I st, 1998 until the Target Date:
(a) the Vendor and ICS shall conduct their respective businesses
in the ordinary course, completely autonomously, and 'm a
manner consistent with the Employment Agreement, and they
shall not make any material change in the customary terms and
conditions upon which they historically did business unless
otherwise agreed in writing between IT and the Vendor, with
the following exception:
That John Armstrong of ICS shall be offered a VP title within ICS, a role of
increased responsibility, an annual bonus of one half of one per cent of the
total Production (as such term is defmed in the Employment Agreement) of ICS,
and stock options in IT equal to 50% of this annualbonus;and
(b) the Vendor and ICS shall use their best efforts to preserve
the bus'mess orgamzation and goodwill of the suppliers, staff,
customers and Business of ICS, provided that the Vendor's
obligations in this regard shall be as set forth in the
Employment Agreement.
6. VENDOR COVENANTS.
The Vendor hereby covenants that
(a) it shall not take any action or omission which will in any way
delay or prevent the completion of this transaction on the
Closing Date;
(b) all bonuses (other dm any bonuses relating to Asset Proceeds,
or Bonuses as defined in and payable to the Vendor under the
Employment Agreement) are to be forgiven by ICS on clos'mg;
(c) it shall cause the owner of ICS's business premises (in
respect of which ICS is currently in occupation) forthwith
after execution and delivery of this Agreement to enter into a
formal commercial lease (a "Premises @ase") with IT or with
ICS. Said lease will have a 3 year term at rents of
$5,000/month, which rent terms shall apply in respect of an
periods of occupation prior to execution and delivery of such
lease. Other Premises Lease terms shall be as settled between
the parties, consistent otherwise with ICS's past use and
occupation of the premises, and IT shall prepare and submit to
the owner a draft document for this purpose within I 0 days of
the date of execution hereof;
(d) ICS will be responsible for its' own share of professional
fees relating to this acquisition; and
(e) it shall keep all details of this Agreement strictly
confidential.
7. IT REPRESENTATIONS AND WARRANTIES.
IT hereby represents to and in favour of the Vendor that the
following statements are and will be true and correct on and as
at the Closing Date:
(a) IT is a corporation duly incorporated and organized and is a
valid and subsisting corporation under the laws of Ontario and
has all necessary corporate power and authority to carried on
by it;
5 -
<PAGE>
(b) IT has the power, full legal right and corporate authority to
enter into, execute and deliver this Agreement, the Employment
Agreement and the Share Option Agreement (collectively, the
"Tra.s.c-tion Documents") and to do all acts and things and
execute and deliver all documents and instruments as are
required hereunder and thereunder to be done, observed or
performed by it in accordance with the temis thereof.,
(c) IT has taken all necessary corporate action to authorize the
creation, execution, delivery and performance of the
Transaction Documents and none of the foregoing requires or
will require the consent or approval of any person except such
as has already been obtained and is in full force and effect
nor is any such action in contravention of or in conflict with
its charter or by-laws or resolutions of its directors or
shareholders, the provisions of any statute or regulation or
the terms and provisions of any mortgage, indenture, contrac@
agreement, instrument, judgment, decree or order to which IT
is a party or by which it or any of its properties or assets
are or may become bound;
(d) each of the Transaction Documents, constitutes a valid and
legally binding obligation of IT enforceable against it i.
ccordance with its terms;
(e) the IT Shares have been duly and validly issued as fully
paid and non-assessable shares by IT to the Vendor; forms
of share certificates representing the IT Shares have been
validly adopted by IT and the share certificates delivered
to the Vendor have been validly executed and delivered
under the corporate seal of IT by proper off-lcers of IT
duly authorized in that behalf;
(g) the by-laws of IT as enacted by its board of directors are
consistent in all material respects, and do not conflict 'm
any material way with the provisions of the Transaction
Documents;
(h) attached as Schedule "C" hereto are true copies of IT's
Articles of Incorporation (the "IT Articles"); and
(i) IT is a Canadian-controlled private corporation, within the
meaning of such term as referenced in Section 248 of the
I,,,,,.e Tax Act (Canada).
8. IT COVENANTS:
IT hereby covenants that:
(a) it will be responsible for its' own share of professional fees
relating to this acquisition, which for this purpose shall
include all accounting fees charged from and after April 15,
1998, by Naffim Feiner;
(b) it will be responsible for filing all financial statements and
applicable tax returns subsequent to the Closig Date;
(c) no changes will be made to the commission structure of ICS's
consultants or bank signing authorities before the Issue Date
without the express written consent of the Vendor;
6 -
<PAGE>
(d) no changes will be made to the time fi-ame for ICS
consultant's commission payouts, between when the applicable
cheque is received by ICS from the customer and vhen the ICS
consultant's commission is paid, currently at a maximum of 72
hours;
(e) it shall 'mdemnify the Vendor from any clause, damages and
legal actions that could occur after the Closing Date;
it shall keep all details of this Agreement strictly
confidential;
(g) it shall not, without the prior written consent of the Vendor
cause or permit, at any time prior to the Issue Date:
(i) any amendment to the IT Articles, other than any amendment
made in anticipation of the Public Offering strictly to remove
any private company restrictions and/or requirements for
d'uector's consent to share transfers;
11)
the taking by ICS of any proceedings with a view to the dissolution, winding-up
or termination of the corporate existence of ICS;
the creation or assumption after the date hereof of any mortgage,
pledge, charge or other encumbrance on or the creation of any security
interest in any of the Excluded ICS Assets;
(iv) any material change in the undertaking of the business or
operations of ICS;
(v) the making by ICS of any agreements with any of the parties or
any Affiliate of IT not in the ordinary course of business; or
(V1) the assumption by ICS of liability for the obligations of any
third party other than IT.
9. VENDOR REPRESENTATIONS AND WARRANTIES.
The Vendor represents and warrants to and in favour of IT that the
following statements are true and correct on and as of the Closing Date:
(a) it has not been induced into entering into this Agreement by
oral or written representation ,orpromisesexceptassetout'
thisAgreementoranyotherdocumentreferencedinthis Agreement to
which it is a party;
(b) it is not now and will not be on Closing Date a non-resident
as defmed in the Income T= Act (Canada);
(c) there is no material information or knowledge which has been
withheld from IT relating to ICS which, if known, would cause
the purchaser to alter his decision to purchase the ICS
Shares;
(d) from November 1, 1997, other than the purchase and subsequent
sale of the Pahn Harbor, Florida house, or other transactions,
bonuses, dividends and/or divestitures by or on behalf of ICS
referenced in this Agreement, there are no out of the ordinary
transactions affecting ICS, including but not limited to,
declaration or payment of dividends and payment of declared
bonuses other dm a payment up to a maximum of $100,000 over
7 -
<PAGE>
and above the employment contract as a bonus payment;
(e) IT is relying on the October 3 1 st 1997 fmancial
statements, copies of which are attached as Schedule "B"
hereto; the Vendor is the beneficial owner of the ICS
Shares with good and marketable title thereto, free and
clear of any mortgage, charge, pledge, security interest
lien, demand or other encumbrance whatsoever;
(g) the Vendor has the right to sell and @fer the ICS Shares free
and clear of any mortgage, charge, pledge, security interest,
lien, demand or other encumbrance whatsoever, all 'M
accordance with the terms of this Agreement and no person,
firm or corporation (other than the Purchaser) has any
agreement or option for the purchase or acquisition of the ICS
Shares from the Vendor;
(h) the share certificates representing the ICS Shares were
duly and validly issued by ICS, and have been validly
executed and delivered under the corporate seal of ICS by
proper off-icers of ICS duly authorized in that behalf; and
the by-laws of ICS enacted by its board of directors are
consistent in all material respects, and do not conflict 'M
any material way with the provisions of the Transaction
Documents.
10. EXCLUDED ICS ASSETS.
IT acknowledges that with its consen@ ICS will, prior to the Closing Date
dispose of (and pay out the net proceeds thereof ("Asset Proceeds") to the
Vendor, by way of dividend or bonus) the following assets (collectively the
"Excluded ICS Assets"):
(i) Florida (Pahn Harbor) property (the "Excluded Real Property");
('i) investment in 1242541 Ontario Ltd.;
(iii) ICS Stocks/Mutual fund investments with Midland Walwyn of
$71,000 (approximate); and
(iv) 1993 Jeep Cherokee; and
(v) pay out to the Vendor, by way of bonus or dividend up to
$ 100,000 of cash in ICS's account.
These assets will not, in any even@ form part of this transaction, whether or
not they have been disposed of as of the Closing Date, and the parties shall
make appropriate adjustments in the event that any of same is not disposed of
prior to the Closing Date. IT shall cause ICS to pay out to the Vendor by way of
bonus any Asset Proceeds not rendered paid out or distributed prior to the
Closing Date. Any Asset Proceeds received by ICS shall be held in @t for the
Vendor and shall be immediately thereupon paid over to the Vendor.
IT CLOSING CONDITIONS.
The obligations of the IT hereunder to Purchase the ICS Shares on the
Closing Date is subject to compliance with the following conditions precedent
(the "IT Conditions"), it being agreed that such conditions precedent are for
the exclusive benefit of IT:
(a) the representations and ..r,..ties of the Vendor conta'med 'm
this Agreement or any othe, Transaction Documents shall be
true and cotect on and as at the Closing Date;
<PAGE>
(b) all the Transaction Documents and other closing documents as
are contemplated hereby or as are reasonable and appropriate
in the circumstances shall have been executed and delivered by
each of the parties thereto; and
(c) the Vend., shall have copl'@ed with its covenants hereunder.
12. VENDOR CLOSING CONDITIONS.
The obligations of the Vendor hereunder to sell the ICS Shares on the
Closing Date is subject to compliance with the follow'mg conditions
precedent (the "Vendor Conditions"), it being agreed that such
conditions precedent are for the exclusive benefit of the Vendor:
(a) the representations and warranties of IT contained in this
Agreement or any other Transaction Documents shall be true and
correct on and as at the Closing Date;
(b) the IT Articles shall be in form and substance satisfactory to
the Vendor, acting reasonably;
(c) all the Transaction Documents and other closing documents as
are contemplated hereby or as are reasonable and appropriate
in the circumstances shall have been executed and delivered by
each of the parties thereto;
(d) in the event that the Excluded Real Property is not disposed
of by ICS prior to the Closing Date, the Vendor and IT shall
have entered into an arrangement satisfactory to both of them
for the purchase of beneficial ownership of the Excluded Real
Property from the Vendor; and
(e) IT shall have complied with its covenants hereunder.
13. CONFIDENTL&LITY.
IT, ICS and the Vendor agree that any information obtained during
examination of the fmancial records and/or other legal documentation is
confidential and warrant that any such information will not be transmitted to
anyone other than their respective advisors.
14. SEVERABIILITY.
If any term, representation or condition of this Agreement is
determined invalid or to any extent unenforceable, that provision insofar as it
related to that party or circumstances shall be deemed not to be included herein
and the balance of this Agreement shall remain in full force and effect and
continue to be binding upon the parties hereto.
15. SECTIONS AND HEADINGS.
The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something 'M the subject matter or context is inconsistent therewith, references
herein to Articles and
9
<PAGE>
Sections are to Articles and Sections of this Agreement.
16. T@.
Time shall be of the essence of this Agreement. When calculating the
period of time within which or following which any ct is to be done or step
take. pursuant to this Agreement, the date which is the reference date in
calculating such period shall be excluded.
17. EXTENDED MIEANINGS.
Words importing the singular number only shall include the plural and
vice versa and words importing gender shall 'mclude masculine, feminine and
neuter genders.
18. CANADIAN DOLLARS.
Unless otherwise provided here'm, all monetary amounts set forth in
this Agreement are in Canadian dollars.
19. NOTICES.
Any notices required or permitted to be given hereunder shall be in
writing and may be given by delivering same or sending same by facsimile
addressed to:
(a) the Vendor at: 38 Shady Lane Crescent
Itomhill, ON L3T 3W7
Attention: Mr. John @
Facsimile No.: (905) 707-9941;
(b) IT at: c/o Mr. Declan French
IT Staffing Ltd.
55 University Avenue, Suite 505
Toronto, ON M5H 3L9
Facsimile No.: (416) 364-2424;
with copy to ICS; and
(c) ICS at: c/o Mr. John Irwin
International Career Specialists Ltd.
1041 McNicoll Avenue
Scarborough, ON M I W 3W6
Facsimile No.: (416) 942-0341
with copy to IT.
Any such notice if sent by facs@le shall be deemed to have been
received by the addressee on the day following the day o. which the
notice was so sent. Any party to this Agreement may change its or his
address for notice from time to time by notice given in accordance with
the foregoing and any subsequent notice shall be sent to the party at
its or his changed address.
10 -
<PAGE>
20. FURTHER DOCUMENTS.
Subject to the satisfaction of all Closing Conditions, this Agreement
shall operate as a transfer, ass'g-,,.t and delivery by each transferor to each
transferee of the Securities, as applicable, (effecti,,e on the Clos' g Date,
but nevertheless each party hereto covenants vith the others of them to execute
all such further documents and p,,rform such other acts as may be requisite or
necessary to carry out the purpose and intent of this Agreement.
21. SURVIVAL.
Any representation, warranty or covenant contained 'M this Agreement
made by a party hereto, and the rights of the Vendor under Section 3, shall
survive the Closing Date and shall continue in full force and effect thereafter
for a period of three years from the Closing Date except for the Vendor's
representation and ' Section 9(f) which shall survive indefmitely. warranty in 1
22. AMIENDMEENT.
This Agreement may not be amended except by a written instrument signed
by all the parties hereto.
IN WITNESS WHEREOF the partied here to have duly executed this
Agreement as of the day of May, 1998.
International Career Specialists Ltd.
/s/ John Irwin
---------------------------
John Irwin
IT Staffing Ltd.
/s/ Declan French
---------------------------
President
11
<PAGE>
Exhibit 10.12
LICENSE AGREEMENT
Between
INTERNATIONAL OFFICE CENTERS CORP.
and
IT STAFFING LTD,
<PAGE>
License Agreement
This License (the 'License') is made on the Ist day of August, 1998
between International Office Centers Corp. ('IOC'), a Delaware Corporation
having offices at One World Trade Center, Suite 7967, New York, New York 10048
and I.T. Staffing, Ltd. C'Clientw) of 55 University Ave. Suite 505, Toronto,
Ontario M5J 2H7 (address other than One World Trade Center). The parties hereto
agree as follows:
1. License of Premises. IOC hereby grants Client the revocable
privilege to use Office number 35 (the 'Office') in IOC's premises at One
World Trade Center, Suite 7967, New York, New York (the 'Building'), together
with the revocable privilege to use certain other portions of IOC's premises
along with others that IOC may designate, all in accordance with the terms
and conditions of this License. Client shall have no right to the Office and
shall have no right to receive services pursuant to this License until (a)
IOC has received the first Monthly License Fee payment (as defmed in
Paragraph 3 hereoo and (b) the Security Deposit (as defined in Paragraph 7
hercoo and (c) IOC has accepted this License at its New York office by
executing it and has returned a executed License to Client and (d) IOC has
received all forms required by it including, but not limited to, the Credit
Application Form. Note that this is not a lease, only a revocable License to
use certain space in IOC's pren-tises. Client has no real property right or
interest in the Office or the building. In the event that Client has not paid
the first Monthly License Fee Payment to IOC on, or prior to the Commencement
Date (as defined in Paragraph 2 hereoo, IOC may, at its sole option, cancel
this License and, upon such cancellation, Client shall forfeit any sum
previously paid IOC, including any Security Deposit.
2. Term of License.
(a) Generally: This License shall be for a period of three (3) months
commencing on the Ist day of August, 1998 (the 'Commencement Date') and ending
on the 31 st day of October, 1998 (the 'Expiration Date') unless extended as
provided herein.
(b) Holdover formonthly Clients: In the event that a monthly Client
fails to vacate the Office on the Expiration Date, and IOC agrees to allow
continued occupancy in lieu of any mcrease in payment for being a holdover, IOC
and the Client agree that the term of this License will automatically be
extended on a month-to-month basis at the same Basic Monthly License Fee, until
the Client notifies ICC, in writing, on or before the tenth (10th) day of any
month, that Client will vacate the Office at the end of that month. The
automatic extensions on a month-to-month basis shall continue until the first
anniversary of this License, at which time the provisions of paragraph 4(B)
shall come into effect.
For explanatory purpose only, if a monthly Client's expiration date is
July 3 lat and the Office is not vacated by such date, the Client nuy give
notice by August 10th that August will be the last month of utilization. If the
written notice is not given by August
<PAGE>
10th the Client will be liable for August and September. If notice of vacating
is not recieved by September lOth the Client will be liable for September and
October and so forth, this automatic renewal is in lieu of IOC claiming
customary holdover License Fees.
3. License Fee.
(a) Basic License Fee: Without the need for ICC to send any notice or
invoice, during the term of this License, Client shall pay Seven Thousand Eight
Hundred Dollars and 00/00 Cents U.S. ($7,800.00) (the 'Basic Annual License
Fee") for the right to use the 01Tice. The Basic License Fee shall be payable in
equal monthly instalments of Two Thousand Six Hundred Dollars and 00/00 Cents
U.S. ($2,600.00) (the 'Monthly License Fee Payment") in advance, on the first
day of each calendar month after the Commencement Date. Time is of the essence
with respect to the payment of all Monthly License Payment Fees, Additional
License Fees, (as that term is used in this Agreement), and any other sums
Client is supposed to pay pursuant to this License. Checks must be drawn and
collectable on Domestic Banks unless prior written permission is given by IOC.
If IOC agrees to any alternative method of payment, Client shall be responsible
for any and all bank processing charges, wire transfer charges etc. Client may
be required to increase security deposit or prepay amounts affected by such
arrangement. In the event the check for the first Monthly License Fee payment is
not honored by the bank the first time it is presented for payment IOC may
declare this License to be void ab initio (from its inception) and IOC may
remorse anything Client has moved into the Ofrice and store them at the Clicnt's
risk and expense and the Client agrees to be responsible for any and all damages
incurred by IOC. If IOC does send any invoices for Monthly License Fee Payments
as a courtesy or reminder, this shall not create any obligation on IOC to send
any subsequent invoices, it being agreed that the Monthly License Fee Payment
will be due without the need for IOC to send any invoices or notices. All
charges for Monthly License Fee Payments, Additional License Fees, (as that term
is used in this License), and any other sums Client is expected to pay pursuant
to this License, shall be considered correct and completely collectable unless
disputed in WRITING within thirty (30) days of the due date. No ORAL NOTICE
SHALL BE RECOGNIZED OR EFFECTIVE. Payment for the Basic Monthly License Fees &
Additional License Fees may not be withheld due to variable charge questions
that await resolution.
4. Client's Right to Renew.
(a) Extension of Term: Subject to the provisions of Section 4(b)
hereof, at the Termination Date, the Term and the License shall be automatically
extended for the same period of time as the Term defmed in 2(a), subject to the
same terms and conditions as contained in this License, unless either party
gives notice to the other in writing of its intention to temiinate at the lesser
of (i) at least sixty (60) days prior to the Termination Date, (ninety (90) days
if the Client occupies three or more offices), or (ii) at least half the nwnber
of days in the Term.
(b) Escalation: One year after the Conunencement Date and thereafter
on each and every anniversary of the Commencement Date, the Basic Monthly
License Fee will automatically increase by seven percent (70/o) of the Basic
Monthly License Fee in effect for the month or other applicable period
inunediately prior to such date; provided, however, that IOC may specify a
different adjustment
2
<PAGE>
to the Basic Monthly License Fee based on any desired factors including market
conditions by providing notice thereof at least seventy five (75) days prior to
the Termination Date.
(c) Automatic Renewal: In the event the Client tenders to IOC a check
for the montldy License Fee pursuant to the New License but fails to return a
signed License for any reason whatsoever, such payment shall be considered to be
acceptance in full of all the temis and conditions of the new License and both
IOC and Client shall be bound by such provisions as though the new License had
been fully executed.
5. Use.
(a) General Office Use: The Licensed Premises in general and the
specific Office(s) contracted for shall be used for the purpose of Staffing
Agency and such other use as is normally incident thereto and for no other
purpose, in accordance with the rules and regulations attached hereto and for no
other purpose, and in accordance with the provisions of this License and the
Licensee's right to use Licenso?s Premises or any part thereof. Any change in
the " of. or scope of the business being performed in said Office(s) other than
that specifically described above must be approved in writing by an ofricer of
IOC before the inception of such change. Any use of the Office must be in
accordance with the rules and regulations attached hereto and such other rules
which may be promulgated from time to time by IOC for all of IOC's Clients.
Client shall not pem-dt or suffer the OiTice to be used by anyone other than the
employees of Client, and shall not permit or suffer more than 2 such persons to
the Office. It shall be the Client's responsibility to advise IOC of any change
in personnel if Client desires IOC to restrict access to any prior employee.
(b) No Competitive Services: As a material inducement for IOC to grant
this revocable License, Client agrees not to offer or provide to anyone any of
the services which IOC offers to its Clients, including but not limited to,
those s@ces described in Schedules 'A' and 'B' attached hereto.
(c) No Sublet: Client acknowledges that a major inducement for IOC to
enter into this License is Client's express agreement not to assi@ sublet or
sublicense the Office, or any part thereof. Neither all, nor any part, of
Client's interest in this Ofrice granted hereunder may be encumbered, assigned,
or transferred in whole or in part, either by an act of Client or by operation
of law.
(d) No Violations: Client will not make, pemiit or suffer any use to be
made of the Office, the Building or any part thereof (i) which would violate any
of the covenants, agreements, terms, provision and conditions of this License,
(ii) which is directly or indirectly forbidden by public law, ordinance or
gover=ent regulation, (iii) which may be dangerous to life, limb, or property,
(iv) which may invalidate or increase the premium of any policy of insurance
carried on IOC's Premises, the Building or covering its operations, (v) @hich in
ICC's sole judgment, shall in any way impair or tend to impair the character,
reputation or appearance of the Building as a premier office building, or (vi)
which would impair or interfere with, or tend to impair or interfere with, any
of the services performed by ICC for the OtTice or for any IOC Client. Failure
to cure any violation of d(i) through (vi) within four (4) working days shall be
considered a material breach of this License and IOC shall be entitled to
temiinate Client's License to use the Office and retain the security deposit as
liquidated damages.
<PAGE>
(c) Request for Explanation: At any time during this License IOC may
demand a- written explanation from Client regarding Client's use of the Office
or any other part of IOC's premises. Failure to timely respond with a
satisfactory reply within four (4) working days shall be considered a material
breach of this Agreement and IOC shall be entitled to tenninate Client's License
to use the Office and retain the security deposit as liquidated damages.
(0 Liquidated Damages: In the event Client breaches subparagraphs (a)
through (e) herein, both parties agree the actual damages incurred by IOC will
be difficult to ascertain. Accordingly, both parties agree that as liquidated
damages and not as a penalty, Client shall pay IOC the sum of $500.00 per
week for each such breach, beginning at the first time such breach occurs,
without regard to the date that such breach is first discovered by IOC, and
payable until such breach is cured. It being agreed between the parties that
the aforementioned liquidated damages constitute a fair and reasonable
estimate of damages under the circumstances. The weekly liquidated damage
amount will be due for any breach whether such breach continues for an entire
week or not. This provision shall not be IOC's exclusive remedy and
notwithstanding any payment of liquidated damages, if such breach is not
corrected within two weeks, IOC shall be entitled to temlinate Client's
License to use the office without prejudice to retaining such amounts of the
security deposit as is required to cover the liquidated damages and other
provisions of this Agreement.
(g) Relocation: IOC will have the right to relocate Client to another
space in the Premises, and to substitute such other space for the Ofrice,
provided such other space is substantially similar in area and configuration to
the OtTice and provided Client shall incur no increase in the Basic License Fee
hereto or any relocation cost or expense.
6. Delivery of Possession and Services.
(a) Possession: If IOC cannot deliver possession of the Office to
Client on the Commencement Date for any reason, this License shall not be void
or voidable nor shall IOC be liable to Client for any damage or loss resulting
therefro@ but there shall be abatement of the Basic Monthly License Fee for the
period between the Commencement Date and the date when IOC delivers possession.
NOTWITHSTANDING THE FOREGOING, if IOC fails to deliver possession of the Office
to Client within three (3) months of the- Commencement Date, either party may,
upon written notice to the other, cancel this License.
(b) Services: If, after Client receives possession of the OtTice, IOC
cannot' rovide any of the services'which IOC a@eed p@ to make available or to
provide pursuant to the terms of Paragraph 8 hereof due to any causebeyond IOC's
reasonable control, IOC's@ll not be liable f6r any damage or loss resulting
therefrom, nor shall Client be entitled to any credit for, or abatement of, the
Basic Monthly License Fee or Additional License Fees Client is obligated to pay
pursuant to the tenns of this Agreement.
3
<PAGE>
7. Receipt of Security Deposit.
(a) Amount: Client has deposited with IOC of Two Thousand Six Hundred
Dollars and 00100 Cents (U.S.) ($2,600.00) (the 'Security Deposit'), receipt of
which IOC hereby aclmowledges, as security for (i) the Client's full performance
of the terms, conditions and covenants of this License and; (ii) for the cost of
repair or replacement in excess of nomial wear and tear; and (iii) for the
payment of telephone or other service ordered by IOC at Client's request or
instructions even if this License is terminated ab initio due to Client's check
being dishonored; and (iv) as payment for any liquidated damages pursuant to any
provision herein. 7he Security Deposit, or any balance thereof, shall be
returned to Client in full or in part within forty (40) days of the termination
date only after Client has vacated the Licensed Premises in accordance with
paragraph 9 (following a personal inspection by IOC) and has surrendered all
keys, identification cards, and other means of identification. Parking access
devices and all other means of access and identification are to be surrendered
on or before the date of termination. No credit will be issued or adjustments
made to billing for items returned after the fifth calendar day following the
date of t tion. If IOC determines that any loss, damage, or injury chargeable to
Client hereunder exceeds the Security Deposit, ICC will apply the entire
Security Deposit against the loss, damage or injury and the balance thereof will
be the responsibility of Client, who shall pay the same to IOC on demand. Client
may not apply the Security Deposit to any Monthly License Fee Payment(s) or
Additional License Fees due pursuant to this License. There shall be no interest
paid or payable on the Security Deposit and IOC may use the Security Deposit as
part of its working capital for the provision of services to all Clients. Client
agrees to increase this security deposit upon request in the event it is not
equal to one (1) month current License Fee.
(b) Dishonored Check: In the event the Security Deposit is paid by
check and such cheek is not honored by the bank the first time it is presented
for payment, IOC may, at its sole discretion, declare this License to be void ab
initio and the Client agrees to be responsible l.Por any and all damages
incurred by IOC.
(c) Replenishment of securities: If IOC uses, applies or retains any
part or all, of the Security Deposit, which Client agrees to allow IOC to do,
Client shall, upon demand, pay IOC the amount used, applied or retained in order
to replenish the Security Deposit to its former amount. Failure to replenish the
Security Deposit with good funds shall be cause for termination of this License.
(d) Increase of Security : Security Deposit will be increased in
increments equivalent to one half (1/2) months current License Fee to reinstate
service for each occurrence that Client defaults in making payment as required
by Paragraph 3 (a) hereof
8. Services.
(a) Listing of Services: IOC shall make available to Client, without
charge, the services described in Schedule 'A' annexed hereto. IOC shall also
make available certain other services at ICC's then current rates as described
in Schedule "B' annexed hereto. The prices on Schedule 'B" are in effect on the
Conunencement Date and Client will be advised of any change at least seven (7)
days prior to the due date for a Monthly License Fee Payment and such new prices
will take effect during that month. Client shall pay for the services indicated
on Schedule B' on receipt of a bill, which shall constitute Additional License
Fees. If Client fails to pay such bill, then IOC may, at
<PAGE>
its option, temlinate all services provided in both Schedule 'A' and 'B" upon
twenty-four (24) hours prior written notice to Client and/or make such payment
on behalf of Client by withdrawing funds from the Security Deposit. Client's
obligation to make payments under this paragraph shall survive the Expiration
Date, or sooner termination of this License, or the date of expiration of any
extended term hereof
(b) Limitation of Services: IOC only agrees to make available, or to
provide, those services specifically enumerated on Schedule 'A' and 'B' annexed
hereto. Any other services which are now available, or which may in the future
become available at IOC's Premises, may be canceled or otherwise discontinued at
any time whatsoever. IOC shall have the option, in its sole and absolute
discretion, to tenninate the provision of any and all services being provided to
Client hereunder including, without limitation, telephone service and
electricity service, to hold Client's work including original papers and to
refuse Client access to the Premises or to eject Client from the Premises, all
without being deemed to have committed any manner of trespass.
9. Surrender. Without the need for a demand, Client agrees to, and
shall, promptly surrender and deliver the Office to ICC, broom clean and in
good condition, ordinary wear and tear excepted, on the Expiration Date or on
the date of sooner termination of this License. A fee will be assessed to
cover the repair of furniture or equipment, removal of carpet stains and
repainting of walls, and Client will pay IOC all of said cost and expenses
thereof upon demand. IOC may, but is not required to, make repairs or
replacements at Client's expense.
10. Right to Show The Office. IOC shall have the right to show the
Office to any prospective Client at any time ninety (90) days prior to the
Expiration Date and at any time after the delivery of a notice from IOC
terminating this License pursuant to the relevant provisions herein. IOC will
use reasonable efforts not to disrupt Client's Business.
11. Subordination. This License is subject and subordinate to the
Main Lease for ICC's premises and to all the tenns, provisions, covenants and
conditions thereof. Nothing herein, or in the Main Lease, shall be construed
to require ICC to cure any default of the Overlandlord (the 'Landlord') under
the Main Lease or to bring any action or proceeding or to take any steps to
enforce ICC's rights against the Landlord. Without limiting the generality of
the foregoing provisions of this paragraph, IOC shall not be responsible for
furnishing any service, maintenance or repairs to the Office, and Client
shall in no event whatsoever be entitled to any allowance, reduction or
adjustment of the License fee payable under this License by reason of the
failure of Landlord to comply with its obligations to supply or render the
same. A copy of the Main Lease, with certain fmancial information redacted,
is available on request at the Manager's Office.
4
<PAGE>
12. Defaults and Remedies.
(a) Default in Payment: Client shall not allow the Basic Monthly
License Fee, payment for services which are Additional License Fees, or any
other amounts payable under this License to be in arrears more than three (3)
calendar days nor shall Client remain in default tmder any other condition of
this License for more than five (5) calendar days @ written notice is left in
Clienfs Office. Client shall not fail to pay any new Monthly License Fee Payment
when due. On the fourth (4th) calendar day following the.date upon which any
payment became due or the sixth (6th) calendar day following the date after a
default notice for any other condition is given, IOC may at its option, without
formal demand or notice of any kind re-enter, lock-out Client and/or take
possession of the Office and remove all persons by an unlawful detainer action
or by any other means, including force, and remove property therefrorr4 as well
as disconnect any telephone,lines installed for the benefit of Client, and
discontinue mail service and afi other services provided for in this License,
without being deemed to have committed any manner of trespass. IOC will may
remove anything Client has moved into the Office and store said items at the
Client9s risk and expense and the Client agrees to be responsible for any and
all damages and expenses incurred by IOC. In the event of such termination IOC
may, but shall not be obligated to relicense the Office or any part thereof for
all or any part of the remainder of the term hereof, at such License fee, and on
such other terms and conditions as IOC, in its sole discretion, sees fit. Should
IOC relicense the Office, ClienCs obligations heretmder shall in no way be
diminished or reduced and Client shall remain obligated hereunder until all
obligations are satisfied.
(b) Returned Checks: If two (2) checks are returned unpaid by a
Client's Bank within 35 day period or if more d= 3 checks are returned unpaid by
a Client's bank within a twelve (12) month period, IOC may, in its sole
discretion, re-enter, take possession of the office as set forth in paragraph
12(a) above. Replacement of any returned check shall only be made by Bank cheek,
money order or cash in addition to a $35 handling charge and any bank charges.
If IOC agrees to accept payment in any other manner, Client shall not be
entitled to occupancy of the Office until such check clears.
(c) Lien: In the event of a default by Client hereunder, Client grants
IOC an express security interest, under the terms of the Uniform Conunercial
Code (UCC) upon all goods, chattels or personal prop" of any description
belonging to Client, Clienfs employees, or anyone else which are placed in, or
become a part of the Office, as security for the Monthly License Fee Payment or
Additional License Fees then due and/or to become due for the remainder of the
License term. This lien shall not be in lieu of, or in any way affect, any
statutory lien given by law, and shall be cwnulative to any statutory lien. By
signing this License Client grants IOC this express security interest in all
such personal property placed in the Office and agrees that IOC may file a copy
of this License in order to constitute a fmancing statement. ICC shall be
entitled to all rights and remedies of a secured party under the UCC in addition
to any statutory liens and rights. No property removal passes will be issued
while any breach condition exists.
(d) Properte DeemedAbandoned: In the event IOC exercises its option (i)
to terminate this License, or (ii) to re-enter the
<PAGE>
0ffice, or'(iii) to relicense the Office, or (iv) in the event Client terminates
this License pursuant to Paragraph 4, or (v) in the event that after the
Expiration Date, the Client leaves or forgets property or papers in the Ofric-e,
any property belonging to Client which remains in the 01Tice after the
termination of this License shall be,deemed to have been abandoned and either
may be retained by IOC as its property or may be disposed of in such manner as
IGC may see fit without accounting to Client for its disposition. Files, papers,
documents, etc. may, at IOC's sole option, be stored at Clienfs expense and in
the event a bill for such storage is not paid within seven (7) days of
presentation, IOC may destroy such papers, etc. and shall have no liability
whatsoever to Client in regard to same.
(c) Rights Cumulative and Assignable: All rights and remedies of IOC
under this License shall be cumulative and none shall exclude any other right or
remedy at law or in equity. IOC is expressly given the right to assign any or
all its interest under the terms of this License.
(0 Late Payment Charge: Client agrees to pay IOC a late payment charge
of 5% of the amount due or five dollars, whichever is greater, if any payment
due hereunder is not paid within four (4) days of its due date.
(g) Failure to Vacate: Upon termination of this License, at the
Termination Date or otherwise, or upon any revocation of the License, the Client
shall cease all use of the Office, the Premises, and all services immediately.
For each and every month or portion thereof that Client continues use of the
Office after the termination of this License without the express written consent
of IOC, Client shall pay IOC an amount equal to double the Monthly License Fee
(as defined in Paragraph 3(a) hereto). IOC shall be entitled to exercise all
remedies available to ICC on account of such continued use, and Client's
obligation to pay, such increased charge shall be in addition and without
prejudice to such remedies.
(h) Total Amount Due: IOC may, if IOC so elects, without any additional
notice of such election or demand to Client, forthwith terminate this Agreement
and License, and may enter into the Office and take and hold possession of the
contents thereof, without releasing Client, in whole or in part, from the
Client's obligations hereunder. In the event of such t tion, IOC may, at is
option, declare the entire amount of the Basic Annual License Fee which would
become due and payable during the remainder of the Term, to be due and payable
immediately, in which event, Client agrees to pay the same at once. IOC may, at
its option, also use, apply or retain in whole or in part the Security Deposit
for payment of any sums due hereunder or for the payment of any other sum that
IOC may spend by reason of such default.
(i) Collection Expenses : Client agrees to pay all costs and expenses,
including reasonable attorneys' fee, expended or incurred by IOC in connection
with the enforcement of this License, the collection of any sums due hereunder,
any action for declaratory relief in any way related to this License, or the
protection or preservation of any rights of ICC hereunder.
13. Furniture, Fixtures and Repairs.
(a) Furniture and Fixtures. IOC agrees, at its own cost and expense, to
furnish and install @ture, fixtures and equipment that IOC determines, in its
sole opinion, are necessary to provide suitable office facilities for Client.
Client shall not bring into, or
5
<PAGE>
install in the Office any furniture, facsimile, photocopier, telephone, fixtures
or other equipment without the prior written consent of an officer of IOC.
Client shall not damage any funiiture, fixtures or equipment located in IOC's
Premises, and in the event that any such damage occurs, Client shall pay IOC the
cost of @ or replacement upon demand. Client shall not move any furniture,
fixtures or equipment to or from the OtTice to other portions of IOC's Premises,
and shall not move any furniture, fixtures or equipment from one portion of
IOC's Premises to another nor remove any furniture, fixtures or equipment from
the Building, without the prior written consent of IOC in each instance.
(b) Repairs: Any and all work on, or in the Office, for which prior
written permission from IOC is required, may only be performed through IOC and
by IOC approved contractors.
14. Exclusive of IOC's Liability. IOC shall not be liable or
responsible to Client, and Client Expressly Agrees to Waive, and Agrees NOT to
make any claim for damages, Directly or Consequentially arising from (i) any
injury or damage resulting from the errors, acts or omissions of IOC's employees
(including without limitation, the loss of, or damage to, any package or other
article delivered to Client at Licensor's Premises), persons licensing office
space or services from IOC, or other persons occupying any part of the Building,
(ii) any failure to provide services, for example, such as water, gas,
electricity, or telephone, or (iii) any injury or damage to person or property
caused by any person (except for such loss or damage arising from the willful or
grossly negligent rdsconduct of IOC, its agents, servants, or employees) or
caused by IOC's failure to make repairs which it is expressly obligated to make
hereunder, or for any loss, damage, destruction, or theft of any Clienfs
personal property or equipment, whether belonging to Client or any pem-iitted or
invited guest of Client, while on IOC's premises.
15. Indemnity and Insurance BY Client.
(a) Indemniiy. Client Expressly Agrees to Waive and Agrees to NOT make
any claim for damages, and to defend, indemnify and save harmless IOC and IOC's
agents and employees against, and from, liabilities, obligations, damages,
penalties, claims, costs, charges and expenses, including but not limited to
reasonable attomey's fees and court costs, which may be incurred by IOC by
reason of or arising directly or indirectly from, out of or in connection with,
any negligent or otherwise wrongful error, act or omission of Client, its
agents, employees, contractors or invitees in or about the OtTice, or any
failure on the part of Client to perform or comply with any of the terms,
conditions or provisions of this License.
(b) Insurance: IOC only maintains insurance for its own benefit and in
regard to liability in the common areas. Client must obtain his own liability
insurance for a minimum of $1,000,000 with $750,000 per incident, and shall name
IOC and the Port Authority of New York & New Jersey as additional insureds.
Certificates of such named insureds must be provided to IOC within 30 days of
Client's occupancy of Office. IOC does not maintain any fire insurance for the
contents of Clienfs OtTice and Client is responsible to obtain his own fire and
damage insurance on Client's property. If required Insurance Certificates are
not received by ICC within the designated timeframe,
<PAGE>
IOC may, at Clients expense, arrange for appropriate liability insurance for
Client with a preapproved insurance carrier. Said insurance coverage shall
remain enforce during the Term of this License and renewals thereof. Client
agrees to waive subrogation against the Landlord of the building and other
tenants of the building.
(c) Limitation: Client hereby waives any and all rights of recovery
against IOC or IOC's agents and employees for loss of or damage to its property
or the property of others under its control, to the extent such loss or damage
is covered by any insurance policy.
16. No Waiver of Breach. IOC's failure to insist upon the strict
performance of any term or condition of this License or to exercise any right or
remedy available on a breach thereof, or IOC's acceptance of full or partial
payment during the continuance of any such breach shall not constitute a waiver
of any such breach or any such term or condition. No waiver, alteration or
modification of any tenn or condition required to be performed or observed by
Client, or any waiver of any breach by Client, shall be elective or binding on
IOC except by a written instrument executed by IOC. No waiver of any breach
shall affect or alter any term or condition in this License, and each such term
and condition shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof
17. Advertising. Client shall not place any advertisement in any media
(such as newspaper, radio, direct mail etc.) which uses the name, "One World
Trade Center' or the address of IOC without first receiving IOC's written
consent. Client shall not place a yellow pages display ad without IOC's prior
written consent.
is. Mail. Upon termination of this License for any reason whatsoever,
Client's right to use IOC's address shall also terminate unless Client completes
and delivers to IOC all required mail processing forms and makes the appropriate
payment for mail handling services to IOC. Upon termination of Client's right to
use IOC's address, IOC shall have the right (i) to return all mail to the sender
or (ii) to destroy such mail. Client understands that if its use of IOC's
address terminates for any reason whatsoever, it will be Client's sole
responsibility to notify all parties of such termination and Client's new
address.
19. Service of Process.
(a) On Behalf of Client: It is understood and agreed that neither ICC
nor its employees have the authority to accept service of legal process on
behalf of Client.
(b) Upon Client: The Client hereby agrees that service of process on it
for purposes of any suit by IOC shall be good and sufficient if the summons and
complaint is delivered to any Client/employee found using the Office.
6
<PAGE>
20. Brokerage
(a) Name: Client represents that in the negotiation of this License it
dealt with no brokers other than N/A and that so far as Client is aware said
broker is the sole broker. IOC agrees to pay, to Licensed Brokers only, said
broker's commission pursuant to a separate agreement upon the execution of this
License. Client promises to in@ry IOC against liability arising out of any
inaccuracy or alleged inaccuracy of this representation. Broker's commission
shall be paid on annual contracts only. Commission shall be for Office(s)
initially contracted for and exclusive of any additional offices acquired during
the term of contract. Commission will be paid on fust yW's contract only.
Renewals shall not be subject to any further commission fees. If Client engages
the services of any:broker, salesman, agency, company or any other person or
entity to represent them in any negotiations after the first year, any charges
or commission incurred will be the sole responsibility of the Client.
(b) Adjustments: Should a commission be paid or payable to a broker,
salesman, agent, company or any other person or entity upon execution of this
License, Client agrees that should this License terminate prior to the
Expiration Date (whether pursuant to paragraph 5 hereof or otherwise), then IOC
shall be authorized and permitted to deduct the unamortized portion of any such
commission from the Security Deposit of Client if any, held by IOC. If the
Security Deposit is not sufficient to offset the remaining portion of the
commission, then Client shall pay any additional amount due to IOC on demand.
21. Prohibition On Employment Of IOC Employees.
(a) Solicitation by Client: Client agrees not to employ, to offer, or
cause to have offered, employment to any IOC ear following the termination of
this License. Because of the difficulty employee during the term of this License
and for a period of one (1) y of ascertaining the exact damages that IOC n-dght
suffer in the event of a breach of this clause, the parties' agree that as
liquidated damages, and not as a penalty, for each such breach, Client shall pay
IOC the sum of S 1 5,000 plus 25% of the annual salary of any employee for each
such employee so solicited, it being agreed that such amount constitutes a fair
and reasonable estimate of IOC's damages.
(b) Solicitation by Employee: Client agrees to advise IOC of any
inquiry or attempt by an IOC employee to seek employment by or through the
services of the Client.
(c) Survival: The covenants, representations and agreements of Client
set forth in this paragraph shall survive the termination of this License, or
the date of expiration of any extended term hereof.
22. Rules and Regulations. she attached rules and regulations are an
integral part of this License. Client, its employees and agents, will perform
and abide by such rules and regulations and any amendments or additions to them
as IOC may make from time to time.
23.. Entire Agreement. This Agreement represents the entire
understanding between the parties in regard to the License of the
<PAGE>
Office. All prior understandings, whether oral or written are specifically
merged herein. This agreement may not be modified, changed'or altered in any
respect except by a writing signed by an authorized otticer of both IOC and
Client.
24. Notices. Any notice required or permitted under this License must
be in writing and may be sent by personal delivery to IOC at One World Trade
Center, Suite 7967. New York, New York 10048 and to the Client at the Office. If
such notice is properly addressed and personally delivered, it shall be deemed
notice for all purposes herein even if the party claims it never saw such
notice. The parties ftffier agree that this address shall be the appropriate
address for service of process in any lawsuit arising out of this License. For
the sake of convenience only, and not in derogation of the above designation of
addresses, IOC agrees it will use its best efforts to send a copy of all notices
to the Client at any address it designates other than the Office. Client hereby
designates the following additional address:
Additional Address
N/A
N/A
25. Compliance With Law, At all times during the term of this License
Client shall at Client's sole cost and expense, promptly comply with all present
and future laws, orders and regulations of all state, federal, municipal and
local governments, departments, comrmssions and boards and any direction of any
public officer which shall impose any violation, order or duty upon IOC or
Client with respect to the Office, whether or not arising out of Client's use or
manner of use of the Office or the Building.
26. Construction of Terms. If any term or provision of this License
shall be capable of two constructions, one of which would render the tenn or
proiision valid and the other of which would render the term or provision
invalid, then the construction which renders the term or provision valid shall
be deemed to be binding upon the parties. Any partial or complete invalidity or
unenforceability of any provision of this Agreement shall not be deemed to
modify or affect any other term or provision of this License.
27. Captions. Captions of paragraphs are for convergence of reference
only and shall not be deemed to amen@ modify or construe any terin or provision
of this License.
28. Additional License Fees. Any payment due hereunder shall be deemed
to be Additional License Fees and failure to pay same shall entitle IOC to
rights and remedies available to IOC for failure to pay License fee as set forth
in Paragraph 12.
7
<PAGE>
29. No Offer. IOC's submission of this License to the Client is not an
offer to grant Client a License nor shall it be deemed an option on the part of
the Client to obtain a License from IOC. This License shall be binding upon the
parties only after it is executed by the duly authorized officers or agents of
the Client and accepted and executed by IOC at its New York office.
30. Governing Law. This contract which is accepted in New York shall be
governed solely by the laws of the State of New York.
31. Authorization To Proceed. Note that by tendering to IOC the first
Monthly License Payment (Paragraph 3) and/or the Security Deposit (Paragraph 7),
Client Hereby Authorizes IOC to order the telephone services for the Ofrice and
to begin installation of all items and devices necessary or desirable to
maintain or use the Ofrice and agrees to guarantee payment for all charges so
incurred, whether or not any of Client's cheeks are dishonored by its bank and
IGC elects to tenninate this License ab initio pursuant to Paragraph 3 or 7.
32. --Joint andSeveral Liability, All parties signing this License as a
partnership or co-signing individuals shall be jointly and severally liable for
all obligations of Client.
As an inducement for IOC to enter into this License with the
aforementioned Client, the undersigned hereby guarantees, unconditionally and
without any reservation, the full and prompt payment of all swns due to IOC
pursuant to any provision of this License. This guarantee shall remain in full
force and effect without regard to any extensions, modifications, or other
changes in this License between IOC and the aforementioned Client.
Declan A. French
2045 Lakeshore, Suite 3107
Etobicoke, Ontario MSV 2Z6
Guarantor's Signature
In Witness Whereof, IOC and Client have caused these presents to be
duly executed as of the date first written above.
IT STAFFING LTD.
INTERNATIONAL OFFICE CENTERS CORP.
By: /s/ Declan A. French
Declan A. French, President
By: /s/ Burdette Russo
Burdette Russo, President
<PAGE>
EXHIBIT 23.1
CONSENT OF SCHWARTZ LEVITSKY FELDMAN
The undersigned, Schwartz Levitsky Feldman, hereby consents to the use of
our name and the use of our opinion dated July 27, 1998 for IT Staffing Ltd.
(the "Company") as filed with its Registration Statement on Form SB-2 being
filed by the Company.
/s/ Schwartz Levitsky Feldman
Schwartz Levitsky Feldman
Chartered Accountants
September 18, 1998
