U.S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 1
Form 10-SB
General form for registration of securities of small business issuers
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934
Elgrande.com Inc.
-----------------
(Name of Small Business Issuer in its charter)
Nevada
------
(State or other jurisdiction of incorporation or organization)
88-0409024
----------
(I.R.S. Employer Identification No.)
Suite 308, 1040 Hamilton St., Vancouver, B.C., Canada V6B2R9
------------------------------------------------------------
(Address of principal executive offices)
604 689 0808
------------
(Issuer's Telephone No.)
Securities to be Registered under Section 12(b) of the Act: None
Securities to be Registered under Section 12(g) of the Act:
Common Stock
------------
(Title of Class)
Total Number of Pages: 82
Index to Exhibits Appears on Page: 30
<PAGE>
Except for the historical information contained herein, the matters set forth in
this registration statement are forward looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward looking statements are subject to risk and uncertainties
that may cause actual results to differ materially. These forward looking
statements speak only as of the date hereof and the Company disclaims any intent
or obligation to update these forward looking statements.
Item 1. Description of Business
(a) Business Development
Elgrande.com Inc., (the Registrant) was incorporated in April, 1998
under the laws of the State of Nevada.
(b) Narrative Description of Business
The Company intends to develop and market an Internet application that enables
consumers to locate and purchase goods sold directly by manufacturers and
producers, which the Company believes will be without the increased cost of
intermediate handling by distributors and retailers. For the manufacturers or
producers involved, the site will provide a sales outlet for their goods which
the Company Believes will ultimately generate a higher profit margin, compared
to sales conducted through traditional distribution and wholesale organizations.
Elgrande.com believes it can establish an economic model that will be superior
to traditional marketing models involving inventory and margins on sales by
providing a transaction service that eliminates much of the traditional cost of
sales for the producer, while eliminating large mark-ups for the consumer.
As of April 1, 1999, over one hundred suppliers with over two million book
titles, eighty thousand music titles and sixteen hundred DVD titles have agreed
to participate in the Elgrande.com System.
The company will offer the merchandise of publishers on its world wide web site
by generating descriptive web pages featuring each participating publishers'
inventory. The company creates the initial database for each publisher's web
page, and provides a means for the publishers to readily maintain the inventory
database. The prices displayed on the Elgrande site will be comprised of the
publishers wholesale price plus a US$1.50 flat rate fee per item for Elgrande.
The purchaser shall also pay a percentage based surcharge based upon the payment
method, as well as delivery charges.
For example, a client who purchases a book will see a listed price of $11.50,
which consists of the $10.00 price plus the $1.50 Elgrande fee. Then if the
purchaser pays with Visa, and opts for overnight delivery via FedEx, then he
will incur the additional charges use of his Visa card, the cost of processing
the credit card transaction, and the cost of delivery.
The site will initially focus on the sale and marketing of merchandise, such as
books, software, audio and video CDs, tapes, and computer games. Elgrande.com
will continuously add new products to its cataloging system as consumer
confidence in Internet commerce and security grows. The objective is to create
an Internet portal site that functions as a search engine (a software
application that enables the user to locate information from a database or other
information archive using relevant words pertaining to the search subject or
criteria), but differs differs from typical search engines in that all of the
material returned to users comprises merchandise that can be purchased
immediately from the publisher/manufacturer of the merchandise. A portal site is
an Internet site that functions as a starting point for world wide web sessions.
2
<PAGE>
It is believed by Elgrande.com management that a search engine geared
exclusively toward retail merchandise is at this time non-existent and in high
demand. Elgrande.com filed U.S. and Canadian trademarks for the name
"SHOPENGINE" and "ELGRANDE.COM".
Consumer support for this service is high, (See Table 1.1) as Internet shopping
is increasing each year and is expected to continue to do so well into the next
century. As consumer confidence in Internet transaction technologies increases,
the Internet is expected to become the de facto research tool for locating the
cheapest source of everyday goods. Elgrande.com intends to capitalize on this
explosion as it has the team and the technology in place to successfully create,
deploy, and market the first Internet application to provide direct purchasing
at wholesale prices to consumers, while eliminating many of the marketing costs
of goods- producing companies.
TABLE 1.1
----------------------
WEB COMMERCE
----------------------
1996 $2.6 billion
2002 $220 billion
----------------------
WEB USERS
----------------------
1996 28 million
2002 175 million
----------------------
(Source: Ziff Davis)
----------------------
According to the Gartner Report commissioned by the Company and reports filed by
publicly held companies, Internet sales have increased 31% during the last
quarter of this year, a result of boosted consumer confidence in the interactive
media Marketplace. The "Earth's Biggest Bookstore," Amazon.com, grew the most
with a 35% jump in revenue from $27.8 million in the last quarter to $37.9
million this quarter. E*Trade, an online brokerage, was up from last quarter by
31% as revenue went from $37 million to $48.5 million, with 60% of all revenue
produced over the Internet. Companies such as Insight and CUC International were
also up in Internet sales profits this quarter. An Internet Shopping report
issued by Binary Compass Enterprises shows consumer confidence to be up from 26%
to 33% and average expenditures online have increased from $162 to $192. The
report also found that in considering online purchases, consumers are attracted
to the ease, efficiency and availability of Internet sales rather than lower
prices.
Elgrande.com inventory databases will be managed using relational database
technology integrated with state-of-the-art geographically redundant hardware
units at key Internet access points globally. A Relational Database is a
software application component that digitally stores information in such a way
that relationships to and from other data sources may be preserved thereby
maximizing the functionality of stored data. Geographically Redundant Hardware
Units are computing devices that are deployed in multiple physical locations so
that the data and functions stored on one device are the same as that stored on
devices at other locations as a means of guarding against system failure due to
the failure of a single device. The Elgrande computers will contain all of the
inventory data as well as programs necessary to permit an internet user to shop
and conclude transactions. Elgrande.com will continuously evaluate Internet
architecture as part of its operations to ensure 100% uptime and availability of
the site to all consumers worldwide. Analysis and systems evaluation will be an
integral part of Elgrande.com's ongoing effort and new technologies will be
adapted to the system as they become available and are determined practical for
the site. The proprietary relational database programming and web server
configuration has been contracted to Macdonald Harris and Associates of
Vancouver, British Columbia (MHA). MHA has been programming sophisticated
dynamically generated web sites since 1994, and currently has The Royal Bank and
Billboard Magazine sites as clients.
3
<PAGE>
In January and February of 1998, Elgrande.com conducted an initial email survey
of 200 publishing firms to determine if the firms would be inclined to
participate in an online service such as that offered by Elgrande.com. Of 200
email letters sent, 177 replies were received in which the respondents expressed
interest in the Elgrande.com system. In October of 1998, Elgrande.com
commissioned the Gartner Group of San Jose, California to perform a study of the
Company's business model and potential marketplace. The report concluded that
eighty-eight percent of the publishers surveyed were highly probable to
participate in Elgrande.com's business model.
THE ELGRANDE.COM SYSTEM
The Elgrande.com System consists of the development and deployment of a web
site, search engine, relational databases, and administrative software
interfaces. These will accommodate online shopping for retail level and business
to business consumers, and enable management of the system by Elgrande.com
management and companies participating in the Elgrande.com program. Initially,
the products offered on Elgrande.com's website will be limited to literature,
music, software, video and games.
The system will work in the following manner:
Visitors to the Elgrande.com web site will first encounter a welcome screen that
presents a graphical user interface. This interface contains a menu with
hyperlinks (text or image that causes a different page to appear on the user's
screen when clicked on with mouse pointer during internet use) and a table of
contents outlining the features, specials, articles and news available in the
current issue. A search box will be part of every page, which enables the
visitor to enter keywords, phrases or numbers to locate merchandise within the
Elgrande.com database currently listed for sale. Upon entering the search
criteria, a screen will be returned listing the matches to the visitor's query.
The query matches will be brief descriptive paragraphs of each of the items
returned. They will provide a hyperlink to a more detailed information page, as
well as an option to add each item to a "shopping cart". The shopping cart is a
software application that tracks user's accumulated purchases via mouse clicks
on selected items.
Another option to the specific product search will be the option to "browse"
through hierarchical directories of logically grouped headings based on subject
type. This service will allow the visitor to "drill down" (using a series of
hyperlinks in succession) through the directories until a list of products is
returned that matches the subject matter sought by the visitor. The options
available include add to shopping cart, search again, go back one level, return
to the home page, or click any item in the menu bar to go to a corresponding
section of the web site.
The "shopping cart" tracks the items that the visitor has tentatively decided to
purchase on the Elgrande.com server. When the visitor has added all the items to
the shopping cart that they wish to purchase, they will click on the "proceed to
checkout" button where they will be presented with a list of all of the items in
their cart, the price per item, plus applicable taxes. At this screen, options
are presented to remove certain items, increase or decrease the quantities of
each item, or to cancel the transaction entirely.
Once the contents of the shopping cart are edited to the satisfaction of the
visitor, the "next" button is clicked that brings the visitor to the "shipment
type" dialogue box. Here the option is presented for immediate (overnight via
courier) delivery, secondary (within 2-3 days) delivery, and normal (land mail,
first class) delivery. Besides the delivery option boxes, price descriptions are
included in general terms.
This page is also where the customer submits delivery, billing, and contact
information; including preferred method of payment. Payment options will include
instant credit card through secure server.
4
<PAGE>
telephone/credit card transaction, or submitted form/mailed money order or
check.
Upon submission of this page, a screen will be returned that has the total cost
of the transaction. The lower part of the screen will either ask for credit card
information, or provide a form to fill out notifying Elgrande.com of a mailed
payment method.
If the customer opts for instant credit card transaction, the information will
be entered onto the form, the form will be submitted, and the transaction will
be either approved or declined by the online clearinghouse. If the transaction
is approved, a final confirmation screen is returned to the client confirming
the amount billed to the credit card, an itemized list of the products and
charges, as well as the total cost for shipping. A transaction number is issued
which the client will use if they have any reason to contact Elgrande.com at any
time before, during, or after shipment of the products. Elgrande.com will
provide a tracking screen where the client will be able to keep track of their
order as it is processed through the Elgrande.com system. Customs, duty and
taxation information is also included in the final screen before submission for
payment.
If the customer chooses to mail in payment, then the information is collected on
a form including check type, check number, account number, etc. The subsequent
screen will return all of the information included in the next screen of a
credit card transaction, but with a notice that the orders paid for in this
manner are not shipped until the funds have cleared from the account on which
the check is written. Elgrande.com ships orders paid for by certified check or
postal money order upon receipt and verification.
COMPANY PARTICIPATION
The recruitment of companies who will provide products to sell through the site
(referred to as "Clients") will be accomplished through direct marketing and
business development by the Company's employees. The system will be briefly
described to the publishers during the initial contact, after which they will be
directed to a section of the web site not accessible to the general public that
will detail the terms of participation to the company. These terms will be as
follows:
i. Elgrande.com will charge Clients US$1.50 per completed transaction of a
purchase of one item from that company's inventory as listed in the
Elgrande.com database. The Client company is responsible for maintaining
accurate inventory status records in the database, and is expected to
update the database at least once per month. The Elgrande.com system
employs software that converts any common database format into the
Elgrande.com format. Clients will be provided with a client account number
and password, which will give them access to their section of the database
only. Companies will be able to complete standard "data dumps"
(transferring data in digital format from one device to another, as known
as "downloading") over the Internet while connected to the Elgrande.com
server. Because Elgrande.com accepts any tab-delimited database format, no
additional preparation beyond pre-existing inventory database management
will be required by companies to participate in the system. Tab-delimited
database format is where the data elements are separated by use of the tab
key on a standard keyboard. The only other charges for the transaction that
the client will be expected to absorb are the fees charged by the credit
card clearing house and the credit card companies themselves.
5
<PAGE>
ii. Clients will be mandated by policy to provide the lowest wholesale price to
the Elgrande.com clientele, and only manufacturers or those who otherwise
"create" products will be eligible for participation. No distribution
organization will be permitted entry unless they are the only agents for a
particular manufactured item. In this manner, Elgrande.com intends to
provide a very economical method of direct marketing to manufacturers of
goods and publishers of intellectual merchandise. It is believed that this
will also ensure the lowest prices anywhere in the world for the products
listed in the database, except where discontinued inventories may be sold
at significant discount. Items sold at below cost to offset sales of other
merchandise at significant mark-up will be able to undercut Elgrande.com,
but on average, prices will be maintained at wholesale levels, and will
therefore be cheaper on average.
iii. In addition to providing Elgrande.com with inventory information, technical
data pertaining to every product listed on the search engine will be
provided if applicable. This information will be housed in a separate
searchable database that will be made available to Clients of Elgrande.com.
Elgrande.com staff will be mandated by policy to ensure that all customers
receive satisfaction as a result of their purchases through Elgrande.com.
Where Clients are dissatisfied with their purchases upon receipt, it will
be Company policy to provide refunds in full. It is anticipated that this
will bear somewhat negatively on the bottom line, but Elgrande.com
management believes any lost revenues due to refunds will be easily
recouped by satisfied repeat customers, and all possible attempts will be
made to recover funds from the product provider. Elgrande.com analysts will
provide constant monitoring of all customer complaints to identify
manufacturers and publishers of inferior goods, who will be eliminated from
the system.
iv. Upon conclusion of a transaction (payment received) the Elgrande.com system
sends email to:
* the company from whom the product is ordered;
* the customer, confirming once again the order has been processed;
* the accounting database, updating it with the transaction;
* The Elgrande.com order monitoring system;
* the shipper chosen, if applicable.
v. Elgrande.com will develop a tiered volume pricing schedule whereby those
companies that are the recipients of greater numbers of orders through
Elgrande.com than others will be entitled to pricing discounts on per
transaction fees.
vi. Certain members of Elgrande.com staff will be responsible for liaison
between Elgrande.com, participating companies, and the customers. At all
times systems evaluation will be running to identify opportunities for
expanded and improved service to both customers and Clients.
IMPLEMENTATION AND DEPLOYMENT
The public launch of the Elgrande retail web site is scheduled to be on May 1,
1999 and is expected to ready and able to process sale transactions. The Company
chose to delay its scheduled launch for March 1, 1999 so as to complete testing
of various components and to be satisfied with the web site's quality assurance.
As the Company is presently satisfied with its continual testing results, it has
chosen to forego the forty-five day test run of the site.
The Company's direct marketing and business development is now in the process of
contacting companies who are publishers of literature, music, videos, games and
software to solicit their participation in the Elgrande system. Graphic
production of the web pages for the Elgrande.com site is accomplished by
Elgrande staff.
6
<PAGE>
The smooth integration of participant companies as they are recruited by
marketing, will be handled by the staff of Elgrande, who will work with company
representatives to ensure satisfaction. Fulfillment tracking will be the
responsibility of senior management initially until such time as satisfactory
sales levels justify the addition of personnel for that purpose. Strategy and
evaluation meetings will be conducted frequently to assess strategy impact and
possible remedies to problems as they arise.
COMPETITION
Competition for internet based commerce is very high even though the industry is
still relatively new. Access to the industry is open to anyone with the
appropriate computer equipment and hardware. Competition includes companies
organized expressly for the purpose of internet based commerce as well as
traditional product manufacturers, publishers and marketing firms that establish
internet based components to their marketing. Obtaining market share is
primarily a function of name recognition and advertising on popular internet
portal sites such as Yahoo, Alta Vista or America Online. As a result of
internet advertising rates, obtaining market share is highly capital intensive.
Many if not most competitors who are already conducting transactions have
greater resources than the Company and capturing market share from such large
companies as Amazon.com will be difficult.
The Company believes that it has unique features which will allow the Company to
effectively compete. The Elgrande.com System allows for flexible and multiple
sources for products through manufacturers, publishers, wholesalers and
retailers. Often such flexibility will allow the consumer to choose a local
source if one exists. Amazon.com does not have this capability. The Elgrande.com
System is also unique in that its trademarked "ShopEngine" allows consumers to
use hyperlinks directly to the source and the source (the Company's client) can
create their own content and advertising at lower cost than developing their own
site.
REGULATION
The Company is only subject to general business regulations.
EMPLOYEES
The company employs twenty-two full time employess.
Item 2. Management's Discussion And Analysis or Plan of Operation
All amounts are presented in U.S. dollars and where converted from Canadian
dollars, converted using a conversion rate of 1 to .6575.
Elgrande.com was incorporated in April 1998, and commenced construction of an
Internet site for the marketing of merchandise, including books, videos,
software, CDs, tapes and computer games. The company commenced with the hiring
of consultants in August, 1998, and engaged McDonald Harris & Associates of
Vancouver, B.C.(MD&A) in September, 1998 to develop proprietary data base
programming and web server configuration. The total cost of this program is
$247,000 and the sum of $130,000 has been paid as at November 30, 1998. McDonald
Harris & Associates is due to receive a final payment of $57,200 on June 1,
1999. The construction of the initial database has been completed. There are no
other contracts of a material nature required to achieve the desired launch
site. There have been no sales to date and none are contemplated before May 1,
1999.
LIQUIDITY AND CAPITAL RESOURCES
The company raised $997,800 as of November 30, 1998 by way of sale of common
shares. At November 30, 1998, Elgrande.com had cash of $236,350 and subscription
receivables of $538,050, providing sufficient liquidity to complete the program
and launch the site which was sufficient to complete construction of the web
site. Since November 30, 1998 all of the subscription receivables have been
paid.
7
<PAGE>
The estimated cost of the web site to launch date was estimated at $650,000. As
of April 16, 1999, construction of the web site has been substantially completed
and the Company has sufficient working capital to commence operations after the
site is launched. The company intends to continue to raise additional funds
either through the sale of common stock, from private loans, or other forms of
equity/debt.
The Company had $137,000 on hand at February 28, 1999 and is in the final stages
of completion of a private placement of 300,000 common shares at $3.00 per
share. This private placement is being done with a single accredited investor
located in London England. This is expected to close by April 30, 1999. This
will provide the Company with an additional $900,000 in working capital which
Management believes is sufficient for its operations for the next five months.
The Company maintains cash equivalents with a large Canadian financial
institution and a large U.S. financial institution. Excess cash will be invested
in highly liquid investments that are readily convertible into cash.
The Company has sufficient cash to finance its operations. While staff
requirements will continue to grow, the Company does not anticipate any problems
in the financing of this growth.
In the first fiscal year of operations, commencing April 1, 1998, the company
will require an additional $2,000,000 to sustain an extensive marketing program.
It is expected that approximately $2,000,000 in advertising costs will be
incurred in year one to assist in the launching of the site. Funding
requirements could increase significantly in year two, depending on the success
of the marketing program in year one. Should anticipated results be generated,
the company proposes to raise up to $20,000,000 in year two through a public
offering of securities, of which $10,000,000 would be allocated to marketing
costs.
RESULTS OF OPERATIONS
At November 30, 1998, the company had incurred expenses of $170,558, which have
been covered from the sale of common stock. Included in the expenses is the sum
of $107,028 for legal and consulting fees paid. In addition to the incurred
expenses, the company incurred start-up costs of $100,715 as reflected on its
balance sheet.
Results to date have been in accordance with the budget and the company
continues to operate within a predetermined operating budget.
There are no revenues as of February 28, 1999 as the Company has not as yet
activated its website. The Company expects to go live with its site by May 1,
1999 when initial revenue is anticipated to begin.
A summary of expenses to February 28, 1999 is as follows:
Consulting and Professional fees 351,329
Marketing and public relations 114,432
Communication and internet fees 35,083
Other 67,494
-------
568,338
=======
IMPACT ON INFLATION
The company believes that the impact of inflation is not material to the
development of its business. The company carries no inventory, and both North
American and world inflation rates are nominal to non-existent at the present
time.
8
<PAGE>
YEAR 2000 ISSUE
The company is already compliant with the year 2000 issue and requires Y2K
compliance certification from its client companies and third parties such as
shippers and credit card processors virtually all of which have provided
compliance assurances. The company believes that it is unlikely that there will
be a systemic failure of the internet and that any disruptions in the company's
operations will be limited.
ITEM 3. DESCRIPTION OF PROPERTY
The Registrant leases its approximately 3,000 square foot headquarters
office space from a third party pursuant to a lease ending August, 2001 for
$2,347.50 per month.
9
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners holding five
percent or greater of the 10,818,800 shares of common stock outstanding as
of January 30, 1998.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature % of
of Beneficial Owner of Beneficial Owner Class
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Common James West 1,000,000 Founder 9.2%
Ste. 308- 1040 Hamilton St.
Vancouver, B. C. V6B 2R9
Michael Page 1,000,000 Direct 9.2%
te. 308- 1040 Hamilton St.
Vancouver, B. C. V6B 2R9
Josephine Cross 1,000,000 Direct 9.2%
Ste. 307 - 19533 Fraser Hwy.
Surrey, B.C. V3S 6K7
Carlton Parfitt 1,000,000 Direct 9.2%
Ste. 308- 1040 Hamilton St.
Vancouver, B. C. V6B 2R9
</TABLE>
(b) Security Ownership of Management
<TABLE>
<CAPTION>
Title of Class Name and Address(1) Amount and Nature % of
of Beneficial Owner of Beneficial Owner Class
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Common Michael Page 1,000,000 9.2%
Carlton Parfitt 1,000,000 9.2%
James West 1,000,000 9.2%
Dennis Brovarone 25,000 Direct 0.2%
Randal Palach 25,000 Direct 0.2%
All officers and directors
as a Group (5 persons) 3,050,000 28.0%
</TABLE>
(1) The address for management is that of the Registrant: Suite 308, 1040
Hamilton Street, Vancouver, B.C., Canada V6B 2R9
(c) Changes in Control
There are no arrangements which may result in a change in control of the issuer.
10
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and Executive Officers
NAME AGE POSITION 1ST YEAR WITH COMPANY
Michael Page 30 President, Director 1998
Carlton J. Parfitt 31 Sec., Treas., Director 1998
Randal Palach 48 Chief Executive Officer 1999
Dennis Brovarone 43 General Counsel, Director 1999
(b) Business Experience
MICHAEL PAGE: Mr. Page is a founder of the Company and became President in
September, 1998. From March, 1997 to March, 1998 Mr. Page served as president of
Strategic Financial Corp., Langley, British Columbia, public relations firm.
From October 1995 to August 1996, Mr. Page was a public relations consultant
with Axion Communications, Vancouver, British Columbia. From April 1992 to
September 1995, Mr. Page was the President and chief editor of Hammer Publishing
Corp., Surrey, British Columbia where he developed and oversaw the marketing of
an annual tourist publication as well as a quarterly in-flight magazine for
Central Mountain Air.
CARLTON J. PARFITT: Mr. Parfitt is a founder of the Company. From July 1997 to
May 1998, Mr. Parfitt was a Vice President of Marketing and Sales for New Vision
Entertainment, Tokyo, Japan, a television and multimedia content distribution
company. From June 1995 to June 1997, Mr. Parfitt was a Special Assistant to the
President of Mori & Associates, Tokyo, Japan, an international business
consultant. From January 1993 to January 1995, Mr. Parfitt was the president of
the Food For All Foundation, a non-profit organization. From January 1992 to
December 1992, Mr. Parfitt was a Research Scientist engaged in software
development for CTF Systems, Inc., Port Coquitlam, British Columbia. Mr. Parfitt
graduated from Simon Fraser University, Vancouver, British Columbia in 1991 with
a degree in Physics.
RANDAL PALACH: Mr. Palach was engaged as the Chief Executive Officer of the
Company in April, 1999. During 1998 to April 1999 Mr. Palach was President of
Astral Communications Inc., North York, Ontario, a national distribution company
servicing 4,000 clients in the entertainment industry. He was responsible for
the profitability and operating performance of the recognized leader in this
industry. Major accounts included Blockbuster and Sears; major studios included
Disney, Universal, 20th Century Fox, Universal, Paramount and Columbia Tri-Star
and major labels included Sony, Polygram, MCA, EMI, BMG, and Warner. From 1993
to 1998, Mr. Palach was President of ITW Canada and President of Signode North
American Distribution. He was responsible for the supply chain management of
consumer and industrial packaging related products sold globally. He also
implemented a major restructuring of the North American distribution network,
and led several acquisitions. Locations -Toronto,Ontario; Chicago, Ill; and
Charollette, N.C.
DENNIS BROVARONE - Mr. Brovarone has been practicing corporate and securities
law since 1986 and as a sole practitioner since 1990. Prior to 1990, Mr.
Brovarone served as in-house counsel to R.B. Marich, Inc.; a Denver, Colorado
based brokerage firm. Mr. Brovarone served as President (Chairman) of the Board
of Directors of The Community Involved Charter School, from January 1995 to
March 1998, a four-year old K-12 independently chartered public school located
in Lakewood, Colorado. He also serves as a Director of Innovative Medical
Services, a publicly held corporation located in San Diego, California and is
President and Chairman of the Board of Directors of Ethika Corporation, a
publicly held corporation located in Westminster, Colorado.
(c) Significant Employees:
JAMES WEST: Mr. West is a founder of the Company and is the Chief Information
Officer. From June 1996 to September 98, Mr. West was President of Intellicom
Canada Communications, Inc., Vancouver, British Columbia specializing in the
translation of marketing, public and investor relations documents into
graphically enhanced world wide web pages for corporate clients. From January
1993 to June 1996, Mr. West was the owner/operator of Jim West Design, a sole
proprietorship specializing in corporate logo graphic design and copywriting.
MARIUSZ GIRT: Mr. Girt joined the Company in October 1998 as project manager for
the Company's computer systems. From March 1998 to October 1998 Mr. Girt was a
software testing engineer with Microsoft Corporation, Redmond, Washington where
he planned network scenarios simulating real time environments for new product
testing. From June 1997 to February 1998 Mr. Girt was the manager of network and
computer systems for Strategic Financial Corporation, Langley, British Columbia.
Mr. Girt was an Information Technology Consultant with Microbell Network
Solutions of Vancouver, British Columbia from September 1995 to May 1997 with
responsibility for its network and computer systems. Mr. Girt attended the
British Columbia Institute of Technology and completed its computer science
program specializing in Network Security, TCP/IP, Routing, and Network
Topologies related to Local and Wide Area Networks.
11
<PAGE>
(d) Family Relationships: Elise West, the mother of James West, Kendall
Page, the sister of Michael Page, Sonja Parfitt and Anthony Parfitt, the mother
and brother of Carlton Parfitt are employed by the Company in its marketing
department. In September 1998, Elise West, Kendall Page and Sonja Parfitt were
each issued 50,000 shares of the Company's common stock and Anthony Parfitt was
issued 37,500 shares as compensation for their services. These shares begin
vesting at 20% as of April 1, 1999 and an additional 20% every six months
thereafter so long as services are continued with the Company.
(e) Involvement in Certain Legal Proceedings: There are no legal
proceedings to report.
ITEM 6. EXECUTIVE COMPENSATION
(a) Summary Compensation Table
Name & Position Year Salary Paid
- -----------------------------------------------
Michael T. Page 1998 $17,538.00 *
Carlton J. Parfitt 1998 $17,538.00 *
James West 1998 $17,538.00 *
*No other cash compensation or bonuses paid or accrued.
(b) Option/SAR Grants in Last Fiscal Year (Individual Grants)
No options have been granted to date.
The Registrant has a Stock Option Plan, entitled the "Elgrande.com, Inc., 1998
Directors and Officers. Stock Option Plan" (the "Plan"). Its purpose is to
advance the business and development of the Company and its shareholders by
affording to the employees, directors and officers of the Company the
opportunity to acquire a proprietary interest in the Company by the grant of
Options to such persons under the Plan's terms. By doing so the Company seeks to
motivate, retain and attract highly competent, motivated employees, executive
Officers and Directors to lead the Company. The effective date of the Plan is
September 23, 1998. Article 3 of the Plan provides that the Board shall exercise
its discretion in awarding Options under the Plan, not to exceed 1,000,000
shares. The per share Option price for the stock subject to each Option shall be
$0.50 per share or such other price as the Board may determine. All Options must
be granted within ten years from the effective date of the Plan. There is no
express termination date for the Options, although the Board may vote to
terminate the Plan. Under the Plan, there have been no Options granted.
(c) Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end
Option/SAR Values : None
(d) Long-term Incentive Plans -- Awards in Last Fiscal Year: None
The Registrant has not otherwise awarded any stock options, stock appreciation
rights or other form of derivative security or common stock or cash bonuses to
its executive officers and directors.
(e) Compensation of Directors
1. Standard Arrangements
12
<PAGE>
The members of the Company's Board of Directors are reimbursed for actual
expenses incurred in attending Board meetings.
2. Other Arrangements: There are no other arrangements.
(f) Employment Contracts And Termination of Employment, And
Change-in-control Arrangements
The Company's President, Michael Page is subject to an two year consulting
contract at a salary of $81,000 CN ($53,265US) per annum. The consulting
contract was executed on September 1, 1998 and became effective in October 1,
1998. The Company's Secretary / Treasurer, Carlton Parfiett is also subject to
an two year consulting contract at a salary of $81,000 CN ($53,265US) per annum.
The consulting contract was executed on September 1, 1998 and became effective
in October 1, 1998. The Companys Chief Executive Officer, Randall Palach is
subject to a six month consulting contract beginning April 1, 1999 at a salary
of $12,500 CN ($8,218.75US) per month. Dennis Brovarone, the Company's General
Counsel beginning April 1, 1999 receives a $4,000 US per month retainer
terminable by the Company on thirty days notice. Compensation expense for Mr.
Page and Mr. Parfitt was reflected in the Company's first quarter unaudited
financial statements contained in the Form 10QSB filed on or about April 15,
1999 and every quarter thereafter. Compensation expense for Mr. Brovarone and
Mr. Palach will be reflected in the second quarter financial statements and
every quarter thereafter.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's By-Laws include a provision regarding Related Party Transactions
which requires that each participant to such transaction identify all direct and
indirect interests to be derived as a result of the Company's entering into the
related transaction. A majority of the disinterested members of the board of
directors must approve any Related Party Transaction. Elise West, the mother of
James West, Kendall Page, the sister of Michael Page, Sonja Parfitt and Anthony
Parfitt, the mother and brother of Carlton Parfitt are employed by the Company
in its marketing department. In September 1998, Elise West, Kendall Page and
Sonja Parfitt were each issued 50,000 shares of the Company's common stock and
Anthony Parfitt was issued 37,500 shares as compensation for their services.
These shares begin vesting at 20% as of April 1, 1999 and an additional 20%
every six months thereafter so long as services are continued with the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of Company consists of 200,000,000 shares of common
stock. No warrants to acquire common stock have been authorized. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of the Company's common stock.
The common stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The common stock
affords the holders no cumulative voting rights, and the holders of a majority
of the shares voting for the election of the directors can elect all of the
directors if they should choose to do so.
Pursuant to a vote of the Shareholders on April 2, 1998, the Registrant's Board
of Directors has the authority to declare a reverse split of the outstanding
shares.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
(a) Market Information
The Registrant's stock is not listed for sale on any exchange or trading medium.
The Registrant intends to seek the listing of its Common Stock on the OTC
Electronic Bulletin Board upon the effectiveness of this Form 10-SB. Until such
time, there is no public market for the Company's Common Stock.
13
<PAGE>
(b) Holders
There are 117 holders of the Registrant's Common Stock as of April 19, 1999.
There are 4,925,000 shares of common stock, which are restricted securities as
defined by Rule 144, none of which have been held in excess of one year.
(c) Dividends
The Registrant has paid no dividends to date on its Common Stock. The Registrant
reserves the right to declare a dividend when operations merit.
ITEM 2. LEGAL PROCEEDINGS
There is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of the
Registrant, threatened, against the Registrant, or any of its properties,
business affairs or business prospects of the Registrant which would have a
material effect thereon.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS: NONE
14
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant sold securities which were not
registered under the Securities Act of 1933, as amended, as set forth
below.
Date Name # of shares issued Consideration (U.S. $)
- ---- ---- ------------------ ----------------------
040298 James West 1,000,000 $1,000
040298 Michael Page 1,000,000 $1,000
040298 Josephine Cross 1,000,000 $1,000
040298 Carlton Parfitt 1,000,000 $1,000
- ------ --------------- --------- ------
$0.001 per share total 4,000,000 $4,000
040298 Jim Sheehan 500,000 $5,000
040298 Raymond Barth 500,000 $5,000
040298 Charles F. Payne 500,000 $5,000
040298 Glen Helfmeyer 500,000 $5,000
040298 Paul L. Harrison 500,000 $5,000
040298 Kerry J. McCullagh 500,000 $5,000
040298 Michael McCullagh 500,000 $5,000
040298 Brad Pow 500,000 $5,000
040298 Michael Parker 500,000 $5,000
040298 L. Joan McCullagh 500,000 $5,000
- ------ ----------------- ------- ------
$0.01 per Share Total 5,000,000 $50,000
112898 293701 Alberta Ltd. 5,000 $5,000
112898 Abby Broussard 5,000 $5,000
112898 Alexander Reynolds 5,000 $5,000
112898 Anita Pow 500 $500
112898 C. Hilgenberg 5,000 $5,000
112898 Candelar Holdings 2,000 $2,000
112898 Carol Geraldi 250 $250
112898 Carole Lind-Peterson 20,000 $20,000
112898 Charlie Huddy 2,000 $2,000
112898 Christian Schenk 5,000 $5,000
112898 Clayton Ness 5,000 $5,000
112898 Craig McTavish 2,000 $2,000
112898 David Morgan 10,000 $10,000
112898 David H. Troxwell 2,000 $2,000
112898 Dean Murray 2,000 $2,000
112898 Della Grant 10,000 $10,000
15
<PAGE>
112898 Edwin Fishbaine 5,000 $5,000
112898 Elsie Harasym 1,000 $1,000
112898 Gary C. Rosholt 50,000 $50,000
112898 Gerry Franco 10,000 $10,000
112898 Gerry W. Sauve 2,000 $2,000
112898 Gilbert M. Russell 3,000 $3,000
112898 Helen Trieman 30,000 $30,000
112898 Hugh Fleshar 1,000 $1,000
112898 James D. George 10,000 $10,000
112898 Jason Booth 2,000 $2,000
112898 Jean J. Schroeter 20,000 $20,000
112898 J. Broussard Eq. Trst. 5,000 $5,000
112898 L. Christine Firby 12,000 $12,000
112898 Lance Gardiner 5,000 $5,000
112898 Leslie Abe 1,000 $1,000
112898 Maurice Schelvis 10,000 $10,000
112898 May Etta Carlson 2,000 $2,000
112898 Mel Pesony 2,000 $2,000
112898 Mitch Lascelle 10,000 $10,000
112898 Orville Brill 10,000 $10,000
112898 Otto Gassner 5,000 $5,000
112898 Patrick Bayard 5,000 $5,000
112898 Peter Samler 10,000 $10,000
112898 Peter Huber 25,000 $25,000
112898 Procan Investor 10,000 $10,000
112898 Rhett K. Martin 1,000 $1,000
112898 Robert Cooper 5,000 $5,000
112898 Robert Landry 20,000 $20,000
112898 Rudolph DeLeo 500 $500
112898 Russell McQueen 1,500 $1,500
112898 Stanley G. Kroeker 3,000 $3,000
112898 Stephen Bishop 2,000 $2,000
112898 Theodor Reinalter 15,000 $15,000
112898 Tom Nakshara 6,000 $6,000
112898 W. Margaret Houck, CMC 10,000 $10,000
112898 Wilbur P. Pool 4,000 $4,000
112898 William Pow 500 $500
112898 Wilma Perskin 5,000 $5,000
112898 Yamanishi Hldgs 5,500 $5,500
113098 Wachi Andres 15,000 $15,000
113098 Steeg Oliver 9,000 $9,000
113098 Leili Schuerch 30,000 $30,000
113098 798111 Alberta Ltd. 2,000 $2,000
113098 Ezra Schwartz 1,000 $1,000
113098 Chaim Schwartz 31,500 $31,500
113098 Chaim Slomiuc 7,500 $7,500
113098 Ed Fishbaine 13,400 $13,400
16
<PAGE>
113098 Raymond McAllister 3,000 $3,000
113098 Beatrice Williams 1,000 $1,000
113098 Alfred Williams 5,000 $5,000
113098 William Bailey 1,000 $1,000
113098 Fred Milner 1,000 $1,000
113098 Albert J. Auriat 2,000 $2,000
113098 David J. Vos 5,000 $5,000
113098 Joyce L. Vos 10,000 $10,000
113098 Delayne Pfan 2,000 $2,000
113098 Tim Whaley 350 $350
113098 Procan Investment 115,000 $115,000
113098 Kunz Daniel 11,000 $11,000
113098 Kazimierz Kozica 4,000 $4,000
113098 Paul Schmid 5,000 $5,000
113098 Kevin Bredeson 200 $200
113098 John McHugh 20,000 $20,000
113098 Peter Huber 5,000 $5,000
113098 Malic Money Mgmt 10,000 10,000
113098 Frances R. Kreway 10,000 $10,000
113098 Gary Sutter 11,000 $11,000
113098 Brenda Meyer 5,000 $5,000
113098 Sabrina Jones 3,000 $3,000
113098 Intnl. Investment Servs. 95,000 $95,000
113098 Bill Westby 1,600 $1,600
113098 Dr. Jud Hollis 500 $500
113098 Sandra J. Quinn 1,000 $1,000
113098 Peter Allard 100,000 100,000
113098 Don Moroz 1,000 $1,000
- ------ --------- ----- ------
$1.00 per Share Total 988,800 $988,800
091798 Barclay Pacific Dev. Ltd. 250,000 services
091798 Wolnosc Int. Inc. 250,000 services
091798 Stacey McGrillen 50,000 services
091798 Kendall Page 50,000 services
091798 Sonja Parfitt 50,000 services
091798 Elise West 50,000 services
091798 Woojun Jeon 37,500 services
091798 Anthony Parfitt 37,500 services
091798 David Halmai 37,500 services
091798 Mavis Robinson 37,500 services
121098 Dennis Brovarone 25,000 services
041999 Randal Palach 25,000 services
- ------ -------------- ------ --------
Issued for Services Total 900,000 services
The Registrant was not a reporting company pursuant to the Securities Exchange
Act of 1934 nor was it a development stage company with no business plan. Thus
it was eligible to rely upon Rule 504. Moreover, Rule 504 was available in that
the Registrant sold less than $1,000,000.00 worth of securities in the previous
12 month period and except for the Registrant's officers and directors, the
purchasers were unaffiliated investors. The Shares sold at $0.01 per share in
April, 1998 and at $1.00 per share in September 1998 were sold pursuant to the
Rule 504 safe harbor. These sales were entirely private transactions pursuant to
which all material information as specified in Rule 502(b)(2) was made available
to the purchasers.
The shares issued for services are for compensation to the Company's employees,
consultants and legal counsel and the shares sold to the Company's founders and
Josephine Cross, the mother of Michael Page were sold pursuant to the exemption
contained in Section 4(2) of the Securities Act. The shareholders had unlimited
access to all material information regarding the Company as a result of their
employment with the Company or family relationship with the executive officers
and directors.
On all transactions depicted, no sales commission was paid by the Company to
Pacific Rim Investment Inc. pursuant to the April 2, 1998, Offering Sales Agency
Agreement. (See Exhibit 10(ii)). Pacific Rim Investment Inc. is a corporation
organized under the law of the Pacific island nation of Vanuatu. Pacific Rim has
two principals. They are Geoffrey Robert Gee and John Caldwell Malcolm.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 11 of the Company's By-laws provides that every person who was or is a
party or is
17
<PAGE>
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or a person for whom he is the legal representative is or
was a director or officer of the corporation or is or was serving at the request
of the corporation or for its benefit as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless to the fullest extent
legally permissible under the General Corporation Law of the State of Nevada
against all expenses, liability and loss (including attorney's fees, judgments,
fines and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him in connection therewith.
18
<PAGE>
PART F/S
ELGRANDE.COM INC.
(A Development Stage Company)
TABLE OF CONTENTS
ACCOUNTANTS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations and Accumulated Deficit 3
Stockholders' Equity (Deficit) 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
19
<PAGE>
WILLIAMS & WEBSTER PS
CERTIFIED PUBLIC ACCOUNTS
Seafirst Financial Center
W 601 Riverside, Suite 1970
Spokane, WA 99207
(509) 838-5111
Board of Directors
Elgrande.com Inc.
1040 Hamilton Street
Vancouver, British Columbia
Canada V6B 2R9
Independent Auditor's Report
We have audited the accompanying balance sheet of Elgrande.com Inc. (a
development stage company) as of November 30, 1998 and the related statements of
operations and accumulated deficit, cash flows, and stockholders' equity for the
period from April 8, 1998 (inception) to November 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Elgrande.com Inc. as of
November 30, 1998, and the results of its operations and its cash flows for the
period from April 8, 1998 (inception) to November 30, 1998, in conformity with
generally accepted accounting principles.
As discussed in Note 2, the Company has been in the development stage since its
inception on April 8, 1998. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. Management's plans regarding those matters
also are described in Note 2. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Williams & Webster, P.S.
Spokane, Washington
January 20, 1999
Except for Note 11, as to which the date is April 19, 1999
20
<PAGE>
ELGRANDE.COM INC.
(A Development Stage Company)
BALANCE SHEET
November 30, 1998
A S S E T S
CURRENT ASSETS
Cash $ 236,350
----------
PROPERTY AND EQUIPMENT
Computer hardware 38,407
Furniture and fixtures 20,878
Database and software 296,408
Less accumulated depreciation (2,160)
----------
TOTAL PROPERTY AND EQUIPMENT 353,533
----------
OTHER ASSETS
Deposit 3,600
Organizational costs, net of $5,285 amortization 100,715
----------
TOTAL OTHER ASSETS 104,315
----------
TOTAL ASSETS $ 694,198
==========
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 234,189
Accrued interest 529
Stock over-subscription payable 90,000
----------
TOTAL CURRENT LIABILITIES 324,718
----------
LONG-TERM DEBT
Note payable 39,543
----------
TOTAL LIABILITIES 364,261
----------
COMMITMENTS AND CONTINGENCIES -
----------
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares authorized,
$.001 par value; 10,793,800 shares issued and
outstanding 10,794
Additional paid-in capital 1,027,996
Subscriptions receivable (538,050)
Accumulated deficit during developmental stage (170,803)
----------
TOTAL STOCKHOLDERS' EQUITY 330,182
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 694,198
==========
The accompanying notes are an integral part of these
financial statements.
2
21
<PAGE>
ELGRANDE.COM INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the Period Ended November 30, 1998
R E V E N U E S $ -
----------
E X P E N S E S
Legal and professional fees 107,028
Software and internet services 11,568
Marketing and public relations 18,217
Rent 9,965
Depreciation and amortization 7,445
Office and administration 6,208
Travel and entertainment 5,224
Communication 2,669
Production and programming 1,950
Interest 529
----------
TOTAL EXPENSES 170,803
----------
NET LOSS (170,803)
ACCUMULATED DEFICIT, BEGINNING BALANCE -
----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (170,803)
==========
NET LOSS PER COMMON SHARE $ (0.0181)
==========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 9,436,725
==========
The accompanying notes are an integral part of these
financial statements.
3
22
<PAGE>
ELGRANDE.COM INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period Ended November 30, 1998
<TABLE>
<CAPTION>
Common Shares
-------------------- Additional Total
Number Paid-in Subscriptions Accumulated Stockholders'
of Shares Amount Capital Receivable Deficit Equity
--------- -------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
in April, 1998:
For cash at $.001
per share 4,000,000 $ 4,000 $ - $ - $ - $ 4,000
For cash at $.01
per share 5,000,000 5,000 45,000 50,000
Issuance of common stock
in September, 1998
for services at $.06
per share 850,000 850 49,150 50,000
Issuance of common stock
in November, 1998
For cash and
subscription
at $1.00 per
share less expense
of $9,010 943,800 944 933,846 (538,050) 396,740
Loss for period ending,
November 30, 1998 (170,803) (170,803)
---------- --------- ---------- --------- ---------- ---------
Balance
November 30, 1998 10,793,800 $ 10,794 $ 1,027,996 $ (538,050) $ (170,803) $ 329,937
========== ========= ========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
23
<PAGE>
ELGRANDE.COM INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period Ended November 30, 1998
Cash flows from operating activities:
Net loss $ (170,803)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 7,445
Services paid by issuance of common stock 50,000
Increase in:
Accounts payable 59,989
Accrued interest 529
Over-subscriptions payable 90,000
----------
Net cash used in operating activities (12,840)
----------
Cash flows from investing activities:
Purchase of property and equipment (141,950)
Deposit on leased property (3,600)
Payment on organizational costs (106,000)
----------
Net cash used in investing activities (251,550)
Cash flows from financing activities:
Issuance of stock 450,740
----------
Net increase in cash 236,350
Cash, beginning of period -
----------
Cash, end of period $ 236,350
==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ -
==========
Income taxes $ -
==========
NON-CASH INVESTING ACTIVITIES
Note issued for purchase of property and equipment $ 39,543
Purchase commitment for database 174,200
----------
Total $ 213,743
==========
The accompanying notes are an integral part of these
financial statements.
5
24
<PAGE>
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Elgrande.com Inc., formerly Intellicom Internet Corp (hereinafter "the
Company"), was incorporated in April 1998 under the laws of the State of Nevada
primarily for the purpose of developing and marketing internet applications,
specifically for books, software, audio and video media and computer games. The
name change to Elgrande.com Inc. was effective on September 19, 1998. The
Company maintains an office in Vancouver, British Columbia, Canada.
The Company is in the development stage, and as of November 30, 1998 had not
realized any significant revenues from its planned operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Elgrande.com Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
which is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
DEVELOPMENT STAGE ACTIVITIES
The Company has been in the development stage since its formation on April 8,
1998. It is primarily engaged in developing and marketing internet applications.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a net
loss of $170,803 for 1998. At November 30, 1998, current liabilities exceed
current assets by $88,368. The Company, being a developmental stage enterprise,
is currently putting technology in place which will, if successful, mitigate
these factors which raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
issuances that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
25
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Provision for Taxes
At November 30, 1998, the Company had net operating loss of approximately
$170,803. No provision for taxes or tax benefit has been reported in the
financial statements, as there is not a measurable means of assessing future
profits or losses.
Use of Estimates
- -----------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
26
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight line method over the estimated useful lives of the
assets. The useful lives of property, plant and equipment for purposes of
computing depreciation and amortization are five and seven years. The following
is a summary of property, equipment and accumulated depreciation and
amortization:
Accumulated Depreciation
------------------------
Cost or Amortization
---- ---------------
Computers $ 38,407 $1,915
Furniture and fixtures 20,878 245
Database 296,408 -
------- -----
$355,693 $2,160
======= =====
The database is expected to be completed in March, 1999, and amortization will
begin at that time. See related Note 7.
NOTE 4 - INTANGIBLE ASSETS
During the period ended November 30, 1998, Elgrande.com Inc. incurred
organization costs of $106,000. These organization costs are being amortized
over the useful life of sixty months beginning September 1, 1998. During the
period ending November 30, 1998, $5,285 was recorded as amortization of
organization costs. In accordance with SOP 98-5 (effective for fiscal years
beginning after December 15, 1998), the Company expects to write off its
organizational costs in 1999, thereby incurring a one time only charge of
$100,715.
The Company has capitalized $296,408, which is the contractual cost of data base
software purchased from an independent software supplier. No portion of this
software, acquired in November 1998, was internally developed and, accordingly,
there are no internal costs associated with this software which were charged to
research and development. Consistent with SOP 98-1, the costs of this software,
which was purchased solely for internal use and will not be marketed externally,
have been capitalized.
NOTE 5 - COMMON STOCK
Upon incorporation, 4,000,000 shares of common stock were distributed at $.001
per share to the board of directors for $4,000. The second share issuance was
for 5,000,000 common shares at $.01 per share for $50,000. Under Regulation D,
Rule 504, 943,800 shares of common stock were issued at $1.00 per share for cash
and subscriptions. At November 30, 1998, $538,050 in stock subscriptions were
receivable and subsequently $491,305 of this was received by January 11, 1999.
At November 30, 1998 the Company's stock offering was over-subscribed by
$90,000, which was recorded on the Company's balance sheet as a current
liability. This overage of $90,000 was repaid in December, 1998.
27
<PAGE>
NOTE 5 - COMMON STOCK (Continued)
In September 1998, the Company adopted the Elgrande.com Inc. 1998 Directors and
Officers Stock Option Plan, a non-qualified plan. This plan allows the Company
to distribute up to 1,000,000 shares of common stock to officers, directors,
employees and consultants through the authorization of the Company's Board of
Directors.
In the period ending November 30, 1998, the Company issued 850,000 common stock
shares of common stock for the services of consultants. The Company valued these
services at $50,000. The shares issued include negotiation rights and will begin
to vest in April, 1999 with 20% of shares vesting every six months until the
consultants are fully vested in their shares.
NOTE 6 - RELATED PARTIES
Certain consultants which received common stock are related to the Company's
directors and stockholders. Of the 850,000 shares issued to consultants, 187,500
shares were issued to family members of directors who provided services to the
Company.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space in Vancouver, B.C., Canada from Yaletown Centre
Investment Ltd. for $2,347.50 per month. The lease is effective from September
1, 1998 to August 31, 2001. The terms of the lease required the Company to give
the lessor a $3,600 refundable security deposit.
Future minimum rental commitments under the operating lease are as follows:
Year Ending November 30, 1999 $28,170
Year Ending November 30, 2000 28,170
Year Ending November 30, 2001 21,128
-------
$77,468
=======
Database Development
The Company's purchase commitment for services to develop a database at November
30, 1998 totaled $247,000, of which $72,800 was paid in 1998 and the balance of
$174,200 is expected to be paid by March 1999. As of November 30, 1998, the
Company considered that the majority of the services contracted for were payable
and accrued the balance owed of $174,200 as part of accounts payable.
28
<PAGE>
NOTE 8 - TRANSLATION OF FOREIGN CURRENCY
The Company has adopted Financial Accounting Standard No. 52. The Canadian
foreign exchange rate has remained approximately the same since inception
therefore, there are no material exchange rate transaction gains or losses. In
the future, the Company will record such transactions in the Statement of
Stockholders' Equity.
NOTE 9 - CONCENTRATION OF CREDIT RISK FOR CASH HELD AT BANKS
The Company maintains cash balances at two banks. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation up to $100,000. At
November 30, 1998 the cash balance at one institution exceeded this insured
amount by $87,660.
NOTE 10 - LONG-TERM DEBT
The Company's long-term debt consists of a note secured by furniture and
computers for $47,000. The terms of this agreement call for a balloon payment of
all principal on November 30, 2000. The Company's management expects to pay this
amount by the due date of the loan, which does not contain a stipulated rate of
interest. Upon origination the estimated current value of this debt was $39,543.
Imputed interest accrued at 8% per annum from September 15, 1998 to November 30,
1998 was $529.
NOTE 11 - RESTATED FINANCIAL STATEMENTS
The Company's audited financial statements have been reissued on April 12, 1999
to reflect changes requested by the Securities and Exchange Commission in
connection with the filing of the Company's Form 10-SB. These changes do not
affect the auditor's opinion, balance sheet or statement of operations.
Additional disclosures on the Company's intangible assets (database software and
organizational costs), on stock over-subscription payable, and on issuance of
common stock to consultants were made in Notes 4 and 5, respectively.
In addition, the Company has modified its Statement of Cash Flows to reclassify
a noncash expense item under adjustments to reconcile net loss in cash flows
from operating activities.
29
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
3. (i) Articles of Incorporation *
(ii) By-laws*
10.1 Offering Sales Agency Agreement among El Grande.Com, Inc.,
and Pacific Rim Investment Inc.*
10.2 MacDonald Harris & Associates Ltd., Consulting Agreement*
10.3 M. Page Consulting Agreement*
10.4 J. Parfitt Consulting Agreement*
10.5 R. Palach Consulting Agreement
10.6 Office Lease dated August 27, 1998
10.7 Office Lease dated December 22, 1998
27 Financial Data Schedule*
* Previously filed as an exhibit to Form 10-SB filed on February 2, 1999
30
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Amendment No 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly aut horized.
Elgrande.com Inc.
(Registrant)
By:
MICHAEL PAGE
- ------------
Michael Page, President, Chairman of the Board
April 19, 1999
RANDAL PALACH
- -------------
Randal Palach, Chief Executive Officer
CARLTON PARFITT
- ---------------
Carlton Parfitt, Chief Financial Officer, Secretary-Treasurer, Director
April 19, 1999
DENNIS BROVARONE
- ---------------
Dennis Brovarone, Director
April 19, 1999
31
CONSULTING AGREEMENT
This Consulting Agreement ("the Agreement") is made the March 22, 1999
Between:
Elgrande.com, Inc., a British Columbia Corporation, with offices at
308-1040 Hamilton Street, Vancouver, BC, V6B 2R9, Canada (Hereinafter
referred to as "Elgrande.com")
And:
Randal Palach, an individual located at 435 Malabar Drive, Waterloo,
Ontario, N2K 2P7, Canada (Hereinafter referred to as "The
Consultant").
Whereas:
Elgrande.com wishes to engage the Consultant on terms and conditions set forth
herein and the Consultant wishes to be engaged on terms and conditions set
out herein.
Now therefore witnesseth that, the parties for valuable consideration contained
herein agree with each other as follows:
1. Elgrande.com herein agrees to engage the Consultant and the Consultant
hereby accepts said engagement with Elgrande.com upon terms and conditions
set forth below.
2. The referenced Consulting Agreement shall commence April 5th, 1999 and
shall continue for a period of 6 months. Elgrande.com, at its sole
discretion, may renew the contract on terms and conditions mutually agreed
to, should Elgrande.com determine the engagement requires renewal. Any
offer of renewal would be subject to agreed terms and conditions, including
the discharge clause contained herein.
3. The Consultant is engaged on a full time basis during the period of this
Agreement, as a Chief Executive Officer. The Consultant shall report to the
Director of this department. Consultant shall provide services as directed
by said Supervisor.
4. The Consultant shall also carry out other such duties as the Board of
Directors and/or the President shall request.
5. Compensation shall be at the rate of $12,500 per month payable May 1st,
June 1st, July 1st, August 1st, September 1st and October 1st. It is also
agreed that compensation will include 25,000 Shares valued at $1.00 each
($25,000) for this 6 month engagement. Consultant is expected to provide 40
hours of service per week. This may vary, depending on the requirements of
the Supervisor, the President, or the Board of Directors. Consultant agrees
to devote all necessary
-32-
<PAGE>
time, attention, and energy to the performance of whatever duties in the
division as designated by the Supervisor, the President, or Board of
Directors. Consultant shall be responsible for any taxes eligible as a
result of the fees paid to the consultant. Elgrande.com will be responsible
for travel, entertainment and lodging expenses incurred as a consultant for
the company.
6. The Consultant shall diligently and competently devote his time to the
performance of his duties under this Agreement and shall commence providing
such services on April 5th, 1999.
7. The Consultant agrees to exert his best effort to preserve for the benefit
of Elgrande.com the goodwill of Elgrande.com's clients and those who may
have business relations with Elgrande.com or its parent company,
Elgrande.com Inc.
8. Notwithstanding anything else contained herein, Elgrande.com may:
a) Give 30 days prior written notice in writing, to the Consultant that
Elgrande.com is being wound up or will cease to carry out business.
b) That the Board of Directors has executed a resolution stating that the
business of Elgrande.com is being terminated and its assets
liquidated.
c) That this Consulting Agreement is terminated, and all rights,
obligations, and duties of the parties are at an end.
In addition:
d) In the event that during the term of this Agreement, the Consultant
shall become disabled by accident or illness so as to be unable to
perform the duties required, the Consultant will not be paid for
services during the period of illness or disablement. Should this
extend for a period of 30 days, then Elgrande.com has the right to
terminate the Agreement.
9. Notwithstanding anything contained herein in this Agreement, Elgrande.com
may discharge the Consultant for cause at any time upon 30 days written
notice and upon the occurrence of such discharge for cause, this Agreement,
and all rights, duties, and obligations shall terminate except as to those
in regards to confidentiality which shall remain in force and effect.
10. This Agreement is inclusive and supersedes any and all employment,
consulting or other agreements (with the exception of a Non disclosure
agreement) whether written or oral by and between the Consultant and
Elgrande.com and any such prior agreements are hereby cancelled effective
as at the date of this Agreement.
11. The Consultant agrees to abide by the confidentiality terms attached as
Exhibit "A" and said terms are part of this Agreement and incorporated
herein. The confidentiality terms of this Agreement shall be in effect as a
condition of Elgrande.com Inc. and Elgrande.com entering into this
Agreement with the Consultant. Said terms shall survive the termination of
the Consultant's engagement and such termination shall not be grounds for
the release of any confidential material to any third party.
-33-
<PAGE>
12. This Agreement shall inure to the benefit of and be binding upon
Elgrande.com, its successors and assigns, including, but not limited to:
Any corporation which may acquire all substantially all of Elgrande.com's
assets and business
Any corporation with or into which Elgrande.com may be consolidated or
merged
Any corporation that is the successor corporation in a share exchange and
the Consultant, their heirs, guardians and personal and legal
representatives.
13. The law of the Province of British Columbia shall govern the Agreement and
in all respects in accordance with said law.
14. The Consultant agrees to perform their duties hereunder for any subsidiary
of Elgrande.com and/or Elgrande.com Inc. as directed by the President or
Board of Directors.
15. This Agreement contains the entire agreement of the parties and may only be
amended in writing.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SET THEIR HAND AS OF THE DAY FIRST
ABOVE WRITTEN.
Date: April 2, 1999
- -------------------
/s/ Micahel Page, President
----------------------------
Elgrande.com, Inc.
/s/ Randal Palach
----------------------------
Randal Palach
-34-
<PAGE>
THIS AGREEMENT made as of the 27 day of August 1998,
BETWEEN:
YALETOWN CENTRE INVESTMENTS LTD., (Incorporation No.378951 a body corporate
duly incorporated under the laws of the Province of British Columbia,
having a registered and records office at 708 N. Tower, Oakridge Centre,
650 West 41st Avenue, Vancouver, British Columbia V5Z 2M9
(hereinafter called the "Landlord")
OF THE FIRST PART
AND:
Intellicom Canada Communications Inc. (Incorporation No.561893 BC) a body
corporate duly incorporated under the laws of the Province of British
Columbia, having a registered and records office at #10-20372 Fraser Hwy,
Langley, BC V3A 4G1
(hereinafter called the "Tenant")
AND:
OF THE SECOND PART
James West and Micheal Page , Businessperson, of Suite 2604 - 1500 Hornby
Street, Vancouver, BC V6C 1VS
(hereinafter called the "Covenantor")
WHEREAS:
A. The Landlord is the registered owner of that certain parcel or tract of
land and premises situate, lying and being in the City of Vancouver, in the
Province of British Columbia, and known and described as:
Parcel Identifier: 011-939-150
Lot E (Explanatory Plan 19156)
Block 76
District Lot 541
Plan 3469
upon which is situate the building (as hereinafter defined);
B. The Landlord and Tenant are desirous of entering into a lease of the
Demised Premises (as hereinafter defined);
NOW THEREFORE WITNESSETH THISAGREEMENT that in consideration of the mutual
covenants, agreements, representations and warranties and farther in
consideration of the payment by the Tenant to the Landlord of the rents
hereinafter provided, the parties agree as follows:
-2-
-35-
<PAGE>
ARTICLE 1-DEFINITIONS
1.1 The terms defined in this Article shall for all purposes of this Lease or
other instruments supplemental hereto, have the meanings herein specified,
unless the context expressly or by necessary implication otherwise requires:
(a) "Additional Rent" means any of the costs and expenses at any time
payable by the Tenant pursuant to Article 6 hereof;
(b) "Basic Rent" means the rent described in paragraph 5.1 hereof;
(c) "Building" means the building situate on the Land, and includes any
additions, alterations, or extensions thereto;
(d) "Building Equipment" means all machinery, boiler, plumbing, wiring,
heating, air-conditioning and lighting and other equipment which is an
integral part of the Building, if any, other than Tenant's Equipment;
(e) "Common Areas" means those areas that are designated by the landlord
as Common Areas (which designation may be changed from time to time)
including, without limitation, the root, exterior weather walls,
pedestrian sidewalks, exterior landscaped areas, parking areas,
roadways, sidewalks, all enclosed malls, courts and arcades, public
hallways, open malls, service corridors, stairways, escalators, ramps,
moving sidewalks and elevators and other transportation equipment and
systems, interior landscaped areas, public washrooms, electrical,
telephone, meter, valve, mechanical, mail, storage and janitor rooms
and galleries, fire prevention, security and communications systems,
general signs, columns, all other installations or services located
therein or related thereto as well as the structures housing the same,
truck courts, common loading areas and driveways;
(f) "Common Maintenance Cost" means the total, without duplication, of the
expenses incurred by the Landlord for operating, maintaining and
repairing the Building (including necessary replacements, and shall,
without limiting the generality of the foregoing), include the
aggregate of:
i) the costs of repairs, maintenance and such replacements to the
Common Areas and the Common Facilities as are properly chargeable
in accordance with sound accounting practice to operating
expenses as distinguished from capital replacement or
improvements;
ii) janitorial, window-cleaning and other similar costs, including
supplies and equipment;
iii) the expense for gardening and landscaping, line painting, rental
of signs and equipment, lighting, sanitary control, the removal
of snow, parking areas cleaning and security;
iv) wages paid for maintenance and operating personnel, including
payments for workers compensation, unemployment insurance,
vacation pay, Canada Pension Plan contributions and fringe
benefits whether statutory or otherwise;
v) scavenging, garbage and waste collection and disposal;
vi) the cost of fuel, electrical power and other utilities furnished
to the Building;
vii) equipment or sign rental; and
-3-
-36-
<PAGE>
viii)the cost of any independent contractors engaged to perform any
of the foregoing services;
(g) "Common Facilities" means the electrical, music and public address
systems, heating ventilating, air-conditioning, plumbing and drainage
equipment and installations and any enclosures constructed therefor,
fountains, customer service stairways, escalators, ramps, moving
sidewalks, elevators, signs, lamp standards, public washroom
facilities and parking deck and all other facilities which are
provided or designated (which designation may be changed from time to
time by the Landlord and which are located within the Building.)
(h) "Cost of Heating, Ventilating and Air-Conditioning" means the total,
without duplication, of the expenses incurred by the Landlord for
operating, maintaining, repairing and replacing any heating,
air-conditioning or ventilation systems or equipment ("HVAC"), and
shall without limiting the generality of the foregoing, include the
aggregate of:
i) the amount expended by the Landlord for fuel, water, electricity
and additives for the HVAC;
ii) the total annual costs to boiler and pressure vessels insurance
coverage paid by the Landlord for insurance;
iii) wages paid to maintenance and operating personnel for the HVAC,
including payments for workers compensation, unemployment
insurance, vacation pay, Canada Pension Plan contributions and
fringe benefits whether statutory or otherwise;
iv) the costs of repairs, maintenance and such replacements to the
HVAC as are properly chargeable, in accordance with sound
accounting practice to operating expenses, as distinguished from
capital replacements or improvements;
v) the portion of municipal tax costs from municipal taxes which may
be reasonably allocated to the HVAC.
(i) "Costs of Insurance" means the annual cost to the Landlord to take out
insurance in respect of the Building and the Land (as set out in
Article 8 hereof) and such other insurance as the Landlord may from
time to time determine.
"Demised Premises" means all that portion of the Building which is
outlined in red on Schedule "A" attached hereto and more particularly
referred to as Suite 308, 1040 Hamilton Street, Vancouver, British
Columbia, consisting of approximately 1,878 square feet out of a total
square footage of 45,381 square feet;
(k) "Land" means that parcel or tract of land and premises legally
described in Recital "A" hereof;
(1) "Lease" means this instrument as originally executed and delivered or,
if amended, or supplemented or renewed, as so amended, or supplemented
or renewed;
(m) "Realty Taxes" means all real estate taxes, assessments, rates and
charges and other governmental impositions general or special,
ordinary or extraordinary, foreseen or unforeseen, of every kind,
including, without limitation, water and sewer charges, assessments
for local or public improvements and school taxes which may at any
time during the term of the Lease be imposed, assessed or levied in
respect of the land and/or in respect of the improvements from time to
time thereon, including any cost or expense by way of legal fees,
appraiser's fees or fees of a similar nature incurred by the Landlord
in conducting any appeal in respect of any such taxes, rates, charges
or impositions, all such amounts to be adjusted to exclude any portion
thereof payable for periods outside the Term of Lease.
-37-
<PAGE>
(n) "Security Deposit" means the deposit described in paragraph 5.3
hereof.
(o) "Special Tenant Expenses" means the expenses described in paragraph
6.2 hereof;
(p) 'Structural Repairs" means repairs necessary from time to time to the
foundations, supports, beams, exterior roof and bearing walls of the
Building, painting exterior walls, landscaping and replacement of
Common Area fixtures, provided that if any dispute shall arise between
the Landlord and Tenant as to whether any given repairs are or are not
Structural Repairs then the matter shall be resolved by binding
arbitration under the Commercial Arbitration Act (British Columbia)
decided by a single arbitrator who shall be a duly qualified Civil
Engineer named by the Landlord and the Tenant and the decisions of
such arbitration shall be conclusive and binding upon the parties
hereto;
(q) 'Tenant's Equipment" means all personal property, apparatus, machinery
and equipment, other than Building Equipment, owned by the Tenant and
used or intended for use in connection with the operation of the
business of the Tenant and whether installed prior to the commencement
of the Term of Lease or at any time and from time to time during the
Term of Lease;
(r) "Tenant's Proportionate Share" with respect to any amount means 4.14 %
of such amount;
(s) "Term" means the term of THREE (3) years described in paragraph 3.1
hereof;
(t) "Commencement Date" means September 1,1998;
(u) "Termination Date" means August 31, 2001;
ARTICLE 2- GRANT OF LEASE
2.1 The Landlord hereby demises and leases upon the Tenant and the Tenant
hereby takes and rents the Demised Premises all on the terms and conditions
herein contained.
2.2 In addition to the lease herein of the Demised Premises, the Landlord
hereby grants to the Tenant and the Tenant's invitees, agents and servants,
in common with the Landlord and all other person authorized by the Landlord
from time to time, a license to use the Common Areas for the purpose of
gaining access to the Demised Premises and better using the same, provided
that nothing herein shall in any way restrict the Landlord from entering,
maintaining, altering or changing the Common Areas, or from altering or
adding to the Building as long as the Tenant is able to gain access to the
Demised Premises.
ARTICLE 3- TERM OF LEASE
3.1 The Lease shall be for a term of THREE (3) years the "Term" commencing
September 1, 1998 (the "Commencement Date") and ending on August 31, 2001
(the "Termination Date").
ARTICLE 4- TO OPERATE DURING THE TERM
4.1 The Tenant will not during the term vacate the leased premises either in
whole or in part (whether actually or constructively) but will:
(a) conduct its business in the entire Demised Premises;
308-Lease-08/23/98
-5-
-38-
<PAGE>
(b) actively carry on in the Demised Premises, the type of business for
which the Demised Premises are leased to the Tenant.
ARTICLE 5- RENT
5.1 The Tenant shall pay during the Term total Basic Rent of EIGHTY-FOUR
THOUSAND FIVE HUNDRED TEN DOLLARS ($84,510.00) payable monthly in advance
on the first day of each and every month in consecutive monthly
installments TWO THOUSAND THREE HUNDRED FORTY-SEVEN DOLLARS AND FIFTY CENTS
($2,347.50), and the first such monthly installments, or a pro-rated
portion thereof in the event this Lease is effective other than on the
first day of a month, shall be paid on execution of this Lease and
subsequent installments shall be paid on the firs t day of each and every
month during the term hereby demised;
5.2 The Landlord acknowledges receipt of THREE THOUSAND SIX HUNDRED DOLLARS AND
TWENTY-EIGHT CENTS ($3,600.28) representing the payment of Basic Rent,
Additional Rent and G.S.T. for the first month of the Term.
5.3 The Landlord acknowledges receipt of a Security Deposit in the amount of
THREE THOUSAND SIX HUNDRED TWENTY-EIGHT DOLLARS AND TWENTY-EIGHT CENTS
($3,600.28). The Security Deposit shall be held by the Landlord without
liability for interest, as security for the faithful performance by the
Tenant of all the terms, covenants and conditions of this Lease by the
Tenant to be kept, observed and performed. If at any time during the Term
the Rent or other sums of payable by the Tenant are overdue and unpaid, or
if the Tenant fails to keep or perform any of the terms, covenants and
conditions of this Lease to be kept, observed and performed by the Tenant,
then the Landlord at its option may, in addition to any and all other
rights and remedies provided for in this Lease or by law, appropriate and
apply the entire Security Deposit, or so much thereof is necessary to
compensate the Landlord for loss or damage suffered by the Landlord due to
such breach on the part of the Tenant. If the entire Security Deposit, or
any portion thereof is appropriated and applied by the Landlord for payment
of overdue rent or other sums due and payable to the Landlord by the Tenant
hereunder, then the Tenant shall, upon written demand of the Landlord,
forthwith rernit to the Landlord a sufficient amount in cash to restore the
Security Deposit to the original sum deposited, and the Tenant's failure to
do so within three (3) days after receipt of such demand constitutes a
breach of this Lease. If the Tenant complies with all of the terms,
covenants and conditions and promptly pays all of the rent and other sums
herein provided and payable by the Tenant to the Landlord, the Security
Deposit shall be returned in full to the Tenant without interest within
sixty (60) days after the end of the Term, or within sixty (60) days after
the earlier termination of the Term, as the case may be.
5.4 The rent reserved hereunto shall be paid in Canadian Funds to the Landlord
at its address for notice herein unless another place of payment is
designated by the Landlord to the Tenant in writing, and the Tenant shall
(at the request of the Landlord) deliver postdated cheques to the Landlord
on the first day of the Term for the payment of Rent to fall due in the
months in the Term.
5.5 The Lease shall be a net lease, and the Basic Rent shall be net to the
Landlord, and shall yield to the Landlord the entire Basic Rent during the
Term without abatement, deduction or set-off of any nature whatsoever and
all costs, expenses, rates, taxes, charges and obligations of every kind
and nature whatsoever relating to the Demised Premises, whether or not
herein referred to and whether or not of a kind now existing or within the
contemplation of the parties hereto, shall be paid by the Tenant excepting
only any Landlord's Corporation Capital Tax, income tax or taxes other than
business tax imposed or levied by any authority whatever on the income
received by the Landlord from the Demised Premises.
5.6 Any money payable by the Tenant to the Landlord in addition to the Basic
Rent shall be deemed to be rent. All monies payable by the Tenant to the
Landlord pursuant to the Lease shall bear interest at the rate of 2% per
month (26.824% per annum) from the date of default.
308-Lease-08/26/98
-6-
-39-
<PAGE>
ARTICLE 6- ADDITIONAL RENT
6.1 The Tenant shall pay to the Landlord as additional rent (the "Additional
Rent") to the Landlord in each year of the Term of Lease, within ten (10)
days after demand the Tenant's Proportionate Share of:
(a) Common Maintenance Cost;
(b) Cost of Heating, Ventilating and Air-Conditioning;
(c) Cost of Insurance;
(d) Realty Taxes;
(e) an administrative fee equal to 15% of the total of expenses incurred
by the Landlord under paragraphs 6.1 (a)to (d) inclusive;
together with the total of:
(f) all taxes, license fees, duties, rates, assessments or imposts of
whatsoever nature levied by any authority whatsoever in respect of the
Land and Building as shall be attributable to the business or property
of the Tenant, or to any thing or things erected or placed in, upon or
under, or fixed to the Demised Premises by or with the consent or
permission of the Tenant during the Term, including all fixtures,
machines, equipment and other things of any nature or description not
the property of the Landlord or which may be lawfully removed by the
Tenant;
(g) the total cost of all local improvements and utility charges, if any,
and all charges for water, gas, electric light, heat and power,
ventilating and air-conditioning, telephone, scavenging and garbage
and waste collection or other similar service used, rendered or
supplied upon or in connection with the Demised Premises and the
Tenant will indemnify and save the Landlord harmless against and from
any liability or damages on any such account;
(h) Goods and Services Tax ("G.S.T.") payable by the Tenant on Basic Rent
and any of the foregoing payments; and
(i) all other amounts which shall become due and payable pursuant to the
Lease.
6.2 The Tenant shall pay the Landlord upon demand the charges established by
the Landlord from time to time for all supplementary services and utilities
provided to the Tenant by the Landlord or its agents (the "Special Tenant
Expenses"). Such supplementary services and utilities shall include,
without limitation, security, maintenance, repair, janitorial, cleaning and
any other services provided outside ordinary business hours and/or in a
manner not considered by the Landlord as standard. Where any other expenses
over and above normal operations for the Centre is incurred or paid by the
Landlord specifically for the benefit of and at the request of the Tenant,
the Tenant shall pay such expense. The Landlord may charge and the Tenant
shall pay a service fee for providing such services or for incurring such
expense.
6.3 The Additional Rent shall, when in default, be deemed to be rent,
receivable as such, and all remedies of the Landlord on non-payment of
Basic Rent shall be applicable thereto. The obligation of the Tenant to pay
any of the aforementioned amounts owing, accrued or unpaid at the end of
the Lease Term shall survive the expiration or sooner termination of the
Lease.
6.4 The Tenant covenants to pay the Tenant's taxes and any and all fees or
amounts payable by the Tenant other than to the Landlord, in connection
with the Tenant's business in or occupation of the Demised Premises.
3O8-Lease-O8~3/98
-7-
-40-
<PAGE>
6.5 The Tenant may take advantage of any provisions of law whereby Realty Taxes
or any other amounts payable by the Tenant including amounts payable other
than to or through the Landlord may be paid by installments or deferred for
some portion of the fiscal period to which they relate, provided that no
fine, penalty, interest and expense arising from any failure by the Tenant
to pay any such amount when due and further provided that no fine, penalty
or cost is thereby incurred and the Tenant shall pay any fine, penalty,
interest and expense arising from any failure by the Tenant to pay any such
amount when due and further provided that the Landlord shall be at liberty
to pay any such amount (after five (5) days written notice to the Tenant of
its intention so to do) and may add to the next ensuing installment of rent
the amounts so paid including penalties, charges and interest in connection
therewith.
6.6 The Tenant shall have the right to contest at the Tenant's sole expense the
amount or validity of any Realty Taxes or other amounts imposed in respect
of the Demised Premises but nothing herein contained shall be deemed to
relieve the Tenant of its obligation to pay such Realty Taxes or other
amounts or to authorize the Tenant to defer payment of such Realty Taxes,
unless such deferment is lawful and the Landlord consents in writing to
such deferment and the Tenant has paid the full amount in dispute to the
Landlord, as security, including the amount of any possible penalties and
interest.
6.7 If the Tenant is contesting in good faith the amount or validity of any
Realty Taxes or any other assessment or impost and has complied with the
provision of this Article and if it becomes necessary for the Landlord to
join in or consent to such proceedings the Landlord shall join or consent
as required but the Tenant shall indemnify the Landlord against all expense
arising therefrom.
6.8 Notwithstanding the provisions of this Article, at any time during the Term
of lease the Landlord may by notice in writing require the Tenant to pay
and the Tenant shall pay to the Landlord, on each date following such
notice upon which installments on account of Basic Rent are payable, such
amount or amounts, which shall not bear interest, as the Landlord may from
time to time estimate as being necessary to provide to the Landlord
sufficient funds to pay the Additional Rent and if the amounts actually
charged or payable in any fiscal period shall exceed the amount or amounts
paid by the Tenant for such fiscal period, the Tenant shall pay to the
Landlord forthwith on demand the amount required to make up the deficiency,
and any overpayment made by the Tenant in such fiscal period shall
forthwith upon determination be returned without interest by the Landlord
to the Tenant.
6.9 The Tenant shall upon demand by the Landlord provide to the Landlord proof
in such form as the Landlord may reasonably require, that the Tenant has
paid when due any and all payments required hereunder to be made by the
Tenant other than to the Landlord
6.10 The Landlord shall at the request of the Tenant provide to the Tenant a
statement showing in reasonable detail the amount of any of the items set
out in paragraph 6.1.
ARTICLE 7- TENANT'S EOUIPMENT
7.1 At any time and from time to time during the Term the Tenant may install,
maintain and replace in the Demised Premises, any Tenant's Equipment as the
Tenant, in its sole discretion, may desire and, notwithstanding the fact
that the Tenant's Equipment shall nevertheless be and remain at all times
the property of the Tenant. The Tenant may not permanently remove any
material part of the Tenant's Equipment at any time during the Term without
the written consent of the Landlord which shall not be unreasonably
withheld.
7.2 The Tenant shall be responsible for and will repair all or any damage to
any part of the Demised Premises, including structural portions thereof
caused by installation or removal of any of the Tenant's Equipment,
fixtures, alterations, or improvements, and shall restore the Demised
Premises to the same condition as they were in at the Commencement of the
Term of Lease.
7.3 Any of the Tenant's Equipment remaining in the Demised Premises at the
termination of the Lease may be removed and stored by the Landlord, who
shall thereupon have the first and paramount lien against the said Tenant's
Equipment and the Landlord shall not be required to release possession
thereof until payment to the
3O8-Lease-08/23/98
-8-
-41-
<PAGE>
Landlord of the cost of removal and storage of the Tenant's Equipment and
if the Tenant fails to pay such cost within five (5) days of demand in
writing by the Landlord, the Landlord shall have the right to sell the same
and may apply the proceeds firstly in payment of the costs of such removal,
storage and sale and secondly to the Tenant's account.
7.4 The Landlord shall not be responsible for any loss or damage occurring to
the Tenant's Equipment, save and except for loss or damage caused by the
willful neglect of the Landlord or person for whom in law the Landlord is
responsible.
ARTICLE 8-INSURANCE
8.1 The Landlord, acting reasonably and as a prudent owner of the Land and
Building, may obtain at the expense of the Tenant to the extent of the
Tenant's Proportionate Share such insurance for the benefit of the Landlord
as the Landlord from time to time considers useful, expedient or
beneficial, including, without limitation, any or all of the following:
(a) a broad form of insurance against all risks of loss or damage to all
property owned by the Landlord relative to the Land and Building,
including coverage for fire, flood and earthquake, or any other form
of loss;
(b) insurance against all explosion, rupture or failure of boilers,
pressure vessels, air-conditioning equipment and miscellaneous
electrical apparatus on blanket basis with broad form cover, including
repair and replacement;
(c) insurance against loss of insurable gross rentals attributable to all
perils insured against by prudent landlords, including loss of all
rents receivable from tenants in the Building in accordance with the
provisions of their leases including all rents thereunder and all
other charges payable as additional rent thereunder, in such amount or
amounts as the Landlord or its mortgagees from time to time requires;
(d) insurance against third party liability hazards including exposure to
personal injury, bodily injury and property damage on an occurrence
basis, including insurance of all contractual obligations, and
covering also actions of all employees, other persons, sub-contractors
and agents while working on behalf of the Landlord; and
(e) insurance against any other form or forms of loss that the Landlord or
its mortgagees reasonably requires from time to time for like
properties similarly situated and for amounts against which a prudent
landlord would insure itself.
Notwithstanding any contributions by the Tenant to insurance premiums as
provided for in the Lease, no insurable interest is conferred upon the Tenant
under policies carried by the Landlord, the Landlord shall in no way be
accountable to the Tenant regarding the use of any insurance proceeds arising
from any claim, and the Landlord shall not be obliged on account of such
contributions to apply such proceeds to the repair or restoration of that which
was insured and it is hereby declared and agreed that if the Tenant may desire
to receive indemnity by way of insurance for any property, work or thing
whatever, the Tenant shall insure same for its own account and shall not look to
the Landlord for reimbursement or recovery in the event of loss or damage from
any cause, whether or not the Landlord has insured same and recovered therefor.
8.2 The Tenant shall, during the Term, at its sole cost and expense, take out
and keep in full force and effect, in the name of and with losses payable
to the Tenant, the Landlord and if required by the Landlord or the
Landlord's mortgagees, the following:
(a) property damage insurance, which shall include coverage on property of
every description and kind owned by the Tenant including the Tenant's
inventory and stock in trade, furniture and
308-Lease-08/23/98
-9-
-42-
<PAGE>
fixtures and such other property in or forming part of the Demised
Premises or for which the Tenant is responsible or legally liable
pursuant to the terms of the Lease, or which is installed by or on
behalf of the Tenant, including Tenant's Equipment, in an amount at
least equal in the opinion of the Landlord to the full insurable value
thereof calculated on a replacement cost basis without co-insurance
requirements and the perils insured against shall include fire and
water damage and a form of broad all-risk coverage and such additional
perils as are normally insured against in the circumstances by prudent
tenants, and as any mortgagee having a security interest in the
Building reasonably requires, or as the Landlord, from time to time,
demands;
(b) glass damage insurance, which shall include coverage for plate glass
or other glass and any high-value lettering or ornamentation thereon,
destroyed, damaged or stolen during the Term of Lease, such insurance
to be placed in an amount at least equal in the opinion of the
Landlord to the full insurance value thereof calculated on a
replacement cost basis, without deduction for depreciation and without
co-insurance requirements;
(c) public liability insurance applying to all operations of the Tenant
and which shall include bodily injury liability, liability with
respect to the loss or damage to the property of others, products
liability, contractual liability, contingent liability, non-owned
automobile liability and Tenant's legal liability with respect to the
occupancy by the Tenant of the Demised Premises, such policy to be
written on a comprehensive basis with limits of not less than
$2,000,000.00 per occurrence (or such higher limits as the Landlord or
its mortgagees require from time to time) and with a cross liability
clause;
(d) business intermption insurance applying to all operations of the
Tenant; and
(e) any other form or forms of insurance in such amounts and against such
perils as the Landlord or the Landlord's mortgagees reasonably require
from time to time.
All policies shall contain an undertaking by the insurers to notify the Landlord
and its mortgagees in writing not less than thirty (30) days prior to any
material change in terms, cancellation or other termination thereof.
8.3 All property damage policies written on behalf of the Tenant shall contain
a waiver of any subrogation rights which the Tenant's insurers may have
against the Landlord and against those for whom the Landlord is, in law,
responsible whether any such damage is caused by the act, omission or
negligence of the Landlord or by those for whom the Landlord is in law
responsible and the Tenant hereby releases and agrees to hold harmless the
Landlord from all liability for any loss or damage to or suffered by the
Tenant or its property or improvements, by oversight, fault or any other
cause whatsoever.
8.4 All policies shall be taken out with insurers acceptable to the Landlord
and on policies in form satisfactory from time to time to the Landlord and
the Tenant shall deliver certificates of insurance or, if required by the
Landlord or its mortgagees, certified copies of each such insurance policy
to the Landlord as soon as practicable after the placing of the same.
8.5 If the Tenant fails to take out or to keep in force any such insurance
referred to in this Article 8, or should any such insurance be reasonably
disapproved by either the Landlord or its mortgagees and the Tenant does
not obtain, reinstate or replace insurance, as the case may be, within
forty-eight (48) hours after written notice by the Landlord, or its
mortgagees do not approve of such insurance, (such notice of disapproval to
include the reasons therefor), the Landlord shall have the right, but not
the obligation, to effect such insurance at the sole cost of the Tenant and
all expenses of the Landlord shall be immediately payable by the Tenant to
the Landlord as Additional Rent hereunder and shall be due on the first day
of the next month following payment thereof by the Landlord, in addition to
and without prejudice to any other rights and remedies of the Landlord
under the Lease.
8.6 The Tenant will not keep, use, sell or offer for sale in or upon the
Demised Premises any article which may be prohibited by the fire insurance
policy or any other policies in force from time to time covering the Land
and Building, and further if the Tenant's occupancy of or conduct of
business in, the Demised Premises,
3O8-Lease-08/23/98
-10-
-43-
<PAGE>
whether or not the Landlord has consented to the same, causes any increase
in premiums for the insurance carried from time to time by the Landlord
with respect to the Land and Building, the Tenant shall pay the full amount
of any such increase in premiums as Additional Rent within ten (10) days
after bills for such additional premiums are submitted by the Landlord.
ARTICLE 9- REPAIRS
9.1
own cost and expense.
The Tenant covenants with the Landlord that the Tenant shall at all times during
the Term at its
(a) repair, maintain and keep the Demised Premises in good order and
repair, as a careful owner would do, reasonable wear and tear
excepted; and
(b) repair, maintain and keep all equipment and fixtures in the Demised
Premises in good order and repair and replace the same when necessary,
as a careful owner would do, including, without limitations, the floor,
windows, plate glass, glass partitions within the Demised Premises, and
any improvements now or hereafter made to the Demised Premises,
reasonable wear and tear and repairs for which the Landlord is
responsible only excepted; provided however that if such repairs by the
Landlord are required as a result of the act or omission of the Tenant,
its servants, agents or employees, the Tenant shall pay to the
Landlord, on demand, the costs of such repairs as Additional Rental and
the Tenant covenants to perform such maintenance, to effect such
repairs and replacements and to decorate at its own cost and expense as
and when necessary or reasonably required so to do by the Landlord.
9.2 The Tenant shall, when necessary and, whether upon receipt of notice from
the Landlord or not, effect and pay for such maintenance, repairs,
replacements or decoration as may be the responsibility of the Tenant under
the foregoing paragraph provided that no maintenance, repairs or
replacements to the structure, any perimeter wall, the store front, the
sprinkler system, the heating, ventilating, air-conditioning, plumbing,
electrical or mechanical equipment or the concrete floor shall be made
without the prior written consent of the Landlord, and in so doing shall
use contractors or other workmen designated or approved by the Landlord in
writing, such approval not to be reasonably withheld or delayed.
9.3 The Landlord covenants with the Tenant that the Landlord shall at all times
during the Term at the Tenant's cost and expense repair and replace as a
careful owner would do the heating, ventilating, air-conditioning,
plumbing, sprinkler, mechanical and electrical equipment and fixtures
(including all the parts, wiring and pipes thereof) within the Demised
Premises.
ARTICLE 10- STRUCTURAL DEFECTS
10.1 The Landlord shall be responsible to make good and repair any structural
defect in the Demised Premises by reason of a pre-existing condition in or
damage done to the Building in which the Demised Premises are located, or
damage caused by negligence of the Landlord, its servants or agents.
10.2 The Landlord shall cause proper maintenance of all Common Areas, at the
Tenant's cost to the extent of the Tenant's Proportionate Share.
3O8-Lease---08/23/98
- 11 -
-44-
<PAGE>
ARTICLE 11- CHANGES ALTERATIONS AND ADDITIONS
11.1 Hereafter and at any time and from time to time during the Term, the Tenant
shall have the right, subject to approval of the Landlord, at the Tenant's
expense, to make such changes and alterations in or to the Demised Premises
as the Tenant shall deem necessary or desirable in connection with the
requirements of its business but no structural change or alteration shall
be undertaken until detailed plans and specifications therefor and a list
of the contractors or tradesmen who the Tenant proposes to hire for the
work have first been furnished to and approved by and consented to in
writing by the Landlord, which approval and consent shall not be
unreasonably withheld.
11.2 The Tenant shall be responsible for procuring and paying for all required
municipal and other government permits and authorizations of the various
municipal departments and government divisions having jurisdiction
necessary or advisable in connection with any changes made pursuant to this
Article provided that the Landlord will, at the Tenant's expense, join in
application for such permits and authorizations whenever such action is
necessary.
11.3 All work done in connection with any change or alteration shall be done
promptly and in good and workmanlike manner and in compliance with the
valid and applicable building and zoning laws and with all other valid
laws, ordinances, orders, rules, regulations and requirements of all
federal, provincial and municipal governments, and the appropriate
departments, commissions, boards and officers thereof; and in accordance
with the orders, rules and regulations of the Canadian Fire Underwriters
Association, or any other body hereafter constituted exercising similar
functions; the cost of any such change or alteration shall be paid or
secured so that the Demised Premises shall at all times be free of liens
for labour and materials supplied, or claimed to have been supplied to the
Demised Premises.
11.4 All alterations or additions to the existing improvements, other than
Tenant's Equipment, shall upon attachment to the Demised Premises, be
deemed a part thereof; and title thereto shall immediately vest in the
Landlord without any liability on its part to pay for the same provided
that the Landlord may elect to require the Tenant to remove at the
expiration of the Lease all or any part of any improvement installed by or
on behalf of the Tenant, in which case such removal shall be done by the
Tenant forthwith, at the Tenant's expense, as well as all other repairs
necessitated by such removal, failing which the Landlord may carry out the
same at the Tenant's expense and without liability for damage to the
improvement so removed.
ARTICLE 12- DAMAGE OR DESTRUCTION
12.1 In the event that the Demised Premises are damaged or destroyed by any
peril or hazard recoverable under insurance maintained by the Landlord
under Article 8 then the Landlord shall immediately select a reputable
contractor and if such contractor:
(a) is of the opinion that the damage or destruction is capable of repair
with reasonable diligence within ninety (90) days of the date of the
damage then the Landlord shall deliver notice of its intention to
rebuild or repair and shall repair the damage with reasonable
diligence, or
(b) is of the opinion that the damage or destruction is not capable of
repair with reasonable diligence within ninety (90) days of the date
of the damage, then:
i) the Landlord may elect to repair such damage or destruction and
shall then repair the same with reasonable diligence, or
ii) either the Landlord or Tenant may elect to terminate the Lease.
12.2 In case the Demised Premises are damaged or destroyed by any peril or
hazard not recoverable under insurance maintained by the Landlord under
Article 8 then the Landlord may either elect to repair such
3O8-Lease-08/23/98
-12-
-45-
<PAGE>
damages or destruction and shall then repair the same with reasonable
diligence, or may elect to terminate the Lease.
12.3 If the Lease is not terminated by reason of such damage or destruction by
the Landlord or the Tenant and if such damage or destruction is such as to
render the Demised Premises wholly unfit for occupancy then the Basic Rent
and Additional Rent to be paid by the Tenant hereunder shall abate in
whole, or in proportion to the unoccupiable portion of the Demised
Premises, as the case may be, until the Landlord delivered a notice to the
Tenant that the repairs have been substantially completed at which time all
rent payable by the Tenant hereunder shall recommence.
12.4 If the Landlord herein does not give the Tenant notice of its intention to
either repair such damage or destruction or to terminate the Lease within
thirty (30) days of the damage or destruction then the Tenant may by notice
in writing delivered to the Landlord terminate the Lease, effective the
date upon which such termination notice is received.
12.5 If the Landlord shall elect under any provision of this Article not to
repair such damage or destruction and as a result the Lease terminates, the
Tenant shall cause all insurance proceeds payable in respect of damages to
the Demised Premises to be paid in accordance with the provisions of the
policy of insurance.
ARTICLE 13- USE OF DEMISED PREMISES
13.1 The Tenant shall use the Demised Premises only for general office and for
no other purposes without the written consent of the Landlord.
13.2 During the Term, the Tenant in the use, occupation, alteration or repair of
the Demised Premises, or any property used in connection therewith, shall
comply with the requirements of every applicable valid law, ordinance, rule
or regulation and with the orders, rules and regulations of The Canadian
Fire Underwriters Association, or any other body hereafter constituted
exercising similar functions, and with the requirements of all policies of
public liability, fire and the kinds of insurance at the time in force with
respect to the Demised Premises or any part thereof.
13.3 The Tenant covenants and agrees that it will carry on its business on the
Demised Premises continuously during the Term.
ARTICLE 14- CERTAIN RIGHTS AND DUTIES OF LANDLORD
14.1 The Tenant will permit the Landlord and authorized representatives of the
Landlord to enter into the Demised Premises at any time in case of
emergency and at all reasonable times upon reasonable notice during usual
business hours for the purpose of inspecting the same and of ascertaining
whether the Tenant has failed or neglected to perform any act which it is
required to perform under the provisions of the Lease, and also the
Landlord shall be permitted to enter as aforesaid for the purpose of making
any necessary repairs to the Demised Premises and performing any work
therein, which the Tenant has failed to do, that may be necessary to comply
with any valid law, ordinance, rules or regulations of The Canadian Fire
Underwriters, or of any public authority, or any similar body, or to comply
with the requirements of insurance policies then in force with respect to
the Demised Premises, provided that nothing herein shall imply any duty
upon the part of the Landlord to do or to pay for any work which under any
provision of the Lease the Tenant may be required to perform, and the
performance thereof by the Landlord in the event the Tenant does not
perform the same after demand shall not constitute a waiver of the Tenant's
default in failing to perform the same.
14.2 The Tenant upon paying the Basic Rent, Additional Rent and all other
charges herein provided for, and observing and keeping the covenants,
agreements and conditions of this Lease on its part to be kept, shall
lawfully and quietly enjoy, hold, occupy, control and manage the Demised
Premises during the Term without
3O8-Lease-08/23/98
- 13 -
-46-
<PAGE>
hindrance or molestation of the Landlord, or any person or persons claiming
under the Landlord, save as expressly provided by the Lease.
ARTICLE 15- CONDITIONAL LIMITATIONS DEFAULT PROVISIONS
15.1 In case the Term or any of the goods and chattels of the Tenant shall be at
any time seized in execution or attachment by a creditor of the Tenant or
the Tenant shall make any assignment for the benefit of creditors or become
bankrupt or insolvent or take the benefit of any Act now or hereafter in
force for bankrupts or insolvent debtors, or, if the Tenant is a
corporation and any order shall be made for the winding-up of the Tenant,
or other termination of the corporate existence of the Tenant or a Receiver
or Receiver-Manager is appointed for the Tenant under any Debenture or
other security or by Court Order or otherwise, then in any such case the
Lease shall at the option of the Landlord immediately cease and terminate
and the Term shall immediately become forfeited and void and the then
current month's rent and the next ensuing three (3) month's rent shall
immediately become due and be paid and the Landlord may, without notice,
re-enter and take possession of the Demised Premises as though the Tenant
or other occupant or occupants of the Demised Premises was or were holding
over after the expiration of the Term of Lease without any right
whatsoever.
15.2 During the Term, or any renewal, the Tenant shall make default in the
payment of any rent due under the Lease, and such default shall continue
for three (3) days after notice thereof by the Landlord, the Lease shall
cease and come to an end on the date specified in the said notice, which
date shall not be less than three (3) days after the delivery of such
notice, and the Tenant will then quit and surrender the Demised Premises to
the Landlord.
15.3 During the Term or any renewal thereof the Tenant shall not observe,
perform or keep any of the other covenants in the Lease and such default
shall continue for three (3) days after written notice thereof by the
Landlord to the Tenant, or if the Tenant fails to proceed promptly and with
all due diligence to cure such default, then and in any such case, unless
the default upon which said notice was based has been cured in the meantime
the Lease shall cease and come to an end on the day specified in the said
notice, which date shall not be less than three (3) days after delivery of
such notice, and the Tenant will then quit and surrender the Demised
Premises to the Landlord, provided that in the event of a default which is
capable of being cured but which cannot with due diligence be cured within
a period of three (3) days, the three (3) day period shall be extended for
such time as shall allow the Tenant proceeding promptly and with all due
diligence a reasonable opportunity to cure such default.
15.4 All costs, charges and expenses incurred by the Landlord in recovering or
enforcing payment of monies owing hereunder or in enforcing the terms and
conditions of the Lease, whether or not any default be cured within the
time allowed, including the costs of the Landlord as between solicitor and
own client on a lump sum basis, expenses of taking possession of the
Demised Premises and realizing upon goods and chattels of the Tenant, shall
be paid by the Tenant and such sums shall be deemed to be rent payable
under the Lease.
15.5 No remedy conferred upon or reserved to the Landlord herein or by law or
otherwise shall be considered exclusive of any other remedy, but the same
shall be cumulative with and in addition to every other remedy available to
the Landlord, and all such remedies may be exercised concurrently as well
as individually from time to time, and as often as the Landlord shall deem
fit.
ARTICLE 16- DISTRESS
16.1 The Tenant waives and renounces the benefit of any present or future statue
taking away or limiting the Landlord's right of distress, and covenants and
agrees that notwithstanding any such statute none of the goods and chattels
of the Tenant on the Demised Premises at any time during the Term shall be
exempt from levy by distress for rent in arrears.
3O8-Lease-08/23/98
-14-
-47-
<PAGE>
ARTICLE 17- VOIDANCE OF LEASES VACANT OR IMPROPER USE
17.1 It is hereby further declared and agreed between the Landlord and Tenant
that in the case the said Premises or any part thereof become and remain
vacant and unoccupied for the period of fifteen (15) consecutive days, or
be used by any other person or persons, or for any other purpose than as
above provided, without the written consent of the Landlord, the Lease
shall, at the option of the Landlord, cease and be void and the Term of
Lease shall expire and be at an end, anything herein before to the contrary
notwithstanding, and the then current month's rent and an additional three
(3) months' rent shall thereupon become immediately due and payable and the
Landlord may re-enter and take possession of the Demised Premises as though
the Tenant or other occupant or occupants of the Demised Premises, was or
were holding over after the expiration of the Term of Lease, and the
balance of the Term of Lease shall be forfeit; or in such case instead of
determining the Lease as aforesaid and re entering upon the Demised
Premises, the Landlord may take possession of the Demised Premises or any
part of parts; and let and manage the same and grant any lease or leases
thereof upon such terms as to the Landlord may appear to be reasonable, and
demand, collect, receive and distrain for all rental which shall become
payable in respect; and apply the said rental after deducting all expenses
incurred in connection with the Demised Premises and in the collection of
the said rent, including reasonable commission for the collection thereof
and the management of the Demised Premises, upon the rent hereby reserved,
and the Landlord, and every agent acting for the Landlord from time to time
shall, in so acting, be the agent of the Tenant who alone shall be
responsible for any monies except those actually received, notwithstanding
any act, neglect, omission or default, of any such agent acting as
aforesaid.
ARTICLE 18- WATER AND GAS DAMAGE
18.1 The Landlord shall not be liable for any damage to any property at any time
upon the Demised Premises arising from gas, steam, water, rain or snow,
which may leak into, issue and flow from any part of the Building, or from
the gas, water, steam or drainage pipes, sprinklers, or plumbing works of
the Building or from any other place or quarter, or for any damage caused
by or attributable to the condition or arrangement of any electric or other
wires in the Building.
ARTICLE 19- WATER
19.1 The Landlord agrees to supply normal water consumed on the Demised Premises
and the cost of such supply will be borne by the Tenant in its
Proportionate Share, but in the event of any abnormal consumption of water,
either by reason of the character of the business carried on by the Tenant,
or by the use of mechanical or other contrivances, the Tenant consents to
the installation of a water meter at his own expense, if necessary, and
further agrees to pay for the excess water consumption on the Demised
Premises over and above his Proportionate Share.
ARTICLE 20-SIGNS
20.1 It is further agreed by and between the Landlord and the Tenant that no
sign, advertisement or notice shall be inscribed, painted or affixed by the
Tenant on any part of the outside or inside of the Building whatsoever,
unless of such manner, colour, size and style and in such places upon or in
the Building as shall be consented to in writing by the Landlord and
furthermore, the Tenant, on ceasing to be the Tenant of the Demised
Premises, will before removing his goods and fixtures from the Demised
Premises, cause any sign as aforesaid to be removed or obliterated at his
own expense and in a workmanlike manner to the satisfaction of the
Landlord.
3O8-Lease-O8/23/98
-15-
-48-
<PAGE>
ARTICLE 21-ILLUMINATION OF DISPLAY WINDOWS
21.1 The Tenant shall keep the display windows of the Demised Premises suitably
illuminated during the business hours of the Building as such hours may be
determined from time to time by the Landlord and during such other
reasonable hours as the Landlord may determine.
ARTICLE 22 - NUISANCE OR MENACE
22.1 The Tenant will not carry on or perform or suffer or permit to be carried
on, performed or suffered on the Demised Premises any business practice or
act or engage in any activity which may be deemed a nuisance or a menace or
which in any way may injure the Building.
ARTICLE 23- NO ABATEMENT OF RENT
23.1 Save and except where the Landlord receives insurance proceeds on account
of the cases noted herein, there shall be no abatement from or reduction of
the Basic Rent or Additional Rent due hereunder, nor shall the Tenant be
entitled to damages, losses, costs or disbursements from the Landlord
during the term hereby created on, caused by or on account of fire (except
pursuant to Article 12 where total damage or destruction shall occur),
water, sprinkler systems, partial or temporary failure or stoppage of heat,
light, elevator, live steam or plumbing service in or to the Demised
Premises or in or to the Building, whether alterations, repairs, renewals,
improvements, structural changed to the Demised Premises or to the
Buildings, or the equipment or systems supplying the said services or from
any cause whatsoever; provided that the said failure or stoppage shall be
remedied within a reasonable time.
ARTICLE 24- RIGHT TO SHOW PREMISES
24.1 The Tenant will permit the Landlord to exhibit the Demised Premises during
the last six (6) months of the Term to any prospective tenant and will
permit all persons having written authority from the Landlord to view the
Demised Premises at all reasonable hours.
ARTICLE 25- ASSIGNMENT, SUBLETTING PARTING WITH POSSESSION
25.1 The Tenant shall not assign the Lease or sublet or part with possession of
all or part of the Demised Premises without the prior written consent of
the Landlord, which consent shall not be unreasonably withheld, provided
however, such consent to any assignment or subletting shall not relieve the
Tenant from its obligations for the payment of rent and for the full and
faithful observance and performance of the covenants, terms and conditions
herein contained.
ARTICLE 26- LANDLORD'S RIGHTS
26.1 Provided further and notwithstanding anything hereinbefore set forth:
(a) if at the time of any proposed assignment or subletting, and from time
to time, the Tenant proposes to assign the Lease or sublet the Demised
Premises, the Tenant shall send to the Landlord a notice setting forth
the name and address of the proposed assignee or subtenant and such
information as to the nature of its business and its financial
responsibility and standing as the Landlord may reasonably require,
and all the terms and conditions of the proposed assignment or
sublease;
308-Lease-08/23/98
-16-
-49-
<PAGE>
(b) the Tenant shall have the right without the consent of the Landlord to
assign the Lease to a company incorporated or to be incorporated by
the Tenant, provided that the Tenant owns or beneficially controls all
of the issued and outstanding shares in the capital of the company.
Such assignment shall, however, not relieve the Tenant from its
obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions
herein contained; and
(c) no assignment of the Lease shall be valid unless within the ten (10)
days after the execution; the Tenant shall deliver to the Landlord:
i) a duplicate original of such assignment duly executed by the
Tenant, and
ii) an instrument duly executed by the assignee, in form satisfactory
to the Landlord wherein such assignee shall assume the Tenant's
obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions
herein contained.
ARTICLE 27- PAYMENT OF LANDLORD'S EXPENSES
27.1 If at any time an action is brought for recovery of possession of the
Demised Premises, or the recovery of Basic Rent or any part; or because of
a breach by act or omission of any other covenant herein contained on the
part of the Tenant, and a breach is established, the Tenant shall pay to
the Landlord all expenses incurred by the Landlord in the enforcement of
its rights and remedies hereunder, including all solicitor's fees.
ARTICLE 28 LANDLORD'S RIGHT OF RELET IN CASE OF VACANCY
28.1 In the event that the Demised Premises shall be deserted or vacated, the
Landlord shall have the right, if it thinks fit, to enter the same, as the
agent of the Tenant, either by force or otherwise without being liable to
any prosecution therefor, and to relet the Demised Premises as the agent
and at the risk of the said Tenant and to receive Basic Rent therefor.
ARTICLE 29- TRANSFER OF SHARES OF TENANT
29.1 If the Tenant is a corporation or if this Lease is assigned as aforesaid
with or without the consent of the Landlord to a corporation, and if at any
time during the Term of Lease any part or all of the corporate shares or
voting rights of shareholders shall be transferred by sale, assignment,
bequest, inheritance, trust, operation of law or other disposition, or
treasury shares be issued so as to result in a change in the control of
said corporation by reason of ownership of greater than fifty (50%) percent
of the voting shares of the corporation or otherwise, then and so often as
such a change of control shall occur, the Tenant shall notify the Landlord
in writing of such changes and the Landlord shall have the right to
terminate the Lease and the Term of Lease at any time after such change of
control by giving the Tenant sixty (60) days prior written notice of such
termination. This Article 29 shall not apply to the Tenant if on and from
the date of the Lease the control of the Tenant is represented by shares
listed on a recognized security exchange.
3O8-Lease-08/31/98
-17-
-50-
<PAGE>
ARTICLE 30- SHARE RECORDS
30.1 The Tenant shall, upon request of the Landlord, make available to the
Landlord from time to time for inspection or copying or both, all books and
records of the Tenant which, alone or with other data, show the
applicability or inapplicability of Article 29. If any shareholder or the
Tenant shall, upon request of the Landlord, fail or refuse to furnish to
the Landlord any data requested by the Landlord, which data alone or with
other data may show the applicability or inapplicability of Article 29, the
Landlord may terminate this Lease on sixty (60) days written notice as
aforesaid.
ARTICLE 31- RULES AND REGULATIONS
31.1 The Tenant and its clerks, servants and agents will at all times during the
occupancy of the Demised Premises observe and conform to such reasonable
rules and regulations as shall and may be made from time to time by the
Landlord and any such rules and regulations so made shall be deemed to be
incorporated in and form part of the Lease.
ARTICLE 32-INDEMNIFICATION OF LANDLORD
32.1 The Tenant shall indemnify the Landlord and save it harmless from and
against any and all loss (including loss of rentals payable by the Tenant
pursuant to the Lease), claims, debts, actions, damages, liability and
expense in connection with loss of life, personal injury or damage to
property arising from any occurrence in, upon or at the Demised Premises,
or the occupancy or use by the Tenant of the Demised Premises or any part
thereof; or occasioned wholly Or in part by any act or omission of the
Tenant, its agents, contractors, employees, servants, licensees,
concessionaires or invitees, or by anyone permitted to be on the Demised
Premises by the Tenant. In the event that the Landlord shall, without fault
on its part, be made a party to any litigation commenced by or against the
Tenant, or by reason or any act or omission of the Tenant, its agents,
contractors, employees, servants, licensees, concessionaires or invitees,
or by anyone permitted to be on the premises by the Tenant, then the Tenant
shall protect and hold the Landlord harmless and shall pay all costs,
expenses and legal fees incurred or paid by the Landlord in connection with
litigation.
ARTICLE 33- NAME OF BUILDING
33.1 The Tenant shall not refer to the Building by any name other than that
designated from time to time by the Landlord nor use such name for any
purpose other than that of the business address of the Tenant, provided
that the Tenant may use the municipal number of the Building assigned to it
by the Landlord instead of the name of the Building.
ARTICLE 34- ACCEPTANCE OF PREMISES
34.1 The Tenant shall examine the Demised Premises before taking possession
hereunder and unless the Tenant furnishes the Lanlord with a notice in
writing specifying any defect in the construction of the Demised Premises
or otherwise within seven (7) calendar days after such taking of
possession, the Tenant shall conclusively be deemed to have examined the
Demised Premises and to have found them in order, and such taking of
possession without giving the notice aforesaid within such seven (7) days
shall be conclusive evidence as against the Tenant that at the commencement
date the Demised Premises where in good order and satisfactory condition,
subject only to latent defects, if any. The Tenant agrees that there is no
promise, representation or undertaking by or binding upon the Landlord with
respect to any alteration, remodeling or redecoration or of installation of
equipment or fixtures in the Demised Premises, except such, if any, as are
expressly set forth in the Lease.
3O8-Lease-08/23/98
- 18 -
-51-
<PAGE>
ARTICLE 35- RIGHT OF TERMINATION
35.1 The Tenant further covenants and agrees that on the Landlord's becoming
entitled to re-enter upon the Demised Premises under any of the provisions
of the Lease, the Landlord in addition to all other rights shall have the
right to determine forthwith the Lease and the Term of Lease by giving
notice in writing addressed to the Tenant of its intention to do so and
thereupon Basic Rent and Additional Rent shall be computed apportioned and
paid in full to the date of such determination of the Lease, and any other
payment for which the Tenant is liable under the Lease, and any other
payment for which the Tenant is liable under the Lease shall be paid and
the Tenant shall forthwith deliver upon possession of the Demised Premises
to the Landlord and the Landlord may re-enter and take possession of the
same.
ARTICLE 36- OVERHOLDING
36.1 If the Tenant shall continue to occupy the Demised Premises after the
expiration of the Lease or without the consent of the Landlord and without
any further written agreement, the Tenant shall be a monthly tenant at
double the rent herein reserved, pro rata in relation to the periods of
time during which the Tenant is an overholding tenant, and on the terms and
conditions set out in the Lease except as to length of tenancy.
ARTICLE 37- DIRECTORY BOARD
37.1 The Tenant shall be entitled to have one name for its company inserted in
the Directory Board of the Building and the Landlord shall design the style
of such identification, and the Director Board shall be located in an area
designated by the Landlord in the main lobby.
ARTICLE 38- ACCRUAL OF BASIC RENT
38.1 Basic Rent shall be considered as annual and accruing from day to day and
where it becomes necessary for any reason to calculate such rent for an
irregular period of less than one year, any appropriate apportionment and
adjustment shall be made. Where the calculation of any additional rental is
not made until after the termination of the Lease, the obligation of the
Tenant to pay such additional rental shall survive the termination of the
Lease and such amounts shall be payable by the Tenant upon demand by the
Landlord.
ARTICLE 39- TRANSFER BY LANDLORD
39.1 In the event of a sale, transfer or lease by the Landlord of the Building
or a portion thereof containing the Demised Premises or the assignment by
the Landlord of the Lease or any interest of the Landlord hereunder, the
Landlord shall, without further written agreement, to the extent that such
purchaser, transferee or lessee has become bound by the covenants and
obligations of the Landlord hereunder, be freed, released and relieved of
all liability or obligations under the Lease.
ARTICLE 40- LAWS OF PROVINCE APPLY
40.1 The Lease shall be deemed to have been made in and shall be construed in
accordance with the laws of the Province of British Columbia.
3O8-Lease-08/23/98
-19-
-52-
<PAGE>
ARTICLE 41- LEASE ENTIRE AGREEMENT
41 1 The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions, expressed or implied, collateral or
otherwise, forming part of or in any way affecting or relating to the Lease
or the Demised Premises, save as expressly set out in the Lease and that
the Lease, including the Schedules attached and the Rules and Regulations,
constitutes the entire agreement between the Landlord and the Tenant and
may not be modified except as herein explicitly provided or except by
subsequent agreement in writing of equal formality hereto executed by the
Landlord and the Tenant and the Covenantor, if any. Notwithstanding the
foregoing the Tenant shall remain liable to pay for those improvements in
the Demised Premises which have been made by the Landlord for or on behalf
of the Tenant and which are in excess of the work otherwise required to be
done by the Landlord, and the Landlord's fee for supervision and overhead.
ARTICLE 42- REGISTRATION
42.1 The Tenant covenants and agrees that the Landlord shall not be obliged to
execute or deliver the Lease in form registrable under the Land Title Act,
British Columbia or any other statue in pari material therewith and that
any requirement to produce plans acceptable to the Vancouver Land Title
Office shall be at the cost and the sole responsibility of the Tenant.
ARTICLE 43- INTERPRETATION
43.1 Unless the context otherwise requires, the word "Landlord" wherever it is
used herein shall be construed to include and shall mean the Landlord, its
successors and/or assigns, and the word "Tenant" shall be construed to
include and shall mean the Tenant and when there are two or more tenants,
or two or more persons bound by the Tenant's covenants herein contained,
their obligations hereunder shall be joint and several. The word "Tenant"
and the personal pronoun "it" relating thereto and used therewith shall be
read and construed as "Tenants", and "his", "her", "its" or "their"
respectively, as the number and gender of the party or parties referred to
each require and the number of the verb agreeing therewith shall be
construed and agree with the said word or pronoun so substituted. Time
shall be of the essence in all respects hereunder.
ARTICLE 44- SEVERABLE
44.1 The Landlord and the Tenant agree that all of the provisions of the Lease
are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate
provision hereof. Should any provision or provisions of the Lease be
illegal or not enforceable, it or they shall be considered separate and
severable from the Lease and its remaining provisions shall remain in force
and be binding upon the parties hereto as though the said provision or
provisions had never been included.
ARTICLE 45- CAPTIONS
45.1 The captions appearing within the body of the 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 the Lease or of any provision hereof.
3O8-Lease-08/23/98
- 20 -
-53-
<PAGE>
ARTICLE 46- MISCELLANEOUS COVENANTS
46.1 During the Term of Lease, or any renewal; the Tenant shall not suffer or
permit any builders' or other liens or encumbrances for work, labour,
services or material to be filed against or attached to the Demised
Premises or any portion thereof; if any such lien or encumbrance be filed
or registered, the Tenant shall procure discharge of the same within
fifteen (15) days after the same has come to its notice or attention;
provided that if the Tenant in good faith desires to contest the amount or
validity of any claim for which a lien is registered and so notified the
Landlord, and if the Tenant shall have deposited with the Landlord or paid
into Court in any action with respect to such lien the amount claimed plus
a reasonable amount for costs, the Tenant may thereupon defer payment of
such claim or discharge of such lien for such period as is reasonably
necessary to determine the claim, provided that neither the Demised
Premises nor the Tenant's leasehold interest hereunder may be allowed to
become liable to forfeiture or sale by reason of such deferment.
46.2 Subject to the provisions of Article 15; upon termination of the Lease for
any reason whatsoever, except upon the sale of the Land and the Buildings
by the Landlord to the Tenant, the Tenant shall surrender to the Landlord
the Demised Premises and all Building Equipment upon the Demised Premises,
together with all alterations and replacements and additions thereto
(except the Tenant's Equipment) in good order, condition and repair.
46.3 The Landlord shall have the right to transfer Title to the Demised Premises
at any time or assign its interest under the Lease.
46.4 In the event the Tenant enters into any sublease the Tenant shall not
collect rental from the sublease more than one month in advance of the due
date hereof.
46.5 It is agreed by and between the parties hereto that the Landlord may
mortgage the Demised Premises, the said mortgage to be registered in
priority to the Lease, and the Tenant covenants and agrees to execute
postponements of any encumbrances it may place upon the Title to the
Demised Premises to protect its interest under the Lease for the purpose of
allowing any such mortgagee to have priority over any encumbrance the
Tenant may register as aforesaid and it is further agreed that the Landlord
may assign the rents hereunder to such mortgagee and notice to that effect,
signed by the Landlord, shall be sufficient authority for the Tenant to pay
the rent, or such portion thereof as is assigned to the mortgagee and the
receipt of the mortgagee shall be a full and adequate discharge to the
Tenant for such payment.
46.6 The failure of either party to insist upon strict performance of any
covenant or condition contained in the Lease or to exercise any right or
option hereunder shall not be construed as a waiver or relinquishment for
the future of any such covenant, condition, right or option; the acceptance
of any rent from or the performance of any obligation hereunder by a person
other than the Tenant shall not be construed as an admission by the
Landlord of any right, title or interest or such person as a sublessee,
assignee, transferee or otherwise in the place and stead of the Tenant.
46.7 Any notice required or permitted to be given shall be in writing and shall
be deemed to have been duly given if delivered by hand or mailing by
prepaid mail as follows:
TO THE LANDLORD:
YALETOWN CENTRE INVESTMENTS LTD.
Plaza of Nations, Management Office
B1OO, 750 Pacific Boulevard South
Vancouver, British Columbia
V6B 5E7
3O8-Lease-08/23/98
- 21 -
-54-
<PAGE>
TO THE TENANT:
Intellicom Canada Communications Inc.
Suite 308, 1040 Hamilton Street
Vancouver, British Columbia
V6B 2R9
or to such other address as the respective parties may in writing
advise and any such notice shall be deemed to have been given and
received, if delivered when delivered, and if mailed, forty-eight (48)
hours following the mailing thereof in British Columbia, Saturdays,
Sundays, holidays and days during intermption of ordinary mail
services excepted.
46.8 The Tenant hereby accepts the Lease subject to the conditions, restrictions
and covenants herein set forth and implied.
46.9 The Lease maybe executed in several counterparts, each of which shall be
deemed an original and which together shall constitute one and the same
instrument.
46.10 Wherever the singular or masculine or neuter are used in the Lease, the
same shall be construed to include the plural, neuter, feminine or body
corporate where the context so requires, or where necessary to have
application to a party hereto and the Lease shall be read with all
necessary grammatical and terminological changes thereby rendered
necessary.
46.11 The Lease and the covenant and agreements herein contained shall enure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, legal personal representatives, successors and permitted
assignees and sublessees.
46.12 Time shall be of the essence of the Lease and each provision hereof.
46.13 The Tenant shall have the license in common with other Tenants in the
Building to use the area outlined in blue on Schedule "A" attached hereto
for the purposes of loading, unloading and for the use of washroom
facilities, provided that the Tenant agrees to leave any loading area
adjacent to the Buildings free and clear of major obstructions to the other
Tenants.
46.14 Nothing herein contained shall be construed as creating the relationship
of principal and agent, or of partners or joint ventures between the
parties hereto, the only relationship being that of the Landlord and
Tenant.
46.15 No debris, garbage, trash or refuse shall be placed or left or be
permitted to be placed or left in, on or upon any part of the Common Areas
outside of the Demised Premises, but shall be deposited by the Tenant in
areas and at times in a manner specifically designated by the Landlord from
time to time; should any of the items herein mentioned be of a perishable
nature, the same shall be kept in a properly refrigerated area provided at
its cost by the Tenant; should there be costs for removal of said items
additional to the removal service provided by the City of Vancouver or any
independent disposal services should the City of Vancouver or such
independent disposal service charge additional costs for such service, then
the Tenant shall pay those costs.
46.16 In the event that the Landlord, during the term hereof or any renewal
intends to demolish the Building containing the Demised Premises, the
Landlord may give such notice of intent to demolish and after ninety (90)
days have expired after the due delivery of such notice, the Lease shall be
at an end and the Tenant does hereby covenant to deliver up possession.
46.17 In compliance with the City of Vancouver's by-laws the Building is deemed
a non-smoking premise. Smoking is not permitted in the Building including
but not limited to the elevators, stairwells, hallways, washrooms, and
underground parking.
308-Lease-08/23/98
- 22 -
-55-
<PAGE>
ARTICLE 47- EXPROPRIATION
47.1 If the whole or any part of the Demised Premises or the Building shall be
taken by any public authority under the power of eminent domain or
expropriation, the term hereby granted shall cease from the day possession
shall be taken for such public purposes insofar as the premises so taken
comprises part of the Demised Premises, and the Tenant shall be liable only
for rent in respect of the Demised Premises or part thereof so taken up to
the day of the taking, and if less than the whole be so taken, the Landlord
may at its option cancel and terminate this Lease with respect to the
remainder of the Demised Premises, but notice of such cancellation must be
given to the Tenant within thirty (30) days after notice of such taking has
been received by the Landlord but if the Landlord shall not elect to cancel
this Lease, then the Tenant shall remain in possession of the remainder of
the Demised Premises and the rent thereof shall be reduced in proportion
that the floor area of the space taken in the Demised Premises bears to the
whole rentable area of the Demised Premises. All compensation or damages
awarded in respect of such taking of the Demised Premises and any
diminution in value of the remainder thereof shall be the property of the
Landlord, but the Tenant shall be entitled to receive such compensation or
damages as it may be able to establish against such public authority in
respect of loss of its business, depreciation of and cost of removal of
stock and fixtures.
ARTICLE 48- ESTOPPEL CERTIFICATE
48.1 The Tenant covenants with the Landlord to provide upon the request of the
Landlord an estoppel certificate binding upon the Tenant, confirming:
(a) that the Tenant has accepted possession of the Demised Premises and
that installments of Basic Rent hereunder are then due and payable
from month to month;
(b) whether or not the Landlord has carried out its obligations hereunder;
(c) that the Lease constitutes the entire agreement in relation to use and
occupation of the Demised Premises between the Tenant and the
Landlord; and
(d) such other matters as the Landlord may reasonably require.
ARTICLE 49-OBLIGATIONS OF THE COVENANTOR
49.1 The provisions of this Article shall apply in the event the Lease is
executed by a Covenantor.
49.2 In consideration of the Landlord entering into the Lease with the Tenant
and in further consideration of the sum of ONE ($1.00) DOLLAR now paid by
the Landlord to the Covenantor and other good and valuable consideration
(the receipt of which is hereby acknowledged by the Covenantor), the
Covenantor agrees under seal with the Landlord as follows:
(a) the Covenantor shall be jointly and severally liable with the Tenant
as principal debtor, and not as guarantor or surety, for due payment
of all Basic Rent or other monies payable at the times and in the
manner provided in the Lease;
(b) the Covenantor unconditionally agrees and covenants with the Landlord
to cause the Tenant to duly observe, perform and keep each and every
of the other covenants agreements, stipulations, obligations,
conditions and other provisions of the Lease to be observed, performed
and kept by the Tenant at the time and in the manner provided in the
Lease and, in the event of default by the Tenant, to duly observe,
perform and keep such covenants, agreements, stipulations, obligations
and conditions himself;
3O8-Lease-08/23/98
- 23 -
-56-
<PAGE>
(c) the Covenantor will indemify and save harmless the Landlord against
and from all losses, damages, costs and expenses which the Landlord
may sustain, incur, or become liable for by reason of:
(i) the failure, for any reason whatsoever, of the Tenant or the
Covenantor to pay all rent or other monies payable at the times
and in the manner provided in the Lease;
(ii) the failure, for any reason whatsoever, of the Tenant, or the
Covenantor on behalf of the Tenant, to observe, perform and keep
each and every of the other covenants, agreements, stipulations,
obligations, conditions and other provisions of the Lease to be
observed performed and kept by the Tenant; or
(iii)any act, action or proceeding of or by the Landlord for or in
connection with the enforcement of the Lease including without
limitation the provisions of this Article 49.
(d) with respect to the Covenantor's joint and severable liability with
the Tenant as principal debtor in accordance with Article 49.2(a) such
obligations shall survive any act, omission, actions or proceedings
which might release or diminish the liability of any guarantor or
surety of the due payment of any Basic Rent or other monies payable
pursuant to the Lease.
(e) with respect to the Covenantor's obligations pursuant to Article 49:
(i) the Covenantor hereby renounces and waives the benefit of
discussion and compensation and any right to require the Landlord
to first proceed against the Tenant or to pursue any other remedy
whatsoever which may be available to the Landlord before
proceeding against the Covenantor;
(ii) the Covenantor acknowledges that any act or failure to act of or
by the Landlord against or in respect of the Tenant or the
Demised Premises pursuant to the terms of the Lease, and, without
limiting the generality of the foregoing, any neglect of
forbearance or delay by the Landlord in taking any steps to
enforce the observance, performance and keeping of the covenants,
agreements, stipulations, obligations and other provisions of the
Lease, any extension of time which may be given by the Landlord
from time to time to the Tenant and any release which may be
given by the Landlord from time to time to the Tenant shall not
release or diminish the liability of the Covenantor pursuant to
Article 49;
(iii)the Covenantor agrees that any alterations of the terms of the
Lease agreed to by the Landlord and the Tenant from time to time,
whether material or not, or any assignment of the Lease by the
Landlord or the Tenant or by any trustee, receiver or liquidator
of the Tenant shall not release or diminish the liability of the
Covenantor pursuant to Article 49.
(f) the Covenantor shall execute and deliver such further assurances as
the Landlord may reasonably require including, should the Landlord so
elect upon the occurrence of any event described in Articles 13.1 and
13.2 or upon re-entry or termination of the Lease in accordance with
Article 13, a lease of the Leased Premises for a term equal in
duration to the residue remaining unexpired of the Term, on the same
terms and conditions as the Lease;
(g) in the event of more than one Covenantor to the lease then the term
"Covenantor" shall be taken to apply to all such Covenantors, who
shall be jointly and severally liable to the Landlord;
(h) the obligations of the Covenantor shall survive the expiration of the
Term to the extent that there is then any default under the Lease and
further, shall survive any earlier termination of the Term and the
Covenantor shall remain liable on any renewal notwithstanding any
variation in the terms of any such renewal lease.
3O8-Lease-08/23/98
- 24 -
-57-
<PAGE>
(i) the liability of the Covenantor shall continue notwithstanding any
release or discharge of the Tenant in any receivership, bankruptcy,
winding-up, or other creditor's proceedings or the rejection,
disaffirmane or disclaimer of the Lease in any proceeding or the
repossession of the Demised Premises by the Landlord and the
Covenantor shall, at the request of the Landlord, execute a new lease
as a tenant for the period equal to the balance of the Term remaining
hereunder, in the event of any disclaimer of this Lease by the
Tenant's trustee.
ARTICLE 50- ADDITIONAL COVENANTS
OPTION TO RENEW
50.1 The Tenant, provided it is not in default hereunder shall have the option
of renewing the Lease for ONE (1) further term of THREE (3) years, all
terms of the renewal lease to be the same as the Lease with the exception
of this option to renew which shall be deleted, and with the further
exception of the amount of Basic Rent to be paid. This option to renew
shall be exercised by the Tenant serving written notice exercising the
option upon the Landlord in the manner of serving written notice provided
in the Lease. Notice of intention to exercise such option shall be given by
the Tenant to the Landlord six (6) months prior to the Termination Date.
50.2 Should the Tenant serve written notice exercising the option in the
previous paragraph, the Landlord and the Tenant shall negotiate with the
aim of agreeing on the amount of Basic Rent to be paid during the THREE (3)
years option term. Should the Landlord and the Tenant be unable to reach an
agreement four (4) months prior to commencement of the renewal term, either
party may submit the question of what would be proper market value for the
Basic Rent to be paid for the Demised Premises during the THREE (3) years
option term to arbitration pursuant to the Commercial Arbitration Act,
British Columbia. Until such time as the parties agree to a renewal Basic
Rent or until an arbitrator renders a decision following an arbitration,
the Tenant shall pay Basic Rent equal to the Basic Rent Payable during the
last year of the Term plus fifteen (15%) percent.
308-Lease-08/26/98
- 25 -
-58-
<PAGE>
THIS AGREEMENT made as of the 22 day of December 1998,
BETWEEN:
YALETOWN CENTRE INVESTMENTS LTD., (Incorporation No. 378951)
a body corporate duly incorporated under the laws of the Province of British
Columbia, having a registered and records office at 708 N. Tower, Oakridge
Centre, 650 West 41st Avenue, Vancouver, British Columbia V5Z 2M9
(hereinafter called the "Landlord")
OF THE FIRST PART
AND:
ELGRANDE. COM INC. (Incorporation No.561893) a body corporate duly
incorporated under the laws of the Province of British Columbia, having a
registered and records office at #10 - 20372 Fraser Hwy., Langley, BC V3A
4G1
(hereinafter called the "Tenant")
AND:
OF THE SECOND PART
Michael Page and James West, Businesspersons, of Suite 2604 - 1500 Hornby
Street, Vancouver, BC V6C 1V5
(hereinafter called the "Covenantor")
WHEREAS:
A. The Landlord is the registered owner of that certain parcel or tract of
land and premises situate, lying and being in the City of Vancouver, in the
Province of British Columbia, and known and described as:
Parcel Identifier: 011-939-150
Lot E (Explanatory Plan 19156)
Block 76
District Lot 541
Plan 3469
upon which is situate the building (as hereinafter defined);
B. The Landlord and Tenant are desirous of entering into a lease of the
Demised Premises (as hereinafter defined);
NOW THEREFORE WITNESSETH THIS AGREEMENT that in consideration of the mutual
covenants, agreements, representations and warranties and further in
consideration of the payment by the Tenant to the Landlord of the rents
hereinafter provided, the parties agree as follows:
-2-
-59-
<PAGE>
ARTICLE 1-DEFINITIONS
1.1 The terms defined in this Article shall for all purposes of this Lease or
other instruments supplemental hereto, have the meanings herein specified,
unless the context expressly or by necessary implication otherwise
requires:
(a)"Additional Rent" means any of the costs and expenses at any time
payable by the Tenant pursuant to Article 6 hereof;
(b)Basic Rent" means the rent described in paragraph 5.1 hereof;
(c)"Building" means the building situate on the Land, and includes any
additions, alterations, or extensions thereto;
(d)"Building Equipment" means all machinery, boiler, plumbing, wiring,
heating, air-conditioning and lighting and other equipment which is an
integral part of the Building, if any, other than Tenant's Equipment;
(e)"Common Areas" means those areas that are designated by the landlord as
Common Areas (which designation may be changed from time to time)
including, without limitation, the roof, exterior weather walls,
pedestrian sidewalks, exterior landscaped areas, parking areas,
roadways, sidewalks, all enclosed malls, courts and arcades, public
hallways, open malls, service corridors, stairways, escalators, ramps,
moving sidewalks and elevators and other transportation equipment and
systems, interior landscaped areas, public washrooms, electrical,
telephone, meter, valve, mechanical, mail, storage and janitor rooms
and galleries, fire prevention, security and communications systems,
general signs, columns, all other installations or services located
therein or related thereto as well as the structures housing the same,
truck courts, common loading areas and driveways;
(f)"Common Maintenance Cost" means the total, without duplication, of the
expenses incurred by the Landlord for operating, maintaining and
repairing the Building (including necessary replacements, and shall,
without limiting the generality of the foregoing), include the
aggregate of:
i) the costs of repairs, maintenance and such replacements to the
Common Areas and the Common Facilities as are properly chargeable
in accordance with sound accounting practice to operating
expenses as distinguished from capital replacement or
improvements;
ii) janitorial, window-cleaning and other similar costs, including
supplies and equipment;
iii) the expense for gardening and landscaping, line painting, rental
of signs and equipment, lighting, sanitary control, the removal
of snow, parking areas cleaning and security;
iv) wages paid for maintenance and operating personnel, including
payments for workers compensation, unemployment insurance,
vacation pay, Canada Pension Plan contributions and fringe
benefits whether statutory or otherwise;
v) scavenging, garbage and waste collection and disposal;
vi) the cost of fuel, electrical power and other utilities furnished
to the Building;
vii) equipment or sign rental; and
-3-
-60-
<PAGE>
vii) the cost of any independent contractors engaged to perform any of
the foregoing services;
(g)"Common Facilities" means the electrical, music and public address
systems, heating ventilating, air-conditioning, plumbing and drainage
equipment and installations and any enclosures constructed therefor,
fountains, customer service stairways, escalators, ramps, moving
sidewalks, elevators, signs, lamp standards, public washroom
facilities and parking deck and all other facilities which are
provided or designated (which designation may be changed from time to
time by the Landlord and which are located within the Building.)
(h)"Cost of Heating, Ventilating and Air-Conditioning" means the total,
without duplication, of the expenses incurred by the Landlord for
operating, maintaining, repairing and replacing any heating,
air-conditioning or ventilation systems or equipment ("HVAC"), and
shall without limiting the generality of the foregoing, include the
aggregate of:
i)the amount expended by the Landlord for fuel, water, electricity and
additives for the HVAC;
ii)the total annual costs to boiler and pressure vessels insurance
coverage paid by the Landlord for insurance;
iii)wages paid to maintenance and operating personnel for the HVAC,
including payments for workers compensation, unemployment
insurance, vacation pay, Canada Pension Plan contributions and
fringe benefits whether statutory or otherwise;
iv)the costs of repairs, maintenance and such replacements to the HVAC
as are properly chargeable, in accordance with sound accounting
practice to operating expenses, as distinguished from capital
replacements or improvements;
v)the portion of municipal tax costs from municipal taxes, which may
be reasonably allocated to the HVAC.
(i)"Costs of Insurance" means the annual cost to the Landlord to take
out insurance in respect of the Building and the Land (as set out
in Article 8 hereof) and such other insurance as the Landlord may
from tirne to time determine.
(1)"Demised Premises" means all that portion of the Building which is
outlined in red on Schedule "A" attached hereto and more particularly
referred to as Suite 206, 1040 Hamilton Street, Vancouver, British
Columbia, consisting of approximately 1,260 square feet out of a total
square footage of 45,381 square feet;
(k)"Land" means that parcel or tract of land and premises legally described
in Recital "A" hereof;
(I)"Lease" means this instrument as originally executed and delivered or,
if amended, or supplemented or renewed, as so amended, or supplemented
or renewed;
(m)"Realty Taxes" means all real estate taxes, assessments, rates and
charges and other governmental impositions general or special,
ordinary or extraordinary, foreseen or unforeseen, of every kind,
including, without limitation, water and sewer charges, assessments
for local or public improvements and school taxes which may at any
time during the term of the Lease be imposed, assessed or levied in
respect of the land and/or in respect of the improvements from time to
time thereon, including any cost or expense by way of legal fees,
appraiser's fees or fees of a similar nature incurred by the Landlord
in conducting any appeal in respect of any such taxes, rates, charges
or impositions, all such amounts to be adjusted to exclude any portion
thereof payable for periods outside the Term of Lease.
YCLEASE... 12~6/98
-4-
-61-
<PAGE>
(n)"Security Deposit" means the deposit described in paragraph 5.3 hereof.
(o)"Special Tenant Expenses" means the expenses described in paragraph 6.2
hereof;
(p)"Structural Repairs" means repairs necessary from time to time to the
foundations, supports, beams, exterior roof and bearing walls of the
Building, painting exterior walls, landscaping and replacement of
Common Area fixtures, provided that if any dispute shall arise between
the Landlord and Tenant as to whether any given repairs are or are not
Structural Repairs then the matter shall be resolved by binding
arbitration under the Commercial Arbitration Act (British Columbia)
decided by a single arbitrator who shall be a duly qualified Civil
Engineer named by the Landlord and the Tenant and the decisions of
such arbitration shall be conclusive and binding upon the parties
hereto;
(q)"Tenant's Equipment" means all personal property, apparatus, machinery
and equipment, other than Building Equipment, owned by the Tenant and
used or intended for use in connection with the operation of the
business of the Tenant and whether installed prior to the commencement
of the Term of Lease or at any time and from time to time during the
Term of Lease;
(r)"Tenant's Proportionate Share" with respect to any amount means 2.78 %
of such amount;
(s)"Term" means the term of ONE (1) years described in paragraph 3.1
hereof;
(t)"Commencement Date" means January 1, 1999;
(u)"Termination Date" means December 31, 1999;
ARTICLE 2- GRANT OF LEASE
2.1 The Landlord hereby demises and leases upon the Tenant and the Tenant
hereby takes and rents the Demised Premises all on the terms and conditions
herein contained.
2.2 In addition to the lease herein of the Demised Premises, the Landlord
hereby grants to the Tenant and the Tenant's invitees, agents and servants,
in common with the Landlord and all other person authorized by the Landlord
from time to time, a license to use the Common Areas for the purpose of
gaining access to the Demised Premises and better using the same, provided
that nothing herein shall in any way restrict the Landlord from entering,
maintaining, altering or changing the Common Areas, or from altering or
adding to the Building as long as the Tenant is able to gain access to the
Demised Premises.
ARTICLE 3- TERM OF LEASE
3.1 The Lease shall be for a term of ONE (1) year (the "Term") commencing
January 1, 1999 (the "Commencement Date") and ending on December 31, 1999
(the "Termination Date").
ARTICLE 4- TO OPERATE DURING THE TERM
4.1 The Tenant will not during the term vacate the leased premises either in
whole or in part (whether actually or constructively) but will:
(a) conduct its business in the entire Demised Premises; YCLEASE...1~6/98
-5-
-62-
<PAGE>
(b) actively carry on in the Demised Premises, the type of business for
which the Demised Premises are leased to the Tenant.
ARTICLE 5- RENT
5.1 The Tenant shall pay during the Term total Basic Rent of EIGHTEEN THOUSAND
NINE HUNDRED DOLLARS($18,900.00) payable monthly in advance on the first
day of each and every month in consecutive monthly installrnents ONE
THOUSAND FIVE HUNDRED SEVENTY-FIVE DOLLARS ($1,575.00), and the first such
monthly installments, or a pro-rated portion thereof in the event this
Lease is effective other than on the first day of a month, shall be paid on
execution of this Lease and subsequent installments shall be paid on the
first day of each and every month during the term hereby demised;
5.2 The Landlord acknowledges receipt of TWO THOUSAND FOUR HUNDRED FIFTEEN
DOLLARS FIFTY-THREE CENTS ($2,415.53) representing the payment of Basic
Rent, Additional Rent and G.S.T.for the first month of the Term.
5.3 The Landlord acknowledges receipt of a Security Deposit in the amount of
TWO THOUSAND FOUR HUNDRED FIFTEEN DOLLARS FIFTY-THREE CENTS ($2,415.53).
The Security Deposit shall be held by the Landlord without liability for
interest, as security for the faithfiil performance by the Tenant of all
the terms, covenants and conditions of this Lease by the Tenant to be kept,
observed and performed. If at any time during the Term the Rent or other
sums of payable by the Tenant are overdue and unpaid, or if the Tenant
fails to keep or perform any of the terms, covenants and conditions of this
Lease to be kept, observed and performed by the Tenant, then the Landlord
at its option may, in addition to any and all other rights and remedies
provided for in this Lease or by law, appropriate and apply the entire
Security Deposit, or so much thereof is necessary to compensate the
Landlord for loss or damage suffered by the Landlord due to such breach on
the part of the Tenant. If the entire Security Deposit, or any portion
thereof is appropriated and applied by the Landlord for payment of overdue
rent or other sums due and payable to the Landlord by the Tenant hereunder,
then the Tenant shall, upon written demand of the Landlord, forthwith remit
to the Landlord a sufficient amount in cash to restore the Security Deposit
to the original sum deposited, and the Tenant's failure to do so within
three (3) days after receipt of such demand constitutes a breach of this
Lease. If the Tenant complies with all of the terms, covenants and
conditions and promptly pays all of the rent and other sums herein provided
and payable by the Tenant to the Landlord, the Security Deposit shall be
retumed in full to the Tenant without interest within sixty (60) days after
the end of the Term, or within sixty (60) days after the earlier
termination of the Term, as the case may be.
5.4 The rent reserved hereunto shall be paid in Canadian Funds to the Landlord
at its address for notice herein unless another place of payment is
designated by the Landlord to the Tenant in writing, and the Tenant shall
(at the request of the Landlord) deliver postdated cheques to the Landlord
on the first day of the Term for the payment of Rent to fall due in the
months in the Term.
5.5 The Lease shall be a net lease, and the Basic Rent shall be net to the
Landlord, and shall yield to the Landlord the entire Basic Rent during the
Term without abatement, deduction or set-off of any nature whatsoever and
all costs, expenses, rates, taxes, charges and obligations of every kind
and nature whatsoever relating to the Demised Premises, whether or not
herein referred to and whether or not of a kind now existing or within the
contemplation of the parties hereto, shall be paid by the Tenant excepting
only any Landlord's Corporation Capital Tax, income tax or taxes other than
business tax imposed or levied by any authority whatever on the income
received by the Landlord from the Demised Premises.
5.6 Any money payable by the Tenant to the Landlord in addition to the Basic
Rent shall be deemed to be rent. All monies payable by the Tenant to the
Landlord pursuant to the Lease shall bear interest at the rate of 2% per
month (26.824% per annum) from the date of default.
YCL~ASE...12(16/98
-6-
-63-
<PAGE>
ARTICLE 6- ADDITIONAL RENT
6.1 The Tenant shall pay to the Landlord as additional rent (the "Additional
Rent") to the Landlord in each year of the Term of Lease, within ten (10)
days after demand the Tenant's Proportionate Share of:
(a) Common Maintenance Cost;
(b) Cost of Heating, Ventilating and Air-Conditioning;
(c) Cost of Insurance;
(d) Realty Taxes;
(e) an administrative fee equal to 15% of the total of expenses incurred
by the Landlord under paragraphs 6.1(a) to (d) inclusive; together
with the total of:
(f) all taxes, license fees, duties, rates, assessments or imposts of
whatsoever nature levied by any authority whatsoever in respect of the
Land and Building as shall be attributable to the business or property
of the Tenant, or to any thing or things erected or placed in, upon or
under, or fixed to the Demised Premises by or with the consent or
permission of the Tenant during the Term, including all fixtures,
machines, equipment and other things of any nature or description not
the property of the Landlord or which may be lawfully removed by the
Tenant;
(g) the total cost of all local improvements and utility charges, if any,
and all charges for water, gas, electric light, heat and power,
ventilating and air-conditioning, telephone, scavenging and garbage
and waste collection or other similar service used, rendered or
supplied upon or in connection with the Demised Premises and the
Tenant will indemnify and save the Landlord harmless against and from
any liability or damages on any such account;
(h) Goods and Services Tax ("G.S.T.") payable by the Tenant on Basic Rent
and any of the foregoing payments; and
(i) all other amounts which shall become due and payable pursuant to the
Lease.
6.2 The Tenant shall pay the Landlord upon demand the charges established by
the Landlord from time to time for all supplementary services and utilities
provided to the Tenant by the Landlord or its agents (the "Special Tenant
Expenses"). Such supplementary services and utilities shall include,
without limitation, security, maintenance, repair, janitorial, cleaning and
any other services provided outside ordinary business hours and/or in a
manner not considered by the Landlord as standard. Where any other expenses
over and above normal operations for the Centre is incurred or paid by the
Landlord specifically for the benefit of and at the request of the Tenant,
the Tenant shall pay such expense. The Landlord may charge and the Tenant
shall pay a service fee for providing such services or for incurring such
expense.
6.3 The Additional Rent shall, when in default, be deemed to be rent,
receivable as such, and all remedies of the Landlord on non-payment of
Basic Rent shall be applicable thereto. The obligation of the Tenant to pay
any of the aforementioned amounts owing, accrued or unpaid at the end of
the Lease Term shall survive the expiration or sooner termination of the
Lease.
6.4 The Tenant covenants to pay the Tenant's taxes and any and all fees or
amounts payable by the Tenant other than to the Landlord, in connection
with the Tenant's business in or occupation of the Demised Premises.
YCLEASL...12~6~8
-7-
-64-
<PAGE>
6.5 The Tenant may take advantage of any provisions of law whereby Realty Taxes
or any other amounts payable by the Tenant including amounts payable other
than to or through the Landlord may be paid by installments or deferred for
some portion of the fiscal period to which they relate, provided that no
fine, penalty, interest and expense arising from any failure by the Tenant
to pay any such amount when due and further provided that no fine, penalty
or cost is thereby incurred and the Tenant shall pay any fine, penalty,
interest and expense arising from any failure by the Tenant to pay any such
amount when due and further provided that the Landlord shall be at liberty
to pay any such amount (after five (5) days written notice to the Tenant of
its intention so to do) and may add to the next ensuing installment of rent
the amounts so paid including penalties, charges and interest in connection
therewith.
6.6 The Tenant shall have the right to contest at the Tenant's sole expense the
amount or validity of any Realty Taxes or other amounts imposed in respect
of the Demised Premises but nothing herein contained shall be deemed to
relieve the Tenant of its obligation to pay such Realty Taxes or other
amounts or to authorize the Tenant to defer payment of such Realty Taxes,
unless such deferment is lawful and the Landlord consents in writing to
such deferment and the Tenant has paid the full amount in dispute to the
Landlord, as security, including the amount of any possible penalties and
interest.
6.7 If the Tenant is contesting in good faith the amount or validity of any
Realty Taxes or any other assessment or impost and has complied with the
provision of this Article and if it becomes necessary for the Landlord to
join in or consent to such proceedings the Landlord shall join or consent
as required but the Tenant shall indemnify the Landlord against all expense
arising therefrom.
6.8 Notwithstanding the provisions of this Article, at any time during the Term
of lease the Landlord may by notice in writing require the Tenant to pay
and the Tenant shall pay to the Landlord, on each date following such
notice upon which installments on account of Basic Rent are payable, such
amount or amounts, which shall not bear interest, as the Landlord may from
time to time estimate as being necessary to provide to the Landlord
sufficient funds to pay the Additional Rent and if the amounts actually
charged or payable in any fiscal period shall exceed the amount or amounts
paid by the Tenant for such fiscal period, the Tenant shall pay to the
Landlord forthwith on demand the amount required to make up the deficiency,
and any overpayment made by the Tenant in such fiscal period shall
forthwith upon determination be returned without interest by the Landlord
to the Tenant.
6.9 The Tenant shall upon demand by the Landlord provide to the Landlord proof,
in such form as the Landlord may reasonably require, that the Tenant has
paid when due any and all payments required hereunder to be made by the
Tenant other than to the Landlord
6.10 The Landlord shall at the request of the Tenant provide to the Tenant a
statement showing in reasonable detail the amount of any of the items set
out in paragraph 6.1.
ARTICLE 7- TENANT'S EOUIPMENT
7.1 At any time and from time to time during the Term the Tenant may install,
maintain and replace in the Demised Premises, any Tenant's Equipment as the
Tenant, in its sole discretion, may desire and, notwithstanding the fact
that the Tenant's Equipment shall nevertheless be and remain at all times
the property of the Tenant. The Tenant may not permanently remove any
material part of the Tenant's Equipment at any time during the Term without
the written consent of the Landlord, which shall not be unreasonably
withheld.
7.2 The Tenant shall be responsible for and will repair all or any damage to
any part of the Demised Premises, including structural portions thereof
caused by installation or removal of any of the Tenant's Equipment,
fixtures, alterations, or improvements, and shall restore the Demised
Premises to the same condition as they were in at the Commencement of the
Term of Lease.
7.3 Any of the Tenant's Equipment remaining in the Demised Premises at the
termination of the Lease may be removed and stored by the Landlord, who
shall thereupon have the first and paramount lien against the said Tenant's
Equipment and the Landlord shall not be required to release possession
thereof until payment to the
YCLEASE...1~6/98
-8-
-65-
<PAGE>
Landlord of the cost of removal and storage of the Tenant's Equipment and
if the Tenant fails to pay such cost within five (5) days of demand in
writing by the Landlord, the Landlord shall have the right to sell the same
and may apply the proceeds firstly in payment of the costs of such removal,
storage and sale and secondly to the Tenant's account. 7.4 The Landlord
shall not be responsible for any loss or damage occurring to the Tenant's
Equipment, save and except for loss or damage caused by the willful neglect
of the Landlord or person for whom in law the Landlord is responsible.
ARTICLE 8- INSURANCE
8.1 The Landlord, acting reasonably and as a prudent owner of the Land and
Building, may obtain at the expense of the Tenant to the extent of the
Tenant's Proportionate Share such insurance for the benefit of the Landlord
as the Landlord from time to time considers useful, expedient or
beneficial, including, without limitation, any or all of the following:
(a) a broad form of insurance against all risks of loss or damage to all
property owned by the Landlord relative to the Land and Building,
including coverage for fire, flood and earthquake, or any other form
of loss;
(b) insurance against all explosion, rupture or failure of boilers,
pressure vessels, air-conditioning equipment and miscellaneous
electrical apparatus on blanket basis with broad form cover, including
repair and replacement;
(c) insurance against loss of insurable gross rentals attributable to all
perils insured against by prudent landlords, including loss of all
rents receivable from tenants in the Building in accordance with the
provisions of their leases including all rents thereunder and all
other charges payable as additional rent thereunder, in such amount or
amounts as the Landlord or its mortgagees from time to time requires;
(d) insurance against third party liability hazards including exposure to
personal injury, bodily injury and property damage on an occurrence
basis, including insurance of all contractual obligations, and
covering also actions of all employees, other persons, sub-contractors
and agents while working on behalf of the Landlord; and
(e) insurance against any other form or forms of loss that the Landlord or
its mortgagees reasonably requires from time to time for like
properties similarly situated and for amounts against which a prudent
landlord would insure itself.
Notwithstanding any contributions by the Tenant to insurance premiums as
provided for in the Lease, no insurable interest is conferred upon the Tenant
under policies carried by the Landlord, the Landlord shall in no way be
accountable to the Tenant regarding the use of any insurance proceeds arising
from any claim, and the Landlord shall not be obliged on account of such
contributions to apply such proceeds to the repair or restoration of that which
was insured and it is hereby declared and agreed that if the Tenant may desire
to receive indemnity by way of insurance for any property, work or thing
whatever, the Tenant shall insure same for its own account and shall not look to
the Landlord for reimbursement or recovery in the event of loss or damage from
any cause, whether or not the Landlord has insured same and recovered therefor.
8.2 The Tenant shall, during the Term, at its sole cost and expense, take out
and keep in full force and effect, in the name of and with losses payable
to the Tenant, the Landlord and if required by the Landlord or the
Landlord's rnortgagees, the following:
(a) property damage insurance, which shall include coverage on property of
every description and kind owned by the Tenant ineluding the Tenant's
inventory and stock in trade, furniture and
YCLEASE...1~6/98
-9-
-66-
<PAGE>
fixtures and such other property in or forming part of the Demised Premises
or for which the Tenant is responsible or legally liable pursuant to the
terms of the Lease, or which is installed by or on behalf of the Tenant,
including Tenant's Equipment, in an amount at least equal in the opinion of
the Landlord to the full insurable value thereof calculated on a
replacement cost basis without co-insurance requirements and the perils
insured against shall include fire and water damage and a form of broad
all-risk coverage and such additional perils as are normally insured
against in the circumstances by prudent tenants, and as any mortgagee
having a security interest in the Building reasonably requires, or as the
Landlord, from time to time, demands;
(b) glass damage insurance, which shall include coverage for plate glass
or other glass and any high-value lettering or ornamentation thereon,
destroyed, damaged or stolen during the Term of Lease, such insurance
to be placed in an amount at least equal in the opinion of the
Landlord to the full msurance value thereof calculated on a
replacement cost basis, without deduction for depreciation and without
co-insurance requirements;
(c) public liability insurance applying to all operations of the Tenant
and which shall include bodily injury liability, liability with
respect to the loss or damage to the property of others, products
liability, contractual liability, contingent liability, non-owned
automobile liability and Tenant's legal liability with respect to the
occupancy by the Tenant of the Demised Premises, such policy to be
written on a comprehensive basis with limits of not less than
$2,000,000.00 per occurrence (or such higher limits as the Landlord or
its mortgagees require from time to time) and with a cross liability
clause;
(d) business interruption insurance applying to all operations of the
Tenant; and
(e) any other form or forms of insurance in such amounts and against such
perils as the Landlord or the Landlord's mortgagees reasonably require
from time to time. All policies shall contain an undertaking by the
insurers to notify the Landlord and its mortgages in writing not less
than thirty (30) days prior to any material change in terms,
cancellation or other termination thereof
8.3 All property damage policies written on behalf of the Tenant shall contain
a waiver of any subrogation rights which the Tenant's insurers may have
against the Landlord and against those for whom the Landlord is, in law,
responsible whether any such damage is caused by the act, omission or
negligence of the Landlord or by those for whom the Landlord is in law
responsible and the Tenant hereby releases and agrees to hold harmless the
Landlord from all liability for any loss or damage to or suffered by the
Tenant or its property or improvements, by oversight, fault or any other
cause whatsoever.
8.4 All policies shall be taken out with insurers acceptable to the Landlord
and on policies in form satisfactory from time to time to the Landlord and
the Tenant shall deliver certificates of insurance or, if required by the
Landlord or its mortgagees, certified copies of each such insurance policy
to the Landlord as soon as practicable after the placing of the same.
8.5 If the Tenant fails to take out or to keep in force any such insurance
referred to in this Article 8, or should any such insurance be reasonably
disapproved by either the Landlord or its mortgagees and the Tenant does
not obtain, reinstate or replace insurance, as the case may be, within
forty-eight (48) hours after written notice by the Landlord, or its
mortgagees do not approve of such insurance, (such notice of disapproval to
include the reasons therefor), the Landlord shall have the right, but not
the obligation, to effect such insurance at the sole cost of the Tenant and
all expenses of the Landlord shall be immediately payable by the Tenant to
the Landlord as Additional Rent hereunder and shall be due on the first day
of the next month following payment thereof by the Landlord, in addition to
and without prejudice to any other rights and remedies of the Landlord
under the Lease.
8.6 The Tenant will not keep, use, sell or offer for sale in or upon the
Demised Premises any article which may be prohibited by the fire insurance
policy or any other policies in force from time to time covering the Land
and Building, and further if the Tenant's occupancy of, or conduct of
business in, the Demised Premises,
YCLEASE... 12/16/98
-10-
-67-
<PAGE>
whether or not the Landlord has consented to the same, causes any increase
in premiums for the insurance carried from time to time by the Landlord
with respect to the Land and Building, the Tenant shall pay the full amount
of any such increase in premiums as Additional Rent within ten (10) days
after bills for such additional premiums are submitted by the Landlord.
ARTICLE 9- REPAIRS
9.1 The Tenant covenants with the Landlord that the Tenant shall at all times
during the Term at its own cost and expense:
(a) repair, maintain and keep the Demised Premises in good order and
repair, as a careful owner would do, reasonable wear and tear
excepted; and
(b) repair, maintain and keep all equipment and fixtures in the Demised
Premises in good order and repair and replace the same when necessary,
as a careful owner would do, including, without limitations, the
floor, windows, plate glass, glass partitions within the Demised
Premises, and any improvements now or hereafter made to the Demised
Premises, reasonable wear and tear and repairs for which the Landlord
is responsible only excepted; provided however that if such repairs by
the Landlord are required as a result of the act or omission of the
Tenant, its servants, agents or employees, the Tenant shall pay to the
Landlord, on demand, the costs of such repairs as Additional Rental
and the Tenant covenants to perform such maintenance, to effect such
repairs and replacements and to decorate at its own cost and expense
as and when necessary or reasonably required so to do by the Landlord.
9.2 The Tenant shall, when necessary and, whether upon receipt of notice from
the Landlord or not, effect and pay for such maintenance, repairs,
replacements or decoration as may be the responsibility of the Tenant under
the foregoing paragraph provided that no maintenance, repairs or
replacements to the structure, any perimeter wall, the store front, the
sprinkler system, the heating, ventilating, air-conditioning, plumbing,
electrical or mechanical equipment or the concrete floor shall be made
without the prior written consent of the Landlord, and in so doing shall
use contractors or other workmen designated or approved by the Landlord in
writing, such approval not to be reasonably withheld or delayed.
9.3 The Landlord covenants with the Tenant that the Landlord shall at all times
during the Term at the Tenant's cost and expense repair and replace as a
careful owner would do the heating, ventilating, air-conditioning,
plumbing, sprinkler, mechanical and electrical equipment and fixtures
(including all the parts, wiring and pipes thereof) within the Demised
Premises.
ARTICLE 10- STRUCTURAL DEFECTS
10.1 The Landlord shall be responsible to make good and repair any structural
defect in the Demised Premises by reason of a pre-existing condition in or
damage done to the Building in which the Demised Premises are located, or
damage caused by negligence of the Landlord, its servants or agents.
10.2 The Landlord shall cause proper maintenance of all Common Areas, at the
Tenant's cost to the extent of the Tenant's Proportionate Share.
YCLEASE...12/16/98
- 11 -
-68-
<PAGE>
ARTICLE 11- CHANGES ALTERATIONS AND ADDITIONS
11.1 Hereafter and at any time and from time to time during the Term, the Tenant
shall have the right, subject to approval of the Landlord, at the Tenant's
expense, to make such changes and alterations in or to the Demised Premises
as the Tenant shall deem necessary or desirable in connection with the
requirements of its business but no structural change or alteration shall
be undertaken until detailed plans and specifications therefor and a list
of the contractors or tradesmen who the Tenant proposes to hire for the
work have first been furnished to and approved by and consented to in
writing by the Landlord, which approval and consent shall not be
unreasonably withheld.
11.2 The Tenant shall be responsible for procuring and paying for all required
municipal and other government permits and authorizations of the various
municipal departments and government divisions having jurisdiction
necessary or advisable in connection with any changes made pursuant to this
Article provided that the Landlord will, at the Tenant's expense, join in
application for such permits and authorizations whenever such action is
necessary.
11.3 All work done in connection with any change or alteration shall be done
promptly and in good and workmanlike manner and in compliance with the
valid and applicable building and zoning laws and with all other valid
laws, ordinances, orders, rules, regulations and requirements of all
federal, provincial and municipal governments, and the appropriate
departments, commissions, boards and officers thereof, and in accordance
with the orders, rules and regulations of the Canadian Fire Underwriters
Association, or any other body hereafter constituted exercising similar
functions; the cost of any such change or alteration shall be paid or
secured so that the Demised Premises shall at all times be free of liens
for labour and materials supplied, or claimed to have been supplied to the
Demised Premises.
11.4 All alterations or additions to the existing improvements, other than
Tenant's Equipment, shall upon attachment to the Demised Premises, be
deemed a part thereof, and title thereto shall immediately vest in the
Landlord without any liability on its part to pay for the same provided
that the Landlord may elect to require the Tenant to remove at the
expiration of the Lease all or any part of any improvement installed by or
on behalf of the Tenant, in which case such removal shall be done by the
Tenant forthwith, at the Tenant's expense, as well as all other repairs
necessitated by such removal, failing which the Landlord may carry out the
same at the Tenant's expense and without liability for damage to the
improvement so removed.
ARTICLE 12- DAMAGE OR DESTRUCTION
12.1 In the event that the Demised Premises are damaged or destroyed by any
peril or hazard recoverable under insurance maintained by the Landlord
under Article 8 then the Landlord shall immediately select a reputable
contractor and if such contractor:
(a) is of the opinion that the damage or destruction is capable of repair
with reasonable diligence within ninety (90) days of the date of the
damage then the Landlord shall deliver notice of its intention to
rebuild or repair and shall repair the damage with reasonable
diligence, or
(b) is of the opinion that the damage or destruction is not capable of
repair with reasonable diligence within ninety (90) days of the date
of the damage, then:
i) the Landlord may elect to repair such damage or destruction and
shall then repair the same with reasonable diligence, or
ii) either the Landlord or Tenant may elect to terminate the Lease.
12.2 In case the Demised Premises are damaged or destroyed by any peril or
hazard not recoverable under insurance maintained by the Landlord under
Article 8 then the Landlord may either elect to repair such
YCLEASE...12fl6198
-12-
-69-
<PAGE>
damages or destruction and shall then repair the same with reasonable
diligence, or may elect to terminate the Lease. 12.3 If the Lease is not
terminated by reason of such damage or destruction by the Landlord or the
Tenant and if such damage or destruction is such as to render the Demised
Premises wholly unfit for occupancy then the Basic Rent and Additional Rent
to be paid by the Tenant hereunder shall abate in whole, or in proportion
to the unoccupiable portion of the Demised Premises, as the case may be,
until the Landlord delivered a notice to the Tenant that the repairs have
been substantially completed at which time all rent payable by the Tenant
hereunder shall recommence.
12.4 If the Landlord herein does not give the Tenant notice of its intention to
either repair such damage or destruction or to terminate the Lease within
thirty (30) days of the damage or destruction then the Tenant may by notice
in writing delivered to the Landlord terminate the Lease, effective the
date upon which such termination notice is received.
12.5 If the Landlord shall elect under any provision of this Article not to
repair such damage or destruction and as a result the Lease terminates, the
Tenant shall cause all insurance proceeds payable in respect of damages to
the Demised Premises to be paid in accordance with the provisions of the
policy of insurance.
ARTICLE 13- USE OF DEMISED PREMISES
13.1 The Tenant shall use the Demised Premises only for general office and for
no other purposes without the written consent of the Landlord. 13.2 13.3
During the Term, the Tenant in the use, occupation, alteration or repair of
the Demised Premises, or any property used in connection therewith, shall
comply with the requirements of every applicable valid law, ordinance, rule
or regulation and with the orders, rules and regulations of The Canadian
Fire Underwriters Association, or any other body hereafter constituted
exercising similar functions, and with the requirements of all policies of
public liability, fire and the kinds of insurance at the time in force with
respect to the Demised Premises or any part thereof. 13.4 13.3 The Tenant
covenants and agrees that it will carry on its business on the Demised
Premises continuously during the Term.
ARTICLE 14- CERTMN RIGHTS AND DUTIES OF LANDLORD
14.1 The Tenant will permit the Landlord and authorized representatives of the
Landlord to enter into the Demised Premises at any time in case of
emergency and at all reasonable times upon reasonable notice during usual
business hours for the purpose of inspecting the same and of ascertaining
whether the Tenant has failed or neglected to perform any act which it is
required to perform under the provisions of the Lease, and also the
Landlord shall be permitted to enter as aforesaid for the purpose of making
any necessary repairs to the Demised Premises and performing any work
therein, which the Tenant has failed to do, that may be necessary to comply
with any valid law, ordinance, rules or regulations of The Canadian Fire
Underwriters, or of any public authority, or any similar body, or to comply
with the requirements of insurance policies then in force with respect to
the Demised Premises, provided that nothing herein shall imply any duty
upon the part of the Landlord to do or to pay for any work which under any
provision of the Lease the Tenant may be required to perform, and the
performance thereof by the Landlord in the event the Tenant does not
perform the same after demand shall not constitute a waiver of the Tenant's
default in failing to perform the same.
14.2 The Tenant upon paying the Basic Rent, Additional Rent and all other
charges herein provided for, and observing and keeping the covenants,
agreements and conditions of this Lease on its part to be kept, shall
lawfully and quietly enjoy, hold, occupy, control and manage the Demised
Premises during the Term without
YCLEASE...12/16/98
-13-
-70-
<PAGE>
hindrance or molestation of the Landlord, or any person or persons claiming
under the Landlord, save as expressly provided by the Lease.
ARTICLE 15- CONDITIONAL LIMITATIONS DEFAULT PROVISIONS
15.1 In case the Term or any of the goods and chattels of the Tenant shall be at
any time seized in execution or attachment by a creditor of the Tenant or
the Tenant shall make any assignment for the benefit of creditors or become
bankrupt or insolvent or take the benefit of any Act now or hereafter in
force for bankrupts or insolvent debtors, or, if the Tenant is a
corporation and any order shall be made for the winding-up of the Tenant,
or other termination of the corporate existence of the Tenant or a Receiver
or Receiver-Manager is appointed for the Tenant under any Debenture or
other security or by Court Order or otherwise, then in any such case the
Lease shall at the option of the Landlord immediately cease and terminate
and the Term shall immediately become forfeited and void and the then
current month's rent and the next ensuing three (3) month's rent shall
immediately become due and be paid and the Landlord may, without notice,
re-enter and take possession of the Demised Premises as though the Tenant
or other occupant or occupants of the Demised Premises was or were holding
over after the expiration of the Term of Lease without any right
whatsoever.
15.2 If, during the Term, or any renewal thereof, the Tenant shall make default
in the payment of any rent due under the Lease, and such default shall
continue for three (3) days after notice thereof by the Landlord, the Lease
shall cease and come to an end on the date specified in the said notice,
which date shall not be less than three (3) days after the delivery of such
notice, and the Tenant will then quit and surrender the Demised Premises to
the Landlord.
15.3 If, during the Term or any renewal thereof the Tenant shall not observe,
perform or keep any of the other covenants in the Lease and such default
shall continue for three (3) days after written notice thereof by the
Landlord to the Tenant, or if the Tenant fails to proceed promptly and with
all due diligence to cure such default, then and in any such case, unless
the default upon which said notice was based has been cured in the meantime
the Lease shall cease and come to an end on the day specified in the said
notice, which date shall not be less than three (3) days after delivery of
such notice, and the Tenant will then quit and surrender the Demised
Premises to the Landlord, provided that in the event of a default which is
capable of being cured but which cannot with due diligence be cured within
a period of three (3) days, the three (3) day period shall be extended for
such time as shall allow the Tenant proceeding promptly and with all due
diligence a reasonable opportunity to cure such default.
15.4 All costs, charges and expenses incurred by the Landlord in recovering or
enforcing payment of monies owing hereunder or in enforcing the terms and
conditions of the Lease, whether or not any default be cured within the
time allowed, including the costs of the Landlord as between solicitor and
own client on a lump sum basis, expenses of taking possession of the
Demised Premises and realizing upon goods and chattels of the Tenant, shall
be paid by the Tenant and such sums shall be deemed to be rent payable
under the Lease.
15.5 No remedy conferred upon or reserved to the Landlord herein or by law or
otherwise shall be considered exclusive of any other remedy, but the same
shall be cumulative with and in addition to every other remedy available to
the Landlord, and all such remedies may be exercised concurrently as well
as individually from time to time, and as often as the Landlord shall deem
fit.
ARTICLE 16- DISTRESS
16.1 The Tenant waives and renounces the benefit of any present or future statue
taking away or limiting the Landlord's right of distress, and covenants and
agrees that notwithstanding any such statute none of the goods and chattels
of the Tenant on the Demised Premises at any time during the Term shall be
exempt from levy by distress for rent in arrears.
YCLEASE...1~6/98
- 14 -
-71-
<PAGE>
ARTICLE 17- VOIDANCE OF LEASE VACANT OR IMPROPER USE
17.1 It is hereby further declared and agreed between the Landlord and Tenant
that in the case the said Premises or any part thereof become and remain
vacant and unoccupied for the period of fifteen (15) consecutive days, or
be used by any other person or persons, or for any other purpose than as
above provided, without the written consent of the Landlord, the Lease
shall, at the option of the Landlord, cease and be void and the Term of
Lease shall expire and be at an end, anything hereinbefore to the contrary
notwithstanding, and the then current month's rent and an additional three
(3) months1 rent shall thereupon become immediately due and payable and the
Landlord may re-enter and take possession of the Demised Premises as though
the Tenant or other occupant or occupants of the Demised Premises, was or
were holding over after the expiration of the Term of Lease, and the
balance of the Term of Lease shall be forfeit; or in such case instead of
determining the Lease as aforesaid and reentering upon the Demised
Premises, the Landlord may take possession of the Demised Premises or any
part of parts thereof, and let and manage the same and grant any lease or
leases thereof upon such terms as to the Landlord may appear to be
reasonable, and demand, collect, receive and distrain for all rental which
shall become payable in respect thereof, and apply the said rental after
deducting all expenses incurred in connection with the Demised Premises and
in the collection of the said rent, including reasonable commission for the
collection thereof and the management of the Demised Premises, upon the
rent hereby reserved, and the Landlord, and every agent acting for the
Landlord from time to time shall, in so acting, be the agent of the Tenant
who alone shall be responsible for any monies except those actually
received, notwithstanding any act, neglect, omission or default, of any
such agent acting as aforesaid.
ARTICLE 18- WATER AND GAS DAMAGE
18.1 The Landlord shall not be liable for any damage to any property at any time
upon the Demised Premises arising from gas, steam, water, rain or snow,
which may leak into, issue and flow from any part of the Building, or from
the gas, water, steam or drainage pipes, sprinklers, or plumbing works of
the Building or from any other place or quarter, or for any damage caused
by or attributable to the condition or arrangement of any electric or other
wires in the Building.
ARTICLE 19- WATER
19.1 The Landlord agrees to supply normal water consumed on the Demised Premises
and the cost of such supply will be borne by the Tenant in its
Proportionate Share, but in the event of any abnormal consumption of water,
either by reason of the character of the business carried on by the Tenant,
or by the use of mechanical or other contrivances, the Tenant consents to
the installation of a water meter at his own expense, if necessary, and
further agrees to pay for the excess wateiconsumption on the Demised
Premises over and above his Proportionate Share.
ARTICLE 20- SIGNS
20.1 It is further agreed by and between the Landlord and the Tenant that no
sign, advertisement or notice shall be inscribed, painted or affixed by the
Tenant on any part of the outside or inside of the Building whatsoever,
unless of such manner, colour, size and style and in such places upon or in
the Building as shall be consented to in writing by the Landlord and
furthermore, the Tenant, on ceasing to be the Tenant of the Demised
Premises, will before removing his goods and fixtures from the Demised
Premises, cause any sign as aforesaid to be removed or obliterated at his
own expense and in a workmanlike manner to the satisfaction of the
Landlord.
YCLEASE...12/16/98
-15-
-72-
<PAGE>
ARTICLE 21- ILLUMINATION OF DISPLAY WINDOWS
21.1 The Tenant shall keep the display windows of the Demised Premises suitably
illuminated during the business hours of the Building as such hours may be
determined from time to time by the Landlord and during such other
reasonable hours as the Landlord may determine.
ARTICLE 22- NUISANCE OR MENACE
22.1 The Tenant will not carry on or perform or suffer or permit to be carried
on, performed or suffered on the Demised Premises any business practice or
act or engage in any activity which may be deemed a nuisance or a menace or
which in any way may injure the Building.
ARTICLE 23- NO ABATEMENT OF RENT
23.1 Save and except where the Landlord receives insurance proceeds on account
of the cases noted herein, there shall be no abatement from or reduction of
the Basic Rent or Additional Rent due hereunder, nor shall the Tenant be
entitled to damages, losses, costs or disbursements from the Landlord
during the term hereby created on, caused by or on account of fire (except
pursuant to Article 12 where total damage or destruction shall occur),
water, sprinkler systems, partial or temporary failure or stoppage of heat,
light, elevator, live steam or plumbing service in or to the Demised
Premises or in or to the Building, whether alterations, repairs, renewals,
improvements, structural changed to the Demised Premises or to the
Buildings, or the equipment or systems supplying the said services or from
any cause whatsoever; provided that the said failure or stoppage shall be
remedied within a reasonable time.
ARTICLE 24- RIGHT TO SHOW PREMISES
24.1 The Tenant will permit the Landlord to exhibit the Demised Premises during
the last six (6) months of the Term to any prospective tenant and will
permit all persons having written authority from the Landlord to view the
Demised Premises at all reasonable hours.
ARTICLE 25- ASSIGNMENT, SUBLETTING PARTING WITH POSSESSION
25.1 The Tenant shall not assign the Lease or sublet or part with possession of
all or part of the Demised Premises without the prior written consent of
the Landlord, which consent shall not be unreasonably withheld, provided
however, such consent to any assignment or subletting shall not relieve the
Tenant from its obligations for the payment of rent and for the full and
faithful observance and performance of the covenants, terms and conditions
herein contained.
ARTICLE 26- LANDLORD'S RIGHTS
26.1 Provided further and notwithstanding anything hereinbefore set forth:
(a) if at the time of any proposed assignment or subletting, and from time
to time, the Tenant proposes to assign the Lease or sublet the Demised
Premises, the Tenant shall send to the Landlord a notice setting forth
the name and address of the proposed assignee or subtenant and such
information as to the nature of its business and its financial
responsibility and standing as the Landlord may reasonably require,
and all the terms and conditions of the proposed assignment or
sublease;
YCLEASE...12/16/98
-16-
-73-
<PAGE>
(b) the Tenant shall have the right without the consent of the Landlord to
assign the Lease to a company incorporated or to be incorporated by
the Tenant, provided that the Tenant owns or beneficially controls all
of the issued and outstanding shares in the capital of the company.
Such assignment shall, however, not relieve the Tenant from its
obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions
herein contained; and
(c) no assignment of the Lease shall be valid unless within the ten (10)
days after the execution hereof, the Tenant shall deliver to the
Landlord:
i) a duplicate original of such assignment duly executed by the
Tenant, and
ii) an instrument duly executed by the assignee, in form satisfactory
to the Landlord wherein such assignee shall assume the Tenant's
obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions
herein contained.
ARTICLE 27- PAYMENT OF LANDLORD'S EXPENSES
27.1 If at any time an action is brought for recovery of possession of the
Demised Premises, or the recovery of Basic Rent or any part thereof, or
because of a breach by act or omission of any other covenant herein
contained on the part of the Tenant, and a breach is established, the
Tenant shall pay to the Landlord all expenses incurred by the Landlord in
the enforcement of its rights and remedies hereunder, including all
solicitor's fees.
ARTICLE 28- LANDLORD'S RIGHT OF RELET IN CASE OF VACANCY
28.1 In the event that the Demised Premises shall be deserted or vacated, the
Landlord shall have the right, if it thinks fit, to enter the same, as the
agent of the Tenant, either by force or otherwise without being liable to
any prosecution therefor, and to relet the Demised Premises as the agent
and at the risk of the said Tenant and to receive Basic Rent therefor.
ARTICLE 29- TRANSFER OF SHARES OF TENANT
29.1 If the Tenant is a corporation or if this Lease is assigned as aforesaid
with or without the consent of the Landlord to a corporation, and if at any
time during the Term of Lease any part or all of the corporate shares or
voting rights of shareholders shall be transferred by sale, assignment,
bequest, inheritance, trust, operation of law or other disposition, or
treasury shares be issued so as to result in a change in the control of
said corporation by reason of ownership of greater than fifty (50%) percent
of the voting shares of the corporation or otherwise, then and so often as
such a change of control shall occur, the Tenant shall notify the Landlord
in writing of such changes and the Landlord shall have the right to
terminate the Lease and the Term of Lease at any time after such change of
control by giving the Tenant sixty (60) days prior written notice of such
termination. This Article 29 shall not apply to the Tenant if on and from
the date of the Lease the control of the Tenant is represented by shares
listed on a recognized security exchange.
YCLEASE...12/16/98
-17-
-74-
<PAGE>
ARTICLE 30- SHARE RECORDS
30.1 The Tenant shall, upon request of the Landlord, make available to the
Landlord from time to time for inspection or copying or both, all books and
records of the Tenant which, alone or with other data, show the
applicability or inapplicability of Article 29. If any shareholder or the
Tenant shall, upon request of the Landlord, fail or refuse to furnish to
the Landlord any data requested by the Landlord, which data alone or with
other data may show the applicability or inapplicability of Article 29, the
Landlord may terminate this Lease on sixty (60) days written notice as
aforesaid.
ARTICLE 31- RULES AND REGULATIONS
31.1 The Tenant and its clerks, servants and agents will at all times during the
occupancy of the Demised Premises observe and conform to such reasonable
rules and regulations as shall and may be made from time to time by the
Landlord and any such rules and regulations so made shall be deemed to be
incorporated in and form part of the Lease.
ARTICLE 32- INDEMNIFICATION OF LANDLORD
32.1 The Tenant shall indemnify the Landlord and save it harmless from and
against any and all loss (including loss of rentals payable by the Tenant
pursuant to the Lease), claims, debts, actions, damages, liability and
expense in connection with loss of life, personal injury or damage to
property arising from any occurrence in, upon or at the Demised Premises,
or the occupancy or use by the Tenant of the Demised Premises or any part
thereof, or occasioned wholly or in part by any act or omission of the
Tenant, its agents, contractors, employees, servants, licensees,
concessionaires or invitees, or by anyone permitted to be on the Demised
Premises by the Tenant. In the event that the Landlord shall, without fault
on its part, be made a party to any litigation commenced by or against the
Tenant, or by reason or any act or omission of the Tenant, its agents,
contractors, employees, servants, licensees, concessionaires or invitees,
or by anyone permitted to be on the premises by the Tenant, then the Tenant
shall protect and hold the Landlord harmless and shall pay all costs,
expenses and legal fees incurred or paid by the Landlord in connection with
litigation.
ARTICLE 33- NAME OF BUILDING
33.1 The Tenant shall not refer to the Building by any name other than that
designated from time to time by the Landlord nor use such name for any
purpose other than that of the business address of the Tenant, provided
that the Tenant may use the municipal number of the Building assigned to it
by the Landlord instead of the name of the Building.
ARTICLE 34- ACCEPTANCE OF PREMISES
34.1 The Tenant shall examine the Demised Premises before taking possession
hereunder and unless the Tenant furnishes the Landlord with a notice in
writing specifying any defect in the construction of the Demised Premises
or otherwise within seven (7) calendar days after such taking of
possession, the Tenant shall conclusively be deemed to have examined the
Demised Premises and to have found them in order, and such taking of
possession without giving the notice aforesaid within such seven (7) days
shall be conclusive evidence as against the Tenant that at the commencement
date the Demised Premises where in good order and satisfactory condition,
subject only to latent defects, if any. The Tenant agrees that there is no
promise, representation or undertaking by or binding upon the Landlord with
respect to any alteration, remodeling or redecoration or of installation of
equipment or fixtures in the Demised Premises, except such, if any, as are
expressly set forth in the Lease.
YCLEAS~...1~6/98
-18-
-75-
<PAGE>
ARTICLE 35- RIGHT OF TERMINATION
35.1 The Tenant further covenants and agrees that on the Landlord's becoming
entitled to re-enter upon the Demised Premises under any of the provisions
of the Lease, the Landlord in addition to all other rights shall have the
right to determine forthwith the Lease and the Term of Lease by giving
notice in writing addressed to the Tenant of its intention to do so and
thereupon Basic Rent and Additional Rent shall be computed apportioned and
paid in full to the date of such determination of the Lease, and any other
payment for which the Tenant is liable under the Lease, and any other
payment for which the Tenant is liable under the Lease shall be paid and
the Tenant shall forthwith deliver upon possession of the Demised Premises
to the Landlord and the Landlord may re-enter and take possession of the
same.
ARTICLE 36- OVERHOLDING
36.1 If the Tenant shall continue to occupy the Demised Premises after the
expiration of the Lease or without the consent of the Landlord and without
any further written agreement, the Tenant shall be a monthly tenant at
double the rent herein reserved, pro rata in relation to the periods of
time during which the Tenant is an overholding tenant, and on the terms and
conditions set out in the Lease except as to length of tenancy.
ARTICLE 37- DIRECTORY BOARD
37.1 The Tenant shall be entitled to have one name for its company inserted in
the Directory Board of the Building and the Landlord shall design the style
of such identification, and the Director Board shall be located in an area
designated by the Landlord in the main lobby
ARTICLE 38- ACCRUAL OF BASIC RENT
38.1 Basic Rent shall be considered as annual and accruing from day to day and
where it becomes necessary for any reason to calculate such rent for an
irregular period of less than one year, any appropriate apportionment and
adjustment shall be made. Where the calculation of any additional rental is
not made until after the termination of the Lease, the obligation of the
Tenant to pay such additional rental shall survive the termination of the
Lease and such amounts shall be payable by the Tenant upon demand by the
Landlord.
ARTICLE 39- TRANSFER BY LANDLORD
39.1 In the event of a sale, transfer or lease by the Landlord of the Building
or a portion thereof containing the Demised Premises or the assignment by
the Landlord of the Lease or any interest of the Landlord hereunder, the
Landlord shall, without further written agreement, to the extent that such
purchaser, transferee or lessee has become bound by the covenants and
obligations of the Landlord hereunder, be freed, released and relieved of
all liability or obligations under the Lease.
ARTICLE 40- LAWS OF PROVINCE APPLY
40.1 The Lease shall be deemed to have been made in and shall be construed in
accordance with the laws of the Province of British Columbia.
YCLEASE...Z2(16/98
-19-
-77-
<PAGE>
ARTICLE 41 - LEASE ENTIRE AGREEMENT
41.1 The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions, expressed or implied, collateral or
otherwise, forming part of or in any way affecting or relating to the Lease
or the Demised Premises, save as expressly set out in the Lease and that
the Lease, including the Schedules attached and the Rules and Regulations,
constitutes the entire agreement between the Landlord and the Tenant and
may not be modified except as herein explicitly provided or except by
subsequent agreement in writing of equal formality hereto executed by the
Landlord and the Tenant and the Covenantor, if any. Notwithstanding the
foregoing the Tenant shall remain liable to pay for those improvements in
the Demised Premises which have been made by the Landlord for or on behalf
of the Tenant and which are in excess of the work otherwise required to be
done by the Landlord, and the Landlord's fee for supervision and overhead.
ARTICLE 42- REGISTRATION
42.1 The Tenant covenants and agrees that the Landlord shall not be obliged to
execute or deliver the Lease in form registrable under the Land Title Act,
British Columbia or any other statue in pan material therewith and that any
requirement to produce plans acceptable to the Vancouver Land Title Office
shall be at the cost and the sole responsibility of the Tenant.
ARTICLE 43- INTERPRETATION
43.1 Unless the context otherwise requires, the word "Landlord" wherever it is
used herein shall be construed to include and shall mean the Landlord, its
successors and/or assigns, and the word "Tenant" shall be construed to
include and shall mean the Tenant and when there are two or more tenants,
or two or more persons bound by the Tenant's covenants herein contained,
their obligations hereunder shall be joint and several. The word "Tenant"
and the personal pronoun "it" relating thereto and used therewith shall be
read and construed as "Tenants", and "his", "her", "its" or "their"
respectively, as the number and gender of the party or parties referred to
each require and the number of the verb agreeing therewith shall be
construed and agree with the said word or pronoun so substituted. Time
shall be of the essence in all respects hereunder.
ARTICLE 44- SEVERABLE
44.1 The Landlord and the Tenant agree that all of the provisions of the Lease
are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate
provision hereof. Should any provision or provisions of the Lease be
illegal or not enforceable, it or they shall be considered separate and
severable from the Lease and its remaining provisions shall remain in force
and be binding upon the parties hereto as though the said provision or
provisions had never been included.
ARTICLE 45- CAPTIONS
45.1 The captions appearing within the body of the 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 the Lease or of any provision hereof.
YCLLASE..~12;16/98
- 20-
-78-
<PAGE>
ARTICLE 46- MISCELLANEOUS COVENANTS
46.1 During the Term of Lease, or any renewal thereof, the Tenant shall not
suffer or permit any builders' or other liens or encumbrances for work,
labour, services or material to be filed against or attached to the Demised
Premises or any portion thereof, if any such lien or encumbrance be filed
or registered, the Tenant shall procure discharge of the same within
fifteen (15) days after the same has come to its notice or attention;
provided that if the Tenant in good faith desires to contest the amount or
validity of any claim for which a lien is registered and so notified the
Landlord, and if the Tenant shall have deposited with the Landlord or paid
into Court in any action with respect to such lien the amount claimed plus
a reasonable amount for costs, the Tenant may thereupon defer payment of
such claim or discharge of such lien for such period as is reasonably
necessary to determine the claim, provided that neither the Demised
Premises nor the Tenant's leasehold interest hereunder may be allowed to
become liable to forfeiture or sale by reason of such deferment.
46.2 Subject to the provisions of Article 15 hereof, upon termination of the
Lease for any reason whatsoever, except upon the sale of the Land and the
Buildings by the Landlord to the Tenant, the Tenant shall surrender to the
Landlord the Demised Premises and all Building Equipment upon the Demised
Premises, together with all alterations and replacements and additions
thereto (except the Tenant's Equipment) in good order, condition and
repair.
46.3 The Landlord shall have the right to transfer Title to the Demised Premises
at any time or assign its interest under the Lease.
46.4 In the event the Tenant enters into any sublease the Tenant shall not
collect rental from the sublessee more than one month in advance of the due
date hereof.
46.5 It is agreed by and between the parties hereto that the Landlord may
mortgage the Demised Premises, the said mortgage to be registered in
priority to the Lease, and the Tenant covenants and agrees to execute
postponements of any encumbrances it may place upon the Title to the
Demised Premises to protect its interest under the Lease for the purpose of
allowing any such mortgagee to have priority over any encumbrance the
Tenant may register as aforesaid and it is further agreed that the Landlord
may assign the rents hereunder to such mortgagee and notice to that effect,
signed by the Landlord, shall be sufficient authority for the Tenant to pay
the rent, or such portion thereof as is assigned to the mortgagee and the
receipt of the mortgagee shall be a full and adequate discharge to the
Tenant for such payment.
46.6 The failure of either party to insist upon strict performance of any
covenant or condition contained in the Lease or to exercise any right or
option hereunder shall not be construed as a waiver or relinquishment for
the future of any such covenant, condition, right or option; the acceptance
of any rent from or the performance of any obligation hereunder by a person
other than the Tenant shall not be construed as an admission by the
Landlord of any right, title or interest or such person as a sublessee,
assignee, transferee or otherwise in the place and stead of the Tenant.
46.7 Any notice required or permitted to be given shall be in writing and shall
be deemed to have been duly given if delivered by hand or mailing by
prepaid mail as follows:
TO THE LANDLORD:
YALETOWN CENTRE INVESTMENTS LTD.
C/O Lintall Properties Ltd.
BIOO - 750 Pacific Blvd. South
Vancouver, BC
V6B 5E7
YCLEAS~...12/76/98
-21-
-79-
<PAGE>
TO THE TENANT:
ELGRANDE. COM INC.
Suite 206, 1040 Hamilton Street
Vancouver, British Columbia
V6B 2R9
or to such other address as the respective parties may in writing advise and any
such notice shall be deemed to have been given and received, if delivered when
delivered, and if mailed, forty-eight (48) hours following the mailing thereof
in British Columbia, Saturdays, Sundays, holidays and days during interruption
of ordinary mail services excepted.
46.8 The Tenant hereby accepts the Lease subject to the conditions, restrictions
and covenants herein set forth and implied.
46.9 The Lease may be executed in several counterparts, each of which shall be
deemed an original and which together shall constitute one and the same
instrument.
46.10 Werever the singular or masculine or neuter are used in the Lease, the
same shall be construed to include the plural, neuter, feminine or body
corporate where the context so requires, or where necessary to have
application to a party hereto and the Lease shall be read with all
necessary grammatical and terminological changes thereby rendered
necessary.
46.11 The Lease and the covenant and agreements herein contained shall enure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, legal personal representatives, successors and permitted
assignees and sublessees.
46.12 Time shall be of the essence of the Lease and each provision hereof.
46.13 The Tenant hall have the license in common with other Tenants in the
Building to use the area outlined in blue on Schedule "A" attached hereto
for the purposes of loading, unloading and for the use of washroom
facilities, provided that the Tenant agrees to leave any loading area
adjacent to the Buildings free and clear of major obstructions to the other
Tenants.
46.14 Nothing herein contained shall be construed as creating the relationship
of principal and agent, or of partners or joint ventures between the
parties hereto, the only relationship being that of the Landlord and
Tenant.
46.15 No debris, garbage, trash or refuse shall be placed or left or be
permitted to be placed or left in, on or upon any part of the Common Areas
outside of the Demised Premises, but shall be deposited by the Tenant in
areas and at times in a manner specifically designated by the Landlord from
time to time; should any of the items herein mentioned be of a perishable
nature, the same shall be kept in a properly refrigerated area provided at
its cost by the Tenant; should there be costs for removal of said items
additional to the removal service provided by the City of Vancouver or any
independent disposal services should the City of Vancouver or such
independent disposal service charge additional costs for such service, then
the Tenant shall pay those costs.
46.16 In the event that the Landlord, during the term hereof or any renewal
intends to demolish the Building containing the Demised Premises, the
Landlord may give such notice of intent to demolish and after ninety (90)
days have expired after the due delivery of such notice, the Lease shall be
at an end and the Tenant does hereby covenant to deliver up possession.
46.17 In compliance with the City of Vancouver's by-laws the Building is deemed
a non-smoking premise. Smoking is not permitted in the Building including
but not limited to the elevators, stairwells, hallways, washrooms, and
underground parking.
YCLEASE...1~6/98
- 22 -
-80-
<PAGE>
ARTICLE 47- EXPROPRIATION
47.1 If the whole or any part of the Demised Premises or the Building shall be
taken by any public authority under the power of eminent domain or
expropriation, the term hereby granted shall cease from the day possession
shall be taken for such public purposes insofar as the premises so taken
comprises part of the Demised Premises, and the Tenant shall be liable only
for rent in respect of the Demised Premises or part thereof so taken up to
the day of the taking, and if less than the whole be so taken, the Landlord
may at its option cancel and terminate this Lease with respect to the
remainder of the Demised Premises, but notice of such cancellation must be
given to the Tenant within thirty (30) days after notice of such taking has
been received by the Landlord but if the Landlord shall not elect to cancel
this Lease, then the Tenant shall remain in possession of the remainder of
the Demised Premises and the rent thereof shall be reduced in proportion
that the floor area of the space taken in the Demised Premises bears to the
whole rentable area of the Demised Premises. All compensation or damages
awarded in respect of such taking of the Demised Premises and any
diminution in value of the remainder thereof shall be the property of the
Landlord, but the Tenant shall be entitled to receive such compensation or
damages as it may be able to establish against such public authority in
respect of loss of its business, depreciation of and cost of removal of
stock and fixtures.
ARTICLE 48- ESTOPPEL CERTIFICATE
48.1 The Tenant covenants with the Landlord to provide upon the request of the
Landlord an estoppel certificate binding upon the Tenant, confirming:
(a) that the Tenant has accepted possession of the Demised Premises and
that installments of Basic Rent hereunder are then due and payable
from month to month;
(b) whether or not the Landlord has carried out its obligations hereunder;
(c) that the Lease constitutes the entire agreement in relation to use and
occupation of the Demised Premises between the Tenant and the
Landlord; and
(d) such other matters as the Landlord may reasonably require.
ARTICLE 49-OBLIGATIONS OF THE COVENANTOR
49.1 The provisions of this Article shall apply in the event the Lease is
executed by a Covenantor.
49.2 In consideration of the Landlord entering into the Lease with the Tenant
and in further consideration of the sum of ONE ($1.00) DOLLAR now paid by
the Landlord to the Covenantor and other good and valuable consideration
(the receipt of which is hereby acknowledged by the Covenantor), the
Covenantor agrees under seal with the Landlord as follows:
(a) the Covenantor shall be jointly and severally liable with the Tenant
as principal debtor, and not as guarantor or surety, for due payment
of all Basic Rent or other monies payable at the times and in the
manner provided in the Lease;
(b) the Covenantor unconditionally agrees and covenants with the Landlord
to cause the Tenant to duly observe, perform and keep each and every
of the other covenants agreements, stipulations, obligations,
conditions and other provisions of the Lease to be observed, performed
and kept by the Tenant at the time and in the manner provided in the
Lease and, in the event of default by the Tenant, to duly observe,
perform and keep such covenants, agreements, stipulations, obligations
and conditions himself;
YCLEASE...1~ 6/98
- 24-
-81-
<PAGE>
(i) the liability of the Covenantor shall continue notwithstanding any
release or discharge of the Tenant in any receivership, bankruptcy,
winding-up, or other creditor's proceedings or the rejection,
disaffumance or disclaimer of the Lease in any proceeding or the
repossession of the Demised Premises by the Landlord and the
Covenantor shall, at the request of the Landlord, execute a new lease
as a tenant for the period equal to the balance of the Term remaining
hereunder, in the event of any disclaimer of this Lease by the
Tenant's trustee.
ARTICLE 50- ADDITIONAL COVENANTS
PARKING
50.1 The tenant will, throughout the Term of Lease, have the exclusive use of
ONE (1) designated parking stall, which will be designated by the Landlord.
The Tenant will pay to the Landlord the sum of ONE HUNDRED DOLLARS
($100.00) per month per stall. The Landlord reserves the right to adjust
the rate at any time to reflect the market rental rate.
OPTION TO RENEW
50.2 The Tenant, provided it is not in default hereunder shall have the option
of renewing the Lease for ONE (1) further term of TWO (2) years, all terms
of the renewal lease to be the same as the Lease with the exception of this
option to renew which shall be deleted, and with the further exception of
the amount of Basic Rent to be paid. This option to renew shall be
exercised by the Tenant serving written notice exercising the option upon
the Landlord in the manner of serving written notice provided in the Lease.
Notice of intention to exercise such option shall be given by the Tenant to
the Landlord six (6) months prior to the Termination Date.
50.3 Should the Tenant serve written notice exercising the option in the
previous paragraph, the Landlord and the Tenant shall negotiate with the
aim of agreeing on the amount of Basic Rent to be paid during the TWO (2)
years option term. Should the Landlord and the Tenant be unable to reach an
agreement four (4) months prior to commencement of the renewal term, either
party may submit the question of what would be proper market value for the
Basic Rent to be paid for the Demised Premises during the TWO (2) years
option term to arbitration pursuant to the Commercial Arbitration Act,
British Columbia. Until such time as the parties agree to a renewal Basic
Rent or until an arbitrator renders a decision following an arbitration,
the Tenant shall pay Basic Rent equal to the Basic Rent Payable during the
last year of the Term plus fifteen (15%) percent.
<PAGE>
-50-
-82-
