UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
RABATCO, INC.
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(Name of Small Business Issuer in our charter)
Nevada 87-0616344
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
114 W. Magnolia Street. Suite 400-117
Bellingham, Washington 98225
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (360) 392-2868
Securities to be registered under Section 12(b) of the Act:
None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, with a $0.001 par value per share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Page
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PART I ......................................................................................1
ITEM 1 DESCRIPTION OF BUSINESS...............................................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............................12
ITEM 3 DESCRIPTION OF PROPERTY..............................................................15
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................15
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS........................16
ITEM 6 EXECUTIVE COMPENSATION...............................................................19
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................22
ITEM 8 DESCRIPTION OF SECURITIES............................................................22
PART II .....................................................................................24
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
RELATED STOCKHOLDER MATTERS .......................................................24
ITEM 2 LEGAL PROCEEDINGS....................................................................24
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS........................................24
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES..............................................24
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................25
PART F/S FINANCIAL STATEMENTS
PART III
ITEM 1. INDEX TO EXHIBITS
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results or achievements to be materially
different from any of our future results or achievements expressed or implied by
such forward-looking statements. Such factors include, but are not limited to
the following: our lack of an operating history, our lack of revenues and
unpredictability of future revenues; our lack of functional operating systems,
distribution and web site infrastructure; our future capital requirements to
develop our operating systems, distribution systems, web site and administrative
support systems; intense competition from established competitors with greater
resources; our reliance on internally developed systems and system development
risks; the risks of system failure; our dependence on the Internet; the
uncertainty of participating in developing a market; our reliance on third
parties and lack of agreements with such third parties; the risks associated
with rapidly changing technology; intellectual property risks; risks associated
with online commerce security; the risks associated with governmental
regulations and legal uncertainties; and the other risks and uncertainties
described under "Description of Business - Risk Factors" in this Form 10-SB.
Certain of the forward looking statements contained in this registration
statement are identified with cross-references to this section and/or to
specific risks identified under "Description of Business - Risk Factors".
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
Our Business
We, Rabatco, Inc., were incorporated under the laws of the State of Nevada on
June 16, 1977. From our inception in 1977 through 1982, we were primarily
engaged in the business of mineral resource exploration. We remained inactive
from 1982 to 1998. See "History of Our Company." On January 24, 2000, we agreed
to acquire MindfulEye.com Systems Inc., subject to the completion of a
definitive agreement. On March 13, 2000, we completed the acquisition of
MindfulEye.com Systems Inc. See "Our Acquisition of MindfulEye.com Systems Inc."
We intend to change our name to MindfulEye, Inc. and to complete the development
and commercialization of the technologies developed by MindfulEye.com Systems
Inc.
We have not been subject to any bankruptcy, receivership or similar proceeding.
We are in the process of completing the development of a technology that is
designed to provide subscribers to our service sources topic-related content
available on the Internet. Our technology is expected to browse and monitor
Internet website for specific types of information, including chat room
discussions, newswire postings and published reports; rank it according to the
number of times such information appears on websites monitored by us; and
deliver it to our subscribers in a summarized format. Once our technology is
fully developed, we anticipate that subscribers will be able to select a number
of delivery options for receiving the information we collect, including cell
phone, pager, email, web, fax, and instant messaging.
Our system is being developed in a modular fashion so that each content source
will have a dedicated collection system that will permit us to add new feeds
quickly as they become available. Our web module, for example, is based on
existing web crawling technology that is supported by our own proprietary
technology, "FeedMaps," which is designed to quickly isolate and extract
relevant content and place it into a database format. We anticipate that our
subscribers will be able to subscribe for information related to specific
topics, including investor information on specific companies, indexes or
markets. Our technology is designed to monitor, rank and deliver the information
to the subscriber in a summarized format.
We have not completed the development of the technology related to the services
that we intend to provide, and we cannot assure you that we will successfully
complete such development or that our subscription service will be commercially
successful.
Our principal office is located at Suite 300, 355 Burrard Street, Vancouver,
British Columbia, V6C 2G6. Our World Wide Web address is
http://www.MindfulEye.com. Information contained on our website should not be
considered part of this Registration Statement.
Our Product
The first subscriber service that we intend to provide is designed to monitor
the content on investor related Internet web sites for information of interest
to a subscriber. Our service will monitor information related to specific
companies selected by the subscriber, rank it, retrieve and organize relevant
content, and deliver the content in a summarized format to our subscriber. We
anticipate that we will be able to deliver sourced content immediately, batched
in time periods, or summarized in daily reports. We anticipate that our
subscriber may elect to have the content delivered by one of several methods:
Via PCS, cell phone/pager: Short alert messages can be sent directly to the
screens of PCS (Personal Communications Services), which is a new type of
device that uses digital transmission of voice and data to wireless
handheld devices, wireless cellular phones and pagers. Our initial service
will deliver this
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information via email at first, then we anticipate we will use SMS
technologies (Short Message Service), which allows users to receive or
transmit short text messages using a PCS wireless phone.
Via instant messaging: We intend to use ICQ ("I Seek You"), a chat program
available from AOL for a number of operating systems. ICO can be used to
deliver alerts directly to the screens of subscribers. We may add
additional instant messaging services in the future.
Via fax report: We plan to use a fax delivery service to deliver a fax
report to our subscribers at their home or office fax.
Via web page: An easy-to-navigate web page, customized for each customer,
shows what alert "hits" the system has identified. Subscribers can access
this information through our website at www.mindfuleye.com.
Via email: An email can be sent to the customer containing either a
notification of an alert and link to our website, or the complete
information in the body of the message.
Based on discussions with potential subscribers, we believe that the ability to
customize the delivery of information is a distinguishing feature of our
technology.
We will not offer investment advice or recommend specific securities. Our
subscribers will select the companies they would like information about.
There is no requirement for any government approval of our principal products or
services. There are no existing or probable governmental regulations, which will
have a material affect on our currently anticipated product or service
offerings.
Although we anticipate that we may offer additional services in the future, none
have been publicly disclosed to date.
Our Technology
Platform
Our technology is being developed using open system technologies on the
Microsoft Windows 2000 Advanced Server platform. We anticipate that this will
allow for future communications with non-Microsoft systems should the need ever
arise.
Data storage
We use Microsoft SQL Server 7.0 (on Windows 2000 Advanced Server) for data
storage. We believe that this product offers the scalability to allow us to
expand our web site in feeds and service offerings.
User account management
We plan to work with Microsoft, using its "Passport" system to outsource user
authentication. We believe this will relieve us of the network and
administrative burden of account management and allow us to focus on strategic
decisions and developing our core technologies.
In-feeds
We have developed most of our in-feeds in PERL, a general-purpose programming
language. Our tracking software allows us to monitor in-feeds from investor
related web sites, and wire services investor related chat rooms, such as
SiliconInvestor.com, RagingBull.com, StockHouse.com, Yahoo! Finance, and
Quicken.com. We also in-feed stock information and stock quotes through a
dedicated link from Standard & Poors. Our technology processes the
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communication from in-feeds and the data stored on our server using simple
network shared drives. After processing this data, we transmit processed data to
our subscribers as out feeds.
While we plan to continue to add new in-feeds after the initial launch of our
service, we intend to broaden our offerings by expanding into coverage of
additional media, including monitoring television coverage via closed-captioning
text, and/or monitoring newscasts over digital radio. This expansion is expected
to attract a wide-range of new customers whose interest may include what is
being said about particular companies and organizations on the Internet and
which may not be investment-related.
Out-Feeds
We use Visual Basic COM objects (on Windows 2000) to program our out feeds so
that they can be invoked by SQL Server triggers. The initial version of our
service will use e-mail to alert most of our subscribers through regular e-mail,
PCS, pager and fax. We anticipate that later versions will interface with these
modes of communications directly by sending SMS messages directly or using WAP
(Wireless Application Protocol), a global standard for developing applications
over wireless communication networks to allow subscribers to access the
MindfulEye.com database from their wireless devices.
Our Research and Development
We acquired our technology by acquiring our subsidiary MindfulEye.com Systems
Inc., then a private British Columbia company. The four founders of
MindfulEye.com Systems Inc., Tod Maffin, Todd Cusolle, Amanda Kerr, and Ray
Torresan, developed the initial prototype of our technology and our business
plan at a cost of approximately $227,000. They spent approximately one year,
full-time developing our technologies and our business plan.
We currently employ 11 programmers and developers, including the founders of
MindfulEye.com Systems Inc. We also currently employ 1 office manager and 1
receptionist. We have employment agreements with all programmers, developers and
administration staff. We have no employment agreements with any of the founders
at this time. We also engage Dave Edis of Interactive Tools to assist us in the
development of our technologies.
Our Marketing Strategy
Our initial marketing program to support launch will be to use media relations
with a goal of creating positive image of the company and awareness of the
company's service offering. Our branding strategy will be to brand our first
subscriber service as "The ultimate trading advantage."
We intend to use the following marketing programs to support the launch of our
web site, provided that sufficient financing is available:
Investment Industry Relations: Members of our advisory board members
include senior executives at Merrill Lynch, TD Waterhouse, Manulife and
Trimark Investments. We intend to provide introductory trial subscriptions,
free of charge, to members in the investment community to develop
relationships in with these individuals and their companies and to
demonstrate our services. We believe that these trials will lead to
subscriptions and recommendations of our services to clients of these
companies.
Media Relations: We intend to launch a targeted media relations program
designed to build awareness of our service offerings. The goal of this
program will be to obtain publicity and coverage in major business media,
print and online.
User Referral Marketing: We will employ user referral marketing techniques
to try to use our delivered product as a marketing vehicle. For example,
service fax cover sheets will have a message indicating how others can sign
up and encouraging referrals. Our free trial services will be upgradeable
to full subscriptions without cost by referring a certain number of
subscribers to our service. In the future our
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services may include an ability to "publish" selected hits on a shared
workgroup web site, allowing others to view the content without
subscribing.
Advertising: We intend to launch an advertising program using a combination
of print and television advertising, provided we are able to obtain
adequate financing. Our media strategy is expected to use advertisements in
investor oriented publications and may include ads in publications such as:
The Wall Street Journal, Barron's, Institutional Investor, New York Times,
Registered Representative, Forbes, Money, Inc., Globe & Mail, etc.
Personal Sales: We intend to generate awareness of our services by
attending investment and industry tradeshows. We would attend both as
exhibitors, whenever possible, and as speakers. Our president, Tod Maffin,
is currently represented by a speaking bureau and makes more than 50
appearances annually at conferences, company meetings, etc.
Online Marketing: We also plan to use online media to promote our services
by running banner ads on investor related web sites and by maintaining our
web site at http://www.MindfulEye.com.
We have not entered into any arrangements or agreements to promote our services
and we cannot assure you that we will successfully market our services as
planned. We currently do not have sufficient resources to implement all of the
marketing programs that we intend to use. Unless we are able to raise additional
financing or generate sufficient revenues from our operations, we may not be
able market and promote our services effectively.
Industry Background
Growth of the Internet
The Internet is an increasingly significant global medium for communications,
content and online commerce. There are an estimated 97 million users of the
Internet and that number is anticipated to grow to approximately 320 million by
2002 according to Forrester Research Inc. The growth in Internet usage can
likely be attributed to factors such as:
i) the large and growing base of installed personal computers in the
workplace and at home,
ii) advances in the performance and speed of personal computers and
modems,
iii) improvements in network infrastructure, and
iv) easier and cheaper access to the Internet and increased awareness
of the Internet among businesses and consumers.
The Internet has become an attractive source for information as the
functionality, accessibility and overall usage has increased over the last few
years. The Internet and other online services are evolving into a unique
information channel that allows access to millions of sources of published
information 24 hours a day. Generally the cost of publishing on the Internet is
lower than traditional mediums and the Internet offers the ability to reach and
serve a large and global reader base electronically from a central location.
As the Internet grows in popularity, we believe that the Internet is becoming
crowded and that opportunities exist for companies that are able to assist users
in finding information and web site content in a timely and efficient manner. As
consumers are becoming more comfortable with using, interacting and obtaining
content from the Internet, we believe they are also looking for direct access to
their specific areas of interest or need. This has lead to us to begin
developing search tools that focus on specific types of information content and
categories of interest.
The search engine companies, such as Yahoo!, AOL, AltaVista, Excite, Hotbot,
Infoseek, Lycos, MSN, Netscape and others, have responded to the market demand
for better organization and increased service and have evolved into what are
today referred to as portals or content channels. Other companies have developed
systems that are focused on specific areas of interest, such as food, health
issues, entertainment, children, senior citizens, lifestyles and investing.
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Investment Information Services
We intend to offer investment information services by monitoring the information
publicly available on the Internet, the wire services and other sources and
transmitting this information in a convenient format to our subscribers. Based
on our observations, a number of factors are converging to provide growth in
this category:
Interest in investing: Consumer investors are becoming more aware of
investment information resources, including a number of web sites such as
Motley Fool, SiliconInvestor.com, RagingBull.com, StockHouse.com,
Yahoo!Finance, and Quicken.com, a number of books on investing and investor
newsletters. This along with the recent appreciations in the capital
markets have led to a greater number of investors and an increased number
of persons talking about their investments online.
General Internet penetration: The Internet continues to grow at a
phenomenal rate and there are an increasing number of web sites dedicated
to providing investors with information on the Internet.
More public companies: The publicized success of IPOs and the increased
availability of public financing has led to an increased number of public
companies. In addition, the creation of new trading venues such as the CDNX
and ECN, and an increased interest in international public markets have led
to an increased number of public companies that are of interest to
investors.
We believe that this increased activity will provide opportunities for companies
that develop services that assist investors in managing investor related
information and deliver such information in a structured, convenient format.
Our Competition
There are a number of well-known and well-financed companies that provide
investor information services. Our goal is to focus on providing our subscribers
with useful and timely information in a convenient format on companies that they
select. We intend to do this by monitoring information available on the Internet
wire services, and other media using our in-feed/out-feed technologies to
deliver this information over to our subscribers by email, fax and wireless
communication mediums such as cellular phones, pagers and wireless Internet
devices.
While there are some online content clipping services, there are no direct
competitors in this category. Based on our research we believe MindfulEye.com is
the only company with a service that captures and delivers real-time
discussions. We believe our primary competitors are those services that track
the information of specific companies. We have identified the following
competitors:
CompanySleuth.com: CompanySleuth is a tool for investors that places links
to company discussion boards on a single web page. It also provides
pay-per-view reports such as court filings, domain registrations (free),
and other information, etc. The service tracks information on the companies
their customers' request and provides information on these companies.
eWatch.com: eWatch is a media monitoring service for the Internet.
Positioned as a tool for Fortune 500 companies, eWatch provides general
online monitoring to its subscribers. EWatch uses tracking based on simple
keyword search-engine technology.
InvestorFacts.com: Tracks mostly a public/investor relations information
and provides subscribers with reports on companies that are the targets of
rumors. InvestorFacts uses an automated search engine to monitor discussion
boards.
There are also a number of portals that offer specific information such as stock
prices, trading information, analyst reports, chat rooms, press releases and
other information about specific companies, some of which are free. We are not
aware of any other service providers that currently provide investor information
services by monitoring the Internet and providing such information to
subscribers in a format or using delivery systems similar to ours.
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We anticipate that as the growth of the Internet and investor related web sites
continues, more competitors will begin offering services that are similar to
ours.
Intellectual Property
We have filed trademarks for "MindfulEye" and "MoodScore" both in the United
States and Canada. We are in the process of filing a patent for our
technologies.
History of Our Company
We, Rabatco, Inc., were incorporated under the laws of the State of Nevada on
June 16, 1977, with authorized capital of 100,000 shares of common stock with a
par value of $0.25 per share.
From our inception in 1977 through 1982, we were primarily engaged in the
business of mineral resource exploration.(1) Between February 3, 1981 and
December 9, 1981, we issued a total of 5,250,000 (70,000 pre-5:1 and 15:1 split)
shares for cash to various individuals as follows:
o On February 3, 1981, we issued 1,500,000 (20,000 pre-5:1 and 15:1
split)(1) shares for $20,000;
o On May 18, 1981, we issued 750,000 (10,000 pre-5:1 and 15:1 split)(1)
shares for $10,000;
o On July 20, 1981, we issued 1,125,000 (15,000 pre-5:1 and 15:1
split)(1) shares for $15,000;
o On November 6, 1981, we issued 1,350,000 (18,000 pre-5:1 and 15:1
split) (1) shares for $18,000; and
o On December 9, 1981, we issued 525,000 (7,000 pre-5:1 and 15:1
split)(1) shares for $7,000.
(1) After giving effect to a five for one forward split on June 20, 1998 and a
fifteen for one forward split on January 4, 2000.
We used the proceeds from these sales in order to pay for the cost of the
investigation into the mining project. After an examination of our mineral
properties by a geologist, we concluded that continued exploration of our
mineral properties would involve an unacceptably high risk and we abandoned all
of our mineral resource properties in 1982. We remained inactive until 1998.
In March 1998, Randall Ralph Trover and Adrienne Sue Barnett were appointed to
our board of directors. Mr. Trover was appointed as President and Ms. Barnett
was appointed as Vice President of Business Development. We issued 750,000
(10,000 pre-5:1 and 15:1 split)(1) shares to Mr. Trover for $5,000 and 750,000
(10,000 pre-5:1 and 15:1 split) shares to Ms. Barnett for $5,000. We began
efforts to raise additional capital and began discussions to acquire computer
related technology.
On June 20, 1998, we increased our authorized capital to 100,000,000 shares of
common stock with a par value of $0.001 per share, and completed a forward split
of our outstanding common stock on a five share for one share (5:1) basis. Our
efforts to raise additional capital and to acquire computer related technology
failed, and Mr. Trover and Ms. Barnett resigned as officers and directors of the
company. On November 12, 1999, Carmine Bua was appointed as a director of the
company and as our interim President and Secretary.
On January 4, 2000, we completed a forward split of our 450,000 outstanding
common stock on a fifteen share for one share (15:1) basis. After the forward
split, we had a total of 6,750,000 shares of common stock issued and
outstanding. In mid-January 2000, John Meyer was appointed as a director of the
company and Mr. Bua resigned as our President and Secretary and as a director.
Mr. Meyer was appointed as our interim President and Secretary, and began
negotiations to acquire MindfulEye.com Systems Inc., a private company engaged
in the business of developing technology designed to monitor Internet web sites
and sends subscribers to its services messages related
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to the areas of interest via email, fax and wireless communication mediums such
as cellular phones, pagers and wireless Internet devices.
On January 24, 2000, we agreed to acquire MindfulEye.com Systems Inc., subject
to the completion of a definitive agreement. On March 13, 2000, we completed the
definitive agreement and the acquisition of MindfulEye.com Systems Inc. closed
on March 20, 2000. See "Our Acquisition of MindfulEye.com Systems Inc." We
intend to change our name to MindfulEye.com, Inc. and to complete the
development and commercialization of the technologies developed by
MindfulEye.com Systems Inc.
On March 13, 2000, we completed a private placement to raise $2,257,500 by
issuing 1,075,000 units at $2.10 per unit, each unit consisting of one share of
our common stock and one-half warrant. Each whole warrant is be exercisable to
acquire one additional common share of share of our common stock at $2.10 on or
before March 13, 2001 and $2.50 on or before March 13, 2002.
Our Acquisition of MindfulEye.com Systems Inc.
We acquired our business and technologies by acquiring all of the issued and
outstanding shares of MindfulEye.com Systems Inc., our wholly-owned subsidiary.
Pursuant to a share purchase agreement effective March 13, 2000, we issued
6,910,000 shares of our common stock in exchange for all of the issued and
outstanding shares of MindfulEye.com Systems Inc. to the following MindfulEye
shareholders:
Shareholder Number of Shares
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Tod Maffin 1,232,770
Todd Cusolle 1,232,770
Ray Torresan 1,232,770
Amanda Kerr 1,232,770
Roger Mutimer 259,531
Varshney Capital Corp., a British Columbia 1,719,389
company
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Total 6,910,000
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See "Recent Sales of Unregistered Securities."
Under the share purchase agreement, we:
o paid the MindfulEye.com Systems shareholders $150,000 as follows:
$50,000 in cash and $100,000 in the form of a promissory note payable,
without interest, upon successful launch of an internet website to
operate the business of MindfulEye.com Systems;
o paid debt of approximately $227,000 owned by MindfulEye.com Systems to
Varshney Capital Corp. for cash advances to MindfulEye.com related to
development costs.
o completed a financing to raise $2,257,500 by issuing 1,075,000 units
at $2.10 per unit, each unit consisting of one share of our common
stock and one-half warrant. Each whole warrant is be exercisable to
acquire one additional common share of share of our common stock at
$2.10 on or before March 13, 2001 and $2.50 on or before March 13,
2002;
o appointed Tod Maffin as our President and Ms. Kerr as our Secretary;
o appointed Tod Maffin, Todd Cusolle, Ray Torresan, Amanda Kerr and
Praveen Varshney as our directors; and
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o agreed to file this registration statement to become a reporting
issuer under the Securities Exchange Act of 1934, as amended.
Upon the appointment of our new directors, John Meyer resigned as our President,
Secretary and a director. We acquired all of the assets of MindfulEye.com
Systems, including equipment; the domain names MindfulEye.com, MindfulEye.com,
InvestorTrack.com, RumorTrack.com, RumourTrack.com and MoodIndex.com; and the
technologies developed by MindfulEye.com Systems related to our business.
MindfulEye.com Systems had also applied for trademarks for "Moodscore" and
"MindfulEye" with the United States Patent and Trademark Office. We assumed a
five year lease agreement for office space located at 300, 355 Burrard Street
(Marine Building), Vancouver, British Columbia.
Risk Factors
Our business is subject to a number of risks that are generally associated with
start-up companies in the development stage of their business and companies
engaged in business through the Internet. These risks could cause our actual
results to differ materially from the results we project and any forward-looking
statement we make in this registration statement. Below is a description of some
of the risks that we anticipate will be associated with our business and an
investment in our company.
We have a limited operating history and no revenues from operations, which
makes our ability to continue as a going concern questionable.
We have no material business or results of operation. We have never generated
any revenues from our operations. We acquired MindfulEye.com Systems by issuing
6,910,000 shares of our common stock to the MindfulEye.com shareholders,
resulting in a change in control. As a result, we accounted for the share
exchange as a capital transaction, accompanied by a recapitalization of
MindfulEye.com Systems. For accounting purposes, the MndfulEye.com Systems
financial statements are reported as our financial statements. At December 31,
1999, MindfulEye.com Systems had accumulated losses of approximately $200,308.
We anticipate that we will continue to incur loses at least through 2000. We do
not believe that we will generate sufficient revenues to support our operations
in 2000 because of our projected costs related to development and marketing of
our business and services. In the foreseeable future, we believe that these
expenses will increase our net losses, and we cannot assure you that we will
ever be profitable.
As of December 31, 1999, we had current assets of $nil, of which $nil was in
cash and cash equivalents. We had current liabilities of $nil, of which $nil
were accounts payable. Our working capital position at March 21, 2000 was
$1,559,340. Our recent private placement provided net proceeds of $2,257,500 of
which approximately $250,000 was used to pay off debt we assumed from
MindfulEye.com Systems. We do not anticipate our working capital position will
improve until we can generate revenues from our operations, if any, to cover our
expenses or until we raise additional capital. We anticipate raising additional
capital through sales of our equity and/or debt; however, we cannot assure you
that we will be able to obtain adequate financing to support our operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Because we have recently begun implementing our business strategy and we have no
subscribers to our services, it is difficult to evaluate our business and our
prospects. Our revenue and income potential is unproven and our business model
is still emerging. We cannot assure you that we will attract subscribers to use
our services or generate significant revenues in the future. We cannot guarantee
that we will ever establish a sizeable market share or achieve commercial
success.
Our success depends on the services of Tod Maffin, Todd Cusolle, Ray
Torresan, and Amanda Kerr, and our ability to attract and maintain
qualified, experienced personnel.
Our future success will depend on Tod Maffin, our President, Todd Cusolle, our
VP Technology, Amanda Kerr, our VP Operations, and Ray Torresan, our VP
Corporate Development. We intend to rely heavily on Tod Maffin and Amanda Kerr
to manage our operations and to develop our business. We intend to rely on Todd
Cusolle to develop
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our technologies and to refine our service offerings. We also intend to hire
additional personnel or consultants to assist us in developing and implementing
our technology and business plan.
The loss of key personnel could have an adverse effect on our operations. We do
not maintain insurance to cover losses that may result from the death of any of
our key personnel. Competition for qualified employees is intense, and an
inability to attract, retain and motivate additional, highly skilled personnel
required for expansion of operations and development of technologies could
adversely affect our business, financial condition and results of operations.
Our ability to retain existing personnel and attract new personnel may also be
adversely affected by our financial situation. We cannot assure you that we will
be able to retain our existing personnel or attract additional, qualified
persons when required and on acceptable terms.
Parties may exercise options and warrants that may affect our ability to
raise additional capital or affect the value of our shares.
As of March 13, 2000, we issued warrants to purchase an aggregate of 537,500
shares of our common stock at the price of $2.10 on or before March 13, 2001 and
$2.50 on or before March 13, 2002.
As of March 20, 2000, we have reserved up to an additional 2,072,250 shares of
common stock for issuance upon exercise of options by our directors, officers,
employees and consultants. employees. See "Executive Compensation-- Stock
Options."
Holders of such warrants and options are likely to exercise them when, in all
likelihood, we could obtain additional capital on terms more favorable than
those provided by the options and warrants. Further, while our warrants and
options are outstanding, our ability to obtain additional financing on favorable
terms may be adversely affected.
Our executive officers and directors beneficially own or control a large
number of shares of our common stock, which may affect the value of our
shares or these persons may influence all matters submitted to a vote of
our shareholders.
The number of shares of our outstanding common stock held by affiliates is large
relative to the trading volume of the common stock. Any substantial sale of our
common stock or even the possibility of such sales occurring may have an adverse
effect on the market price of the common stock.
Our executive officers and directors (and their affiliates), as a group directly
own 6,650,469 shares or approximately 48.1% of our common stock, and together
have the ability to influence matters submitted to our stockholders for
approval. See "Security Ownership of Certain Beneficial Owners and Management."
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of our company, impede a merger,
consolidation, takeover or other business combination involving our company, or
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of our company, which in turn could have an adverse
effect on the market price of our company's common stock.
Investors may not be able to secure foreign enforcement of civil
liabilities against our management.
All of our directors and officers are residents of Canada. Consequently, it may
be difficult for United States investors to effect service of process within the
United States upon those directors or officers, or to realize in the United
States upon judgments of United States courts predicated upon civil liabilities
under the United States Securities Exchange Act of 1934, as amended. A judgment
of a U.S. court predicated solely upon such civil liabilities would probably be
enforceable in Canada by a Canadian court if the U.S. court in which the
judgment was obtained had jurisdiction, as determined by the Canadian court, in
the matter. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or MindfulEye.com,
Inc. predicated solely upon such civil liabilities.
9
<PAGE>
The e-commerce industry is highly competitive, and we cannot assure you
that we will be able to compete effectively.
The market for investor information services providing reports over the Internet
or by wireless communication is new and rapidly evolving. We anticipate the
market will become intensely competitive. We face potential competition from a
number of large online communities and services that have expertise in
developing online commerce and in facilitating the delivery of investor
information both online and by other communications mediums. Certain of these
potential competitors, including Amazon.com, America Online, Inc., Microsoft
Corporation and Yahoo! Inc., currently offer a variety of investor information
services at no charge as a method of attaching visitors to their web sites. Many
of our current and potential competitors have long operating histories, large
customer bases, brand recognition and significantly greater financial,
marketing, technical and other resources than us.
Certain of our competitors with other revenue sources may be able to devote
greater resources to marketing and promotional campaigns, adopt more aggressive
pricing policies and devote substantially more resources to technology and
systems development than us or may offer their services for free. We cannot
assure you that we will be able to compete successfully against current and
future competitors. Further, as a strategic response to changes in the
competitive environment, we may, from time to time, make certain pricing,
service or marketing decisions that could have a material adverse effect on our
business, results of operations and financial condition.
If we are unable to achieve a significant number of paying subscribers, we
may be unable to generate sufficient revenues to earn a profit.
The success of our MindfulEye services may be dependent upon achieving
significant market acceptance of services by subscribers. Our technologies and
services have not been tested on a commercial basis, and we anticipate that we
will have very limited market acceptance until our brand name is established.
Several of the technologies in which we intend to use to deliver our service,
including wireless Internet services and digital text messaging, are in the
early stage of development, and our business concept of offering our services
using these delivery methods have not been tested. In addition, we may invest
heavily in developing technologies to deliver our service using methods, which
may become obsolete or fail to gain acceptance in the marketplace.
Our competitors and potential competitors may offer more cost-effective
solutions than us, which could damage our business and our ability to
successfully launch our services. Our failure to attract subscribers,
successfully complete the technologies to deliver our services and/or to develop
an adequate subscriber base will seriously harm our business and our ability to
earn a profit.
Due to the emerging nature of Internet commerce, we may be unable to
develop technologies to adequately monitor investor related information.
As a result of the emerging nature of the Internet, including the growth of
investor related web sites, we may be unable to develop technologies to
adequately monitor investor related information. We believe that due primarily
to the relatively brief time the Internet has been available to the general
public, there are several uncertainties related to the successful development of
technologies that can adequately monitor information on the World Wide Web. Our
current and future technology will attempt to monitor information from a variety
of sources, primarily on the Internet. As the Internet grows, we expect the
number of possible sources for such information to grow as well. We may be
unable to develop technologies that can compile and deliver information in a
timely manner as the World Wide Web grows, and our inability to deliver our
service in a timely manner will have an immediate material adverse effect on our
business, financial condition and operating results.
We have capacity constraints and system development risks that could damage
our customer relations or inhibit our possible growth, and we may need to
expand our management systems and controls quickly.
Our success and our ability to provide high quality customer service largely
depends on the efficient and uninterrupted operation of our computer and
communications systems and the computers and communication systems of third
party vendors in order to accommodate any significant numbers or increases in
the numbers of web
10
<PAGE>
sites we monitor and subscribers using our services. Our success also depends
upon us and our vendors' abilities to rapidly expand information-processing
systems and network infrastructure without any systems interruptions in order to
accommodate any significant increases in use of our service.
We intend to rely on third parties to assist us in expanding our capacity, our
transaction-processing systems and network infrastructure as we grow. We cannot
assure you that the vendors we will select will be capable of accommodating any
significant number or increases in the number of subscribers using our services.
Such failures will have a material adverse affect on our business and results of
operations. We may experience periodic systems interruptions and down time
caused by technical difficulties, which may cause customer dissatisfaction and
may adversely affect our results of operations. Limitations of our and our
vendors' technology infrastructure may prevent us from maximizing our business
opportunities.
Changing technology may render our equipment, software and programming
obsolete or irrelevant.
The market for Internet and wireless-based products and services is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The emerging character of these
products and services and their rapid evolution will require that we continually
improve the performance, features and reliability of our products and services,
particularly in response to competitive offerings. We cannot guarantee that we
will be successful in responding quickly, cost effectively and sufficiently to
these developments. In addition, the widespread adoption of new Internet and
wireless technologies or standards could require substantial expenditures by us
to modify or adapt our services and could fundamentally affect the character,
viability and frequency of Internet-based advertising, either of which could
have a material adverse effect on our business, financial condition and
operating results.
Our business may be subject to government regulation and legal
uncertainties that may increase the costs of operating our web site or
limit our ability to generate revenues.
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet and using wireless technologies. Today there
are relatively few laws specifically directed towards online services. However,
due to the increasing popularity and use of the Internet and wireless services,
it is possible that laws and regulations will be adopted with respect to the
Internet or wireless services. These laws and regulations could cover issues
such as online contracts, user privacy, freedom of expression, pricing, fraud,
content and quality of products and services, taxation, advertising,
intellectual property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain.
Due to the global nature of the Internet and wireless services, it is possible
that the governments of other states and foreign countries might attempt to
regulate our transmissions or prosecute us for violations of their laws. We
might unintentionally violate such laws. Such laws may be modified, or new laws
may be enacted, in the future. Any such development could damage our business.
Broker-dealers may be discouraged from effecting transactions in our shares
because they are considered penny stocks and are subject to the penny stock
rules.
Rules 15g-1 through 15g-9 promulgated under the Securities and Exchange Act of
1934, as amended, impose sales practice and disclosure requirements on NASD
brokers-dealers who make a market in "a penny stock." A penny stock generally
includes any non-NASDAQ equity security that has a market price of less than
$5.00 per share. Our shares are quoted on the NASD OTCBB and there were no
trades of our shares during 1998 or 1999. During the first quarter of 2000 up to
March 21, 2000, the high and low closing price of our shares ranged from $6.75
(high) to $3.00 (low), and the price of our shares on March 21, 2000 was $5.87.
Our stock would be considered a penny stock. The additional sales practice and
disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.
11
<PAGE>
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or an "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Selected Financial Data
On January 24, 2000, we agreed acquired all of the issued and outstanding shares
of MindfulEye.com Systems Inc. in exchange for 6,910,000 (post forward-split)
shares of our common stock; $150,000 in the form of cash ($50,000) and a
promissory note; and the assumption of debt of approximately $227,000, which was
paid at closing. As a result of the share exchange, control of the combined
companies passed to the former shareholders of MindfulEye.com Systems, and
MindfulEye.com Systems became our wholly-owned subsidiary. However, for
accounting purposes, we accounted for the share exchange as a capital
transaction accompanied by a recapitalization of MindfulEye.com Systems. As a
result, the financial statements and the financial data contained in this
registration statement represent the financial position of MindfulEye.com
Systems as at December 31, 1999 and the results of operations of MindfulEye.com
Systems for the period from July 21, 1999 (date of incorporation) to December
31, 1999.
The following table sets forth selected financial data regarding MindfulEye.com
Systems' operating results and financial position. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The following
selected financial data is qualified in its entirety by, and should be read in
conjunction with, MindfulEye.com Systems' financial statements and notes thereto
included elsewhere in this Registration Statement. The financial statements of
MindfulEye.com Systems' are presented in Canadian Dollars. For convenience of
the reader, all MindfulEye.com Systems' financial statements amounts have been
converted from Canadian to United States dollars at Cdn.$1.00 = US$0.6929. The
exchange rate is based upon the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York on December 31, 1999.
Period From
Inception on
July 21, 1999 to
December 31, 1999
-----------------
$
-----------------
Operating Revenues --
General & Administrative Expenses 200,308
Net (Loss) from Continuing Operations (200,308)
Net Loss Per share (1) --
December 31, 1999
-----------------
$
-----------------
Working Capital (10,559)
Total Assets 32,541
Total Liabilities 232,847
Shareholders' Equity 200,306
Long-term Obligations 214,106
Cash Dividends --
12
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operation contains "forward looking
statements." Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this report. Although management believes that the assumptions made and
expectations reflected in the forward looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from the
expectations expressed in this Registration Statement.
Overview
On January 24, 2000, Rabatco, Inc. acquired all of the issued and outstanding
shares of common stock of MindfulEye.com Systems, a Canadian corporation engaged
in the development of a technology that is designed to provide subscribers to
its service topic-related content on the Internet. Our transaction with
MindfulEye.com Systems was considered, for accounting purposes, a capital
transaction accompanied by a recapitalization.
The financial statements filed with this Registration Statement and our
management's discussion and analysis of financial condition and results of
operations are for the period from July 24, 1999, the date of inception of
MindfulEye.com Systems, to December 31, 1999.
Results of Operations
Period from our inception on July 24, 1999 to December 31, 1999
The period from July 24, 1999 (inception) to December 31, 1999 was our first
period of operations. We had no revenues from operations. Our loss during this
period of $200,308 was as a result of developing our business plan, research and
development expenditures related to the development of our MindfulEye.com web
site and general overhead and administrative expenses. These expenses included
$110,818 in consulting fees; $46,694 in salary expenses; $14,788 in general
office expenses; $9,424 in professional fees; $9,464 in rent, utilities and
telephone expenses and $1,944 in expenses related to marketing and promotion.
We expect expenses related to research and development and administrative
expenses to continue to be a material component of our expenses during the
start-up phase of our development. We anticipate that professional fees will
increase during the start-up phase of our development and as we complete the
Exchange Act registration process. We also anticipate that expenses related to
marketing and sales will increase substantially during the second quarter of
2000, as we begin an extensive campaign to market and promote our MindfulEye.com
web site.
Liquidity and Capital Resources
On March 13, 2000, we completed a financing to raise $2,257,500 by issuing
1,075,000 units at $2.10 per unit, each unit consisting of one share of our
common stock and one-half warrant. Each whole warrant is be exercisable to
acquire one additional common share of share of our common stock at $2.10 on or
before March 13, 2001 and $2.50 on or before March 13, 2002.
As of March 21, 2000, we had working capital of approximately $1,559,340. Our
expenses are expected to rise dramatically. See "Our Plan of Operation."
Recent Financing
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
13
<PAGE>
Our Plan of Operation
We anticipate it will need the following financing to implement our business
plan and to meet our financial obligations for the year ending December 31,
2000.
<TABLE>
PERIOD
2000
-----------------------------------------------------
DESCRIPTION 2nd Quarter 3rd Quarter 4th Quarter
Mar. - June July - Sept. Oct. - Dec.
----------------- ------------------- ---------------
$ $ $
----------------- ------------------- ---------------
<S> <C> <C> <C>
Office and administration 56,761 71,080 46,240
Research and Development 82,700 64,197 103,030
Equipment 191,261 71,553 9,798
Marketing and Sales 6,624 106,707 207
Salaries and Consulting Fees 248,102 192,591 309,091
Misc. 257,180 41,704 37,653
Total expenditures 842,628 547,832 506,019
Working Capital end of Quarter 1,293,372(1) 745,540 239,521
</TABLE>
(1) Includes projected expenditures for March 2000.
As of March 21, 2000, we had working capital of $1,559,340. We anticipate that
our working capital is sufficient to satisfy our cash requirements only through
the second quarter 2000.
We believe our estimates of our capital requirements to be reasonable. The
capital requirements are only estimates and can change for many different
reasons, some of which are beyond our control. We are a development stage
company and are the process of developing our technologies and marketing our
services to subscribers. We currently have no subscribers to our services and no
income from our operations or arrangements for financing, and there can be no
assurance that we will successful acquire financing on terms acceptable to us,
if at all.
Product Research and Development
We currently develop all of our technologies internally. We anticipate we will
spend approximately $1,800,000 to develop the technology related to our
MindfulEye services and support systems. We may also engage consultants to
assist us with product research and development, but currently have no
arrangements to do so.
The cost for developing technology is expensive and the process will require
testing and refinement. Our commercial success will depend on our ability to
attract subscribers to our MindfulEye.com Services. This will require us to
develop and use increasing sophisticated technologies to generate, sustain and
maintain user interest and satisfaction. See "Note Regarding Forward Looking
Statements."
We do not anticipate that our technologies will be ready to subscribe to until
at least the fourth quarter 2000. There can be no assurance that we will
successfully develop and test the technologies related to our MindfulEye.com
Services or contemplated in our business plan on a timely basis, if at all. A
substantial delay in obtaining the required financing or developing our
MindfulEye services and the support services for subscribers would have a
materially adverse effect on our business and results of operations. See "Note
Regarding Forward Looking Statements."
14
<PAGE>
Acquisition of Equipment for Our Services
We also intend to acquire computer systems and to develop system software to
support our administrative offices and our subscription services. We anticipate
that the cost of such equipment and systems will be approximately $275,000
during the next twelve months.
Personnel
We have 13 employees, 8 are programmers and developers, who assist us in
development of our business and our internal operating and information systems.
We also employ 5 employees who are engaged in general and administrative and
marketing functions. We also engage Dave Edis of Interactive Tools, as a
consultant, to assist us in the development of our technologies. We may also
engage additional consultants in the future to assist us with the development of
software and information systems and the implementation of our business plan.
We anticipate that during 2000, we will hire a Chief Executive Officer to manage
our ongoing operations and a Vice President of Business Development to manage a
team of business developers. We may also hire up to four employees to provide
consumer support services, three to providing marketing and sales support, four
information systems employees and two administration employees.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees and consultants. We do not anticipate any of
our employees will be covered by a collective bargaining agreement. We do not
currently have any key man life insurance on any of our directors or executive
officers.
Year 2000 Issues
We do not anticipate we will experience any material adverse construence as a
result of the Year 2000 issue.
ITEM 3 DESCRIPTION OF PROPERTY
We currently rent our principal business office at 114 West Magnolia Street,
Suite 400-117 Bellingham, Washington 98225 on a month to month basis for $150
per month.
MindfulEye.com Systems Inc., our operating subsidiary, leases approximately
5,000 square feet of office space at Suite 300, 355 Burrard Street, Vancouver,
BC for approximately US$8,340 per month. This lease expires on February 28,
2005.
We do not presently own or lease any other property or real estate.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of March 13, 2000 by: (i) each
person known to us to own more than five percent (5%) of any class of our voting
securities; (ii) each of our directors; and (iii) all our directors and officers
as a group. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.
15
<PAGE>
<TABLE>
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER CLASS(1)
- ----------------------- -------------------------------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Common Stock Tod Maffin, President, Director 1,232,770 8.9%
111-1045 Haro Street
Vancouver, BC
Canada V6E 3Z8
- ----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Todd Cusolle, VP Technology, Director 1,232,770 8.9%
701-1433 Beach Avenue
Vancouver, BC
Canada V6G 1Y3
- ----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Ray Torresan, VP Corporate Development,
Director 1,232,770 8.9%
403-1000 Beach Avenue
Vancouver, BC
Canada V6E 4M2
- ----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Amanda Kerr, VP Operations 1,232,770 8.9%
198 Aquarius Mews
Vancouver, BC
Canada V6Z 2Y4
- ----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Varshney Capital Corp.(2) 1,719,389 12.4%
1304-925 West Georgia St
Vancouver, BC
Canada V6C 3L2
- ----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Officers and Directors 6,650,469 48.1%
as a Group
</TABLE>
(1) Based on an aggregate 13,815,000 shares outstanding as of March 13, 2000.
(2) Varshney Capital Corp. is beneficially owned by Praveen Varshney, a
director of the company.
We are not aware of any arrangement, which might result in a change in control
in the future.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles of Incorporation. We have not held an
annual regular general meeting and the next regular meeting is anticipated to be
held in May 2001. Our executive officers are appointed by and serve at the
pleasure of our Board of Directors.
16
<PAGE>
As at March 20, 2000, the following persons were our directors and/or executive
officers:
<TABLE>
Principal occupation and if not
at present an elected director,
Name and present office held Age Director since occupation during the preceding
five years
- ------------------------------- ------------------- ----------------------- -----------------------------------
<S> <C> <C> <C>
Tod Maffin, Director President 28 March 2000 Internet Consultant
- ------------------------------- ------------------- ----------------------- -----------------------------------
Todd Cusolle, Director, VP 28 March 2000 Internet Programmer
Technology
- ------------------------------- ------------------- ----------------------- -----------------------------------
Amanda Kerr, Secretary, VP 29 March 2000 Internet Project Manager
Operations
- ------------------------------- ------------------- ----------------------- -----------------------------------
Ray Torresan, Director, VP 37 March 2000 Corporate Communications
Corporate Development Consultant
- ------------------------------- ------------------- ----------------------- -----------------------------------
Praveen Varshney, Director 34 March 2000 Chartered Accountant
- ------------------------------- ------------------- ----------------------- -----------------------------------
</TABLE>
The following is a brief biographical information on each of the officers and
directors of listed:
Tod Maffin, President and Director
After a career in broadcast journalism and public relations, Mr. Maffin became a
founding staff member and Vice President, Marketing, for Emerge Online in March
1996. He then served as Executive Vice President, Marketing, at communicate.com
(formerly IMEDIAT Digital) from September 1998 to January 1999 when he left to
pursue a successful consulting practice securing clients that included AT&T,
Ericsson, Microcell, Mackenzie Financial, Netcom, The Investment Funds Institute
of Canada, Connex GSM, Telus, and others). He is editor of the
MobileCommerce.org and FutureFile.com newsletters and web sites and is a
national broadcaster and columnist. Mr. Maffin serves on the advisory board for
Microcell Solutions Inc. and Tech BC University.
Todd Cusolle, VP Technology and Director
Mr. Cusolle served as a senior developer and architect at Quadravision
Communications (now Bowne Internet) from December 1995 to August 1996, Emerge
Online from August 1996 until September 1998, Communicate.com from September
1998 to January 1999, and at RLG netPeformance from January 1999 to July 1999.
While working with these organizations Mr. Cusolle lead the development of some
of the largest investment and financial web sites, including HSBC USA, TD Bank,
Comerica Bank, Fleet Bank USA, Canada Trust, Canadian Corporate News, Bayshore
Trust.
Amanda Kerr, VP Operations, Secretary and Director
Ms. Kerr served as a senior project manager for Emerge Online from July 1996 to
September 1998 and as senior project manager for communicate.com (formerly
IMEDIAT Digital) from October 1998 to July 1999. Ms. Kerr managed the
development of large-scale transaction web sites such as London Drugs
PhotoStation, CKWX News1130, HSBC Bank USA (formerly Marine Midland Bank) and
the Jim Pattison Trade Group web site and extranet while at Emerge Online and
communicate.com. Ms. Kerr owned a web consulting firm from May 1994 to December
1996.
17
<PAGE>
Ray Torresan, VP Corporate Development and Director
Ray Torresan was president of Torresan Communications Inc., a leading financial
public relations firm based in Vancouver, until he left to start MindfulEye.com
in 1999. Mr. Torresan has been active in corporate communications in Vancouver
and Toronto with the Torresan group of companies since the early 1980s.. He is
an Accredited Public Relations Practitioner (APR), certified by the Canadian
Public Relations Society, a Certified Advertising Agency Practitioner (CAAP),
accredited by the Institute of Canadian Advertising. He has served as a director
of St. Paul's Hospital in Vancouver since 1998 and is involved as a director in
various charitable organizations.
Praveen Varshney, Director
Mr. Varshney is a Chartered Accountant. He obtained his CA designation in 1990
from the Institute of Chartered Accountants of B.C. and graduated from the
University of British Columbia in 1987 with a degree in Bachelor of Commerce in
Accounting. He was a consultant for the Varshney Chowdhry Group, a venture
capital firm, from 1993 to 1999, and Varshney Capital Corp., a merchant banking
and venture capital firm in which he is a principal and co-founder, from 1999 to
present. From 1987 to 1991, he was with KPMG, Chartered Accountants. Mr.
Varshney is a member of the Vancouver chapters of The Young Entrepreneurs
Organization (Y.E.O.) and The IndUS Entrepreneurs (T.I.E.).
Additional Information
Members of our Board of Directors are elected by our shareholders to represent
the interests of all our shareholders. Our Board of Directors meets periodically
to review significant developments affecting us and our business and to act on
matters requiring Board approval. Although our Board of Directors may delegate
many matters to others, it reserves certain powers and functions to itself. The
only standing committee of the Board of Directors of the Registrant is an Audit
Committee. The Audit Committee currently consists of Ray Torresan and Amanda
Kerr. This committee is directed to review the scope, cost and results of the
independent audit of our books and records, the results of the annual audit with
management and the adequacy of our accounting, financial and operating controls;
to recommend annually to our Board of Directors the selection of the independent
auditors; to consider proposals made by our independent auditors for consulting
work; and to report to our Board of Directors, when so requested, on any
accounting or financial matters.
None of the our directors or executive officers are parties to any arrangement
or understanding with any other person pursuant to which the individual was
elected as a director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of the officers or directors of the Registrant have been involved in the
past five years in any of the following: (1) bankruptcy proceedings; (2) subject
to criminal proceedings or convicted of a criminal act; (3) subject to any
order, judgment or decree entered by any court limiting in any way his or her
involvement in any type of business, securities or banking activities; or (4)
subject to any order for violation of federal or state securities laws or
commodities laws.
18
<PAGE>
Advisory Board
Our advisory board consists of various individuals that assist the company in
strategic and business development. Our advisory board consists of the following
individuals:
Name Title Company
City
- --------------------------- ------------------------------ --------------------
Tim Hockey Vice President Canada Trust
Investment & Banking Toronto ON
- --------------------------- ------------------------------ --------------------
Jeff Brock Principal Sierra Systems
E-Commerce Seattle WA USA
- --------------------------- ------------------------------ --------------------
Joel Chamish President PickYourPresent.com
Vancouver BC
- --------------------------- ------------------------------ --------------------
Edward Trapunski Editor, Silicon Valley N. Globe and Mail
Writer, Globe and Mail Toronto ON
- --------------------------- ------------------------------ --------------------
Chris Merry Vice President Merrill Lynch
Toronto ON
- --------------------------- ------------------------------ --------------------
Pat Dunwoody Assistant Vice President Trimark Investments
Toronto ON
- --------------------------- ------------------------------ --------------------
Larry Cardy Vice President Canada NewsWire
Western Canada Vancouver BC
- --------------------------- ------------------------------ --------------------
Lynn Richards Vice President Horizon Computer
Surrey BC
- --------------------------- ------------------------------ --------------------
Richard Ketchen Owner Ketchen & Company
West Vancouver BC
- --------------------------- ------------------------------ --------------------
Jacqueline Voci Manager Pivotal Corporation
Corporate Cmns. North Vancouver BC
- --------------------------- ------------------------------ --------------------
ITEM 6 EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth compensation information for our year ended
December 31, 1999 and anticipated compensation for our year ended December 31,
2000:
19
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
- ---------------------- --------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------- --------------------------------
Awards Pay-outs
Other
Annual Restricted Securities All Other
Compen- Stock Under-lying Compen-
Name and Salary Bonus sation Award(s) Options/ LTIP sation
Principal Position Year Ended ($) ($) ($) ($) SARs (#) Payouts ($)
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Not Not Not Not Not Not
Tod Maffin, (1) 12/31/00 69,000 available available available available available available
President, Director
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Not Not Not Not Not Not
Todd Cusolle, (1) 12/31/00 89,700 available available available available available available
VP Technology,
Director
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Not Not Not Not Not Not
Amanda Kerr, (1) 12/31/00 69,000 available available available available available available
VP Operations,
Secretary, Director
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Ray Torresan, (1) 12/31/99
VP Corporate Not Not Not Not Not Not
Development, Director 12/31/00 69,000 available available available available available available
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Carmine J. Bua (2) 12/31/99 Nil Nil Nil Nil Nil Nil Nil
President and 12/31/00 Nil Nil Nil Nil Nil Nil Nil
Director
- ---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
John A. Meyer (3) 12/31/00 8,400 Nil Nil Nil Nil Nil Nil
President and
Director
- ---------------------- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Appointed on March 13, 2000.
(2) Mr. Bua served as our President and Director from November 12, 1999 to
January 24, 2000.
(3) Mr. Meyer served as our President and Director from January 24, 2000 to
March 13, 2000.
Our Directors do not receive any stated salary for their services as directors
or members of committees of the Board of Directors, but by resolution of the
Board, a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Directors may also serve our company in other capacities as an
officer, agent or otherwise, and may receive compensation for their services in
such other capacity.
Stock Options
We have reserved 2,072,250 shares for issuance pursuant to a stock option plan
we intend to adopt during the second quarter 2000. We anticipate we will issue
shares to certain of our directors, executive officers and consultants after
20
<PAGE>
our stock option plan is adopted. We intend to register our stock option plan
under the Securities Act after we adopt a plan and this registration statement
is declared effective.
We intend to grant stock options to the following officers, directors and
consultants after we approve and adopt a stock option plan:
Grantee(1) Number of Options Exercise Price
- ------------------------------------ --------------------- ---------------------
Tod Maffin, President and Director 207,225 $2.10
- ------------------------------------ --------------------- ---------------------
Todd Cusolle, VP Technology and 207,225 $2.10
Director
- ------------------------------------ --------------------- ---------------------
Amanda Kerr, VP Operations, 207,225 $2.10
Secretary and Director
- ------------------------------------ --------------------- ---------------------
Ray Torresan, VP Corporate 207,225 $2.10
Development and Director
- ------------------------------------ --------------------- ---------------------
Employee pool 1,246,620 $2.10
- ------------------------------------ --------------------- ---------------------
Employment Agreements
We currently have employment agreements with the following employees:
Heather Macintosh: Under the terms of our employment agreement dated
February 1, 2000. The agreement is for a term of 1 year. We also agreed to
issue Ms. Macintosh options to acquire shares our common stock under a
stock option plan, which we intend to adopt in the second quarter 2000.
Xiaowei (William) Tang: Under the terms of our employment agreement dated
February 17, 2000. The agreement is for a term of 1 year. We also agreed to
issue Mr. Tang options to acquire shares of our common stock under a stock
option plan, which we intend to adopt in the second quarter 2000.
Steve Ritchie: Under the terms of our employment agreement dated February
16, 2000. The agreement is for a term of 1 year. We also agreed to issue
Mr. Ritchie options to acquire shares of our common stock under a stock
option plan, which we intend to adopt in the second quarter 2000.
Edna (Rox) Zurbuchen: Under the terms of our employment agreement dated
February 1, 2000. The agreement is for a term of 1 year. We also agreed to
issue Ms. Zurbuchen options to acquire shares of our common stock under a
stock option plan, which we intend to adopt in the second quarter 2000.
Mina Mahdavi-Nia: Under the terms of our employment agreement dated
February 17, 2000. The agreement is for a term of 1 year. We also agreed to
issue Ms. Mahdavi-Nia options to acquire shares of our common stock under a
stock option plan, which we intend to adopt in the second quarter 2000.
Chris Zhao: Under the terms of our employment agreement dated February 18,
2000. The agreement is for a term of 1 year. We also agreed to issue Mr.
Zhao options to acquire shares of our common stock under a stock option
plan, which we intend to adopt in the second quarter 2000.
Dr. Maria-Teresa (MAITE) Taboada: Under the terms of our employment
agreement dated March 2, 2000. The agreement is for a term of 1 year. We
also agreed to issue Dr. Taboada options to acquire shares of our common
stock under a stock option plan, which we intend to adopt in the second
quarter 2000.
21
<PAGE>
Mr. Ashley Webster: Under the terms of our employment agreement dated
February 29, 2000. The agreement is for a term of 1 year. We also agreed to
issue Mr. Webster options to acquire shares of our common stock under a
stock option plan, which we intend to adopt in the second quarter 2000.
We currently have no other employment, consulting or other service contracts or
arrangements between us or our subsidiaries and our directors and/or executive
officers.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since our organization that had or is
anticipated to have a materially affect on us or our business, or any proposed
transaction that would materially affect us or our business, except for an
interest arising from the ownership of our shares where the member will receive
no extra or special benefit or advantage not shared on a pro rata basis by all
holders of shares in our capital.
o We acquired our business and technologies by acquiring all of the
issued and outstanding shares of MindfulEye Systems Inc., our
wholly-owned subsidiary. Pursuant to a share purchase agreement
effective March 13, 2000, we issued 6,910,000 shares of our common
stock in exchange for all of the issued and outstanding shares of
MindfulEye Systems to the following MindfulEye shareholders:
--------------------------------------------------------------------
Shareholder Number of Shares
--------------------------------------------------------------------
Tod Maffin 1,232,770
--------------------------------------------------------------------
Todd Cusolle 1,232,770
--------------------------------------------------------------------
Ray Torresan 1,232,770
--------------------------------------------------------------------
Amanda Kerr 1,232,770
--------------------------------------------------------------------
Roger Mutimer 259,531
--------------------------------------------------------------------
Varshney Capital Corp., a British Columbia 1,719,389
company
--------------------------------------------------------------------
Total 6,910,000
--------------------------------------------------------------------
o We repaid a loan from Varshney Capital Corp. to MindfulEye.com
Services, Inc. in connection with our acquisition of Mindful eye.
Services Inc.
o MindfulEye, our subsidiary, leases its office space from Marine
Building Holdings Ltd. and Omers Realty Corporation, collectively
See "Description of Business-- Our Acquisition of MindfulEye.com Systems, Inc."
We believe that all of the above described transactions are on as favorable
terms to us as such agreements could have been negotiated at arms' length with
unrelated third-parties.
ITEM 8 DESCRIPTION OF SECURITIES
Our authorized capital consists of 100,000,000 shares of common stock with a par
value of $0.001 per share. At March 13, 2000, there were 13,815,000 shares
issued and outstanding and we reserved for issuance an additional 537,500 shares
for issuance pursuant to warrants and 2,072,250 shares for issuance pursuant to
incentive stock option grants.
All shares are of the same class and have the same rights, preferences and
limitations. The holders of the shares are entitled to dividends in cash,
property or shares as and when declared by the Board of Directors out of funds
legally available therefor, to one vote per Share at meetings of our security
holders and, upon liquidation, to receive such assets as are distributable to
the holders of the shares. Upon any liquidation, dissolution or winding up of
our business proceeds, if any, after payment or provision for payment of all our
debts, obligations or liabilities shall be
22
<PAGE>
distributed to the holders of shares. There are no pre-emptive rights or
conversion rights attached to the Shares. There are also no redemption or
purchase for cancellation or surrender provisions, sinking or purchase fund
provisions, or any provisions as to modification, amendment or variation of any
such rights or provisions attached to our shares.
Our Outstanding Share Capital
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
<TABLE>
Number of Shares Total Price of Shares ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Founders shares issued at par value (post-forward 5,250,000(1)(2) 70,000(1)(2)
split)
- --------------------------------------------------------------------------------------------------------------------
Issued for cash at $0.0066 per share (post-forward split) 1,500,000(1)(2) 10,000(1)(2)
- --------------------------------------------------------------------------------------------------------------------
Issued as consideration for the acquisition of all the 6,910,000
issued and outstanding shares of MindfulEye.com
Systems Inc. (3)
- --------------------------------------------------------------------------------------------------------------------
Cancellation/Surrender of 920,000 shares(4) (920,000)
- --------------------------------------------------------------------------------------------------------------------
Issued for cash at $2.10 per share(5) 1,075,000 2,257,500
- ------------------------------------------------------------ -------------------------------------------------------
TOTAL 13,815,000
</TABLE>
(1) On a post-forward split basis. On June 20, 1998, we amended our Articles of
Incorporation to increase the authorized share capital from 100,000 to
100,000,000 common shares with a par value of $0.001 and to affect a
forward split of our issued and outstanding share capital on a five shares
for one share basis. Prior to the forward split, we had 90,000 issued and
outstanding shares of common stock, with a par value of $0.25 each, and
after giving effect to the forward split, such shares were automatically
reclassified and changed into 450,000 fully-paid and non-assessable shares
of common stock, with a par value of 0.001 each.
(2) On January 4, 2000 we amended our Articles of Incorporation to affect a
forward share split of our issued and outstanding share capital on a
fifteen shares for one share basis. Prior to the forward split, we had
450,000 shares of issued and outstanding shares of common stock, with a par
value of $0.001, and after giving effect to the forward split, such shares
were automatically reclassified and changed into 6,750,000 fully paid and
non-assessable shares of common stock, with a par value of $0.001, without
increasing or decreasing the amount of our capital or paid-in surplus.
(3) On January 25, 2000, we agreed to acquire all of the issued and outstanding
shares of MindfulEye.com, our subsidiary for 6,910,000 shares of common
stock with a total deemed value of $2,257,500.
(4) On March 13, 2000, 920,000 shares of common stock issued to John Meyer were
contributed to the company and cancelled since John Meyer resigned as a an
officer and a director of the company and will no longer play an active
role.
(5) We completed a private placement of 1,075,000 units at $2.10 per unit, each
unit consisting of one share of our common stock and one-half warrant. Each
whole warrant is be exercisable to acquire one additional common share of
our common stock at $2.10 on or before March 13, 2001 and $2.50 on or
before March 13, 2002.
23
<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER RELATED STOCKHOLDER MATTERS
On November 20, 1998, our common stock was approved for trading on the OTCBB
under the symbol "RBTC". There was no material market for our common shares and
no trades of our shares from November 20, 1998 to February 29, 2000.
On March 21, 2000, the last reported sale price of our common stock reported by
the NASD was $5.87.
We intend to change our name to MindfulEye.com. We anticipate that our symbol
will change as a result of our name change.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements, and other factors deemed relevant by our Board of Directors.
ITEM 2 LEGAL PROCEEDINGS
We are not a party to, and none of our property is subject to, any pending or
threatened legal proceeding.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
From our inception to December 31, 1981, we issued 5,250,000 (70,000 pre-5:1 and
15:1 split) shares of our common stock for cash of $70,000. We issued these
shares in connection with the initial seed capital investment and the
organization of our corporation. At the time these shares were issued, we were a
shell company with no material business or assets, and there was no market for
our common stock. The issuance of those shares was exempt from registration
under the provisions of Section 4(2) of the Securities Act of 1933, as amended.
The issuance of the shares did not involve a public offering.
On May 1, 1998, we issued 750,000 (10,000 pre-5:1 and 15:1 split)(1) shares to
Randall Trover, our then President and director, for $2,500 and 750,000 (10,000
pre-5:1 and 15:1 split) shares to Adrienne Barnett, our then vice president of
business development, for $2,500. At the time these shares were issued, we were
a shell company with no material business or assets, and there was no market for
our common stock. The issuance of those shares was exempt from registration
under the provisions of Section 4(2) of the Securities Act of 1933, as amended.
The issuance of the shares did not involve a public offering.
(1) After giving effect to a five for one forward split on June 20, 1998 and a
fifteen for one forward split on January 4, 2000.
In early 2000, we began negotiations to acquire MindfulEye Systems, Inc.. At the
time the negotiations began there was no market for our shares. On January 25,
2000, we entered into a letter agreement to acquire all of the issued and
outstanding shares of MindfulEye Systems for 6,910,000 shares of our common
stock. On March 13, 2000, we closed the acquisition of MindfulEye Systems and
issued 6,910,000 pursuant to a definitive agreement and issued 6,910,000 shares
of our common stock, which represents approximately 50% of our issued capital.
These shares were issued to Tod Maffin, Todd Cusolle, Ray Torresan, Amanda Kerr,
Roger Mutimer and Praveen Varshney for all of the issued and outstanding shares
of common stock of MindfulEye Systems. The shares were issued pursuant
24
<PAGE>
to an exemption from registration pursuant to Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended. The issuance of the
shares did not involve a public offering.
Pursuant to a resolution of the Board of Directors dated March 13, 2000, we
issued 1,075,000 units to Soledad Holdings Ltd., a company controlled by Kelley
Cook, at the price of $2.10 per unit to raise $2,257,500. Each unit consisted of
one share of our common stock and one half of one non-transferable share
purchase warrant. The offering was not underwritten. The offer and sale was made
to non-U.S. persons outside of the United States and was exempt from
registration in reliance upon under Regulation S promulgated under the
Securities Act of 1933, as amended. The issuance of the shares did not involve a
public offering.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Bylaws require us to indemnify to the fullest extent permitted by law each
person that is empowered by law to indemnify. Our Articles of Incorporation
require us to indemnify to the fullest extent permitted by Nevada law, each
person that we have the power to indemnify.
Nevada law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit, or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if such directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Nevada law (for unlawful payment
of dividends, or unlawful stock purchases or redemptions) or (4) a transaction
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted by Nevada law.
25
<PAGE>
PART F/S
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
<PAGE>
DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Directors of
MindfulEye.com Systems Inc.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheet of MindfulEye.com Systems Inc.
(formerly Investortrack.com Technologies Inc.) as at December 31, 1999 and the
related statement of operations, changes in stockholders' equity and cash flows
for the period from date of incorporation on July 21, 1999 to December 31, 1999.
These financial statements, expressed in Canadian dollars, 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
in the United States of America. Those standards require that we plan and
perform an 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.
The accompanying financial statements have been prepared assuming that
MindfulEye.com Systems Inc. will continue as a going concern. As discussed in
Note 1 to the financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are discussed in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of MindfulEye.com Systems Inc. (formerly
Investortrack.com Technologies Inc.) as at December 31, 1999 and the results of
its operations, changes in its stockholders' equity and its cash flows for the
period from date of incorporation on July 21, 1999 to December 31, 1999 in
accordance with generally accepted accounting principles in the United States of
America.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
February 7, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
BALANCE SHEET
(Expressed in Canadian Dollars)
AS AT DECEMBER 31, 1999
================================================================================
<TABLE>
ASSETS
Current
<S> <C>
Cash $ 9,411
Accounts receivable 2,397
-------------
Total current assets 11,808
Capital assets (Note 3) 35,155
-------------
$ 46,963
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 27,047
-------------
Total current liabilities 27,047
Long-term debt (Note 4) 309,000
-------------
336,047
Stockholders' equity
Capital stock
Authorized
100,000 common shares without par value
Issued and outstanding
December 31, 1999 - 160 common shares 2
Deficit accumulated during the development stage (289,086)
-------------
(289,084)
$ 46,963
===============================================================================================
</TABLE>
Nature and continuance of operations (Note 1)
Subsequent events (Note 9)
On behalf of the Board:
Director Director
- ---------------------------- -------------------------------
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Expressed in Canadian Dollars)
PERIOD FROM DATE OF INCORPORATION ON JULY 21, 1999 TO DECEMBER 31, 1999
================================================================================
<TABLE>
ADMINISTRATIVE EXPENSES
<S> <C>
Amortization $ 3,270
Consulting fees 158,033
Contract work 1,900
Insurance 500
Interest and bank charges 6,442
Investor relations 2,806
Legal and audit fees 13,745
Office and miscellaneous 21,342
Rent and utilities 10,072
Telephone and communications 3,587
Wages and benefits 67,389
-------------
Loss for the period $ 289,086
=================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in Canadian Dollars)
================================================================================
<TABLE>
Deficit
Accumulated
Common Stock During the Total
----------------------------- Development Stockholders'
Shares Amount Stage Equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, July 21, 1999 - $ - $ - $ -
Common stock issued 160 2 - 2
Loss for the period - - (289,086) (289,086)
------------ -------------- -------------- --------------
Balance, December 31, 1999 160 $ 2 $ (289,086) $(289,084)
============================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Expressed in Canadian Dollars)
PERIOD FROM DATE OF INCORPORATION ON JULY 21, 1999 TO DECEMBER 31, 1999
================================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (289,086)
Adjustment to reconcile net loss to net cash from operating activities:
Amortization 3,270
Changes in non-cash working capital items:
Increase in accounts receivable (2,397)
Increase in accounts payable and accrued liabilities 27,047
-------------
Net cash used in operating activities (261,166)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (38,425)
-------------
Net cash used in investing activities (38,425)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 309,000
Issuance of capital stock 2
-------------
Net cash provided by financing activities 309,002
-------------
Change in cash position during the period 9,411
Cash position, beginning of period -
------------
Cash position, end of period $ 9,411
============================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 7)
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
1. NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated on July 21, 1999 under the laws of British
Columbia. The Company is in the development stage and is currently
developing a subscription-based service for the retail and institutional
investment community that delivers proprietary content directly to
subscribers by wireless devices, fax, email, and the web.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan in
this regard to obtain additional working capital through equity financings.
========================================================================
Working capital (deficiency) $ (15,239)
Deficit accumulated during the development stage (289,086)
========================================================================
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is being provided for annually, using the declining balance
method at the following rates:
Computer hardware 30%
Computer software 100%
Financial instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and accrued liabilities and long term debt. Unless
otherwise noted, it is management's opinion that the Company is not exposed
to significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Comprehensive income
In 1999, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total stockholders'
equity as of December 31, 1999.
Software development
The Company has adopted Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed computer
software costs. Under SOP 98-1, computer software costs incurred in the
preliminary development stage are expensed as incurred. Computer software
costs incurred during the application development stage are capitalized and
amortized over the software's estimated useful life.
3. CAPITAL ASSETS
================================================================================
Accumulated Net
Cost Amortization Book Value
- -------------------------------------------------------------------------------
Computer hardware $ 32,604 $ 2,050 $ 30,554
Computer software 5,821 1,220 4,601
-------------- -------------- --------------
$ 38,425 $ 3,270 $ 35,155
================================================================================
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
4. LONG-TERM DEBT
==========================================================================
Note payable to a related party, bearing interest
at the prime rate of Bank of Montreal plus 2%, or
10% if undeterminable; secured; repayable on either
receipt of proceeds from second round Phase II
Equity financing or Initial Public Offering,
whichever is earlier. $ 309,000
==========================================================================
5. RELATED PARTY TRANSACTIONS
The Company had the following balances owing to or from directors, officers
or companies in which directors or officers have an interest:
======================================================================
Accounts payable and accrued liabilities $ 8,040
Long-term debt 309,000
======================================================================
During the period, the Company included in its expenses the following
amounts paid or payable to directors, officers and companies in which its
directors have an interest.
======================================================================
Consulting fees $ 142,543
Investor relations 2,266
Legal and audit fees 210
Office and miscellaneous 3,743
Telephone and communications 1,230
======================================================================
6. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
7. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
================================================================================
December 31,
1999
- --------------------------------------------------------------------------------
Cash paid for income taxes $ -
Cash paid for interest -
================================================================================
There were no non-cash investing and financing transactions during the
period from incorporation on July 21, 1999 to December 31, 1999.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
8. INCOME TAXES
The Company's total deferred tax asset is as follows:
Net operating loss carryforward $ 98,289
Valuation allowance (98,289)
----------------
$ -
================
The Company has a net operating loss carryforward of approximately $289,086
which expires in 2006. The Company provided a full valuation allowance on
the deferred tax asset because of the uncertainty regarding realizability.
9. SUBSEQUENT EVENTS
The following events occurred subsequent to December 31, 1999:
a) On January 21, 2000, the Company issued 53 common shares to a company
in which its director has an interest.
b) On January 25, 2000, the shareholders of the Company entered into a
letter of intent with Rabatco, Inc ("Rabatco") to sell all of the
Company's issued and outstanding common shares in exchange for
6,910,000 common shares of Rabatco at a deemed value of US$0.01 per
share and cash proceeds in the amount of US$150,000.
The term of the Letter of Intent between the shareholders of the
Company and Rabatco include the following provision:
i) Rabatco will complete a private placement financing of
US$2,257,500 at US$2.10 per unit. Each unit consisting of one
share and one half share purchase warrant exercisable at US$2.10
in the first year and US$2.50 in the second year.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
Rabatco, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Rabatco, Inc. (A Development
Stage Company) as at December 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended and the cumulative amounts from inception on June 16, 1977 to December 31,
1999. 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 audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an 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 audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Rabatco, Inc. (A Development Stage Company)
as at December 31, 1999 and 1998 and the results of its operations and the
changes in its stockholders' equity and its cash flows for the years then ended
and the cumulative amounts from inception on June 16, 1977 to December 31, 1999
in conformity with generally accepted accounting principles in the United States
of America.
The accompanying financial statements have been prepared assuming that Rabatco,
Inc. will continue as a going concern. The Company is in the development stage
and does not have the necessary working capital for its planned activity which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
February 16, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
RABATCO, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31
================================================================================
<TABLE>
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ - $ -
----------- -----------
Total current assets $ - $ -
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ - $ -
----------- -----------
Total current liabilities - -
----------- -----------
STOCKHOLDERS' EQUITY
Common stock
Authorized
100,000,000 common shares with a par value of $0.001
Issued and outstanding
December 31, 1999 - 6,750,000 common shares (1998 - 6,750,000) 6,750 6,750
Additional paid-in capital 73,250 79,325
Deficit accumulated during the development stage (80,000) (80,000)
----------- -----------
Total Stockholders' Equity - -
----------- -----------
$ - $ -
===========================================================================================================
</TABLE>
On behalf of the Board:
Director Director
- ---------------------------- -------------------------------
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31
================================================================================
<TABLE>
Cumulative
Amounts from
June 16,
1977
(Date of
Inception) to Year Ended Year Ended
December 31, December 31, December 31,
1999 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
OPERATING EXPENSES
Consulting fees 80,000 - 10,000
--------------- --------------- --------------
Loss for the year $ 80,000 $ - $ 10,000
===========================================================================================================
Basic and diluted loss per share $ (0.00) $ (0.01)
===========================================================================================================
Weighted average number of shares outstanding 6,750,000 6,750,000
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
================================================================================
<TABLE>
Cumulative
Amounts from
June 16,
1977
(Date of
Inception) to Year Ended Year Ended
December 31, December 31, December 31,
1999 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (80,000) $ - $ (10,000)
Adjustments to reconcile net loss to net cash
provided by operating activities - - -
------------- ------------ ------------
Net cash used in operating activities (80,000) - (10,000)
------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities - - -
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 80,000 - 10,000
------------- ------------ ------------
Net cash provided by financing activities 80,000 - 10,000
------------- ------------ ------------
Change in cash position for the year - - -
Cash position, beginning of year - - -
------------- ------------ ------------
Cash position, end of year $ - $ - $ -
===================================================================================================================
Amounts paid for:
Interest expense $ - $ - $ -
Income taxes - - -
===================================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 4)
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
Deficit
Accumulated
Common Stock Additional During the Total
------------- -------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, June 16, 1977 (date of inception) - $ - $ - $ - $ -
Issuance of common stock for cash at $0.013333
February 3, 1981 1,500,000 1,500 18,500 - 20,000
Issuance of common stock for cash at $0.013333
May 18, 1981 750,000 750 9,250 - 10,000
Issuance of common stock for cash at $0.013333
July 20, 1981 1,125,000 1,125 13,875 - 15,000
Issuance of common stock for cash at $0.013333
November 6, 1981 1,350,000 1,350 16,650 - 18,000
Issuance of common stock for cash at $0.013333
December 9, 1981 525,000 525 6,475 - 7,000
Net operating loss for the year ended
December 31, 1981 - - - (70,000) (70,000)
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1996 5,250,000 5,250 64,750 (70,000) -
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1997 5,250,000 5,250 64,750 (70,000) -
Issuance of common stock for cash at $0.006666
May 1, 1998 1,500,000 1,500 8,500 - 10,000
Net operating loss for the year ended
December 31, 1998 - - - (10,000) (10,000)
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1998 6,750,000 6,750 73,250 (80,000) -
Net operating loss for the year ended
December 31, 1999 - - - - -
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1999 6,750,000 $ 6,750 $ 73,250 $ (80,000) $ -
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of the state of Nevada on June
16, 1977 with authorized common stock of 100,000 shares with par value of
$0.25. On June 20, 1998, the authorized common stock was increased to
100,000,000 shares with a par value of $0.001.
On June 20, 1998, the Company completed a forward common stock split of one
share of its outstanding stock for five shares. This report has been
prepared showing after stock split shares with a a par value of $0.001 from
its inception.
The Company has been in the development stage since its inception and has
been primarily engaged in the business of developing mining properties.
During 1982, the Company abandoned its remaining assets and settled its
liabilities and since that date has remained inactive.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan in
this regard to obtain additional working capital through equity financings.
<TABLE>
=================================================================================
December 31, December 31,
1999 1998
---------------------------------------------------------------------------------
<S> <C> <C>
Deficit accumulated during the development stage $ (80,000) $ (80,000)
Working capital - -
=================================================================================
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Cash and cash equivalents
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
Loss per share
Earnings per share are provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Due to the Company's
simple capital structure, with only common stock outstanding, only basic
loss per share is presented. Basic loss per share is computed by dividing
losses applicable to common stockholders by the weighted average number of
common shares outstanding during the period.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The adoption during the current year of SOP 98-5 had no affect
on the Company's financial statements.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total stockholders'
equity as of December 31, 1999.
4. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
There were no non-cash transactions during the years ended December 31,
1999 and 1998.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
5. INCOME TAXES
The Company's total deferred tax asset is as follows:
Net operating loss carryforward $ 3,400
Valuation allowance (3,400)
-----------
$ -
===========
The Company has a net operating loss carryforward of approximately $10,000
which expires in 2008. The Company provided a full valuation allowance on
the deferred tax asset because of the uncertainty regarding realizability.
6. SUBSEQUENT EVENTS
The following events occurred subsequent to year end:
a) On January 4, 2000, the Company implemented a 15:1 forward stock
split. The statement of changes in stockholder's equity has been
restated to give retroactive recognition of the stock split presented
by reclassifying from common stock to additional paid-in capital, the
par value of shares arising from the split. In addition, all
references to the number of shares and per share amounts of common
stock have been restated to reflect the stock split.
b) The Company cancelled 920,000 common shares.
c) On January 25, 2000, the Company entered into a Letter of Intent with
the shareholders of MindfulEye.com Systems Inc. ("MindfulEye") to
acquire all of the issued and outstanding common shares of MindfulEye
in exchange for cash payment of US$150,000 and issuance of 6,910,000
common shares at a deemed value of US$0.01.
The term of the Letter of Intent between the Company and the shareholders
of MindfulEye include the following provision:
i) The Company will complete a private placement financing of
US$2,257,500 at US$2.10 per unit. Each unit consists of one share
and one half share purchase warrant exercisable at US$2.10 in the
first year and US$2.50 in the second year.
As new shareholders of Rabatco, Inc. hold approximately 54% of the
outstanding shares of the Company after the combination, the business
combination of the two companies is to be accounted for as a capital
transaction accompanied by a recapitalization of MindfulEye.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Articles of Incorporation
2.2 Certificate of Amendment to Articles of Incorporation
2.3 Bylaws
6.1 Share Exchange Agreement dated March 13, 2000
6.2 Lease Agreement dated February 28, 2000
6.3 Form of Employment Agreement
27.1 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 10-SB and has duly caused this Registration Statement to be signed on
our behalf by the undersigned, thereunto duly authorized.
MINDFULEYE.COM, INC.
Date: April --, 2000 By: /s/ Tod Maffin
---------------------------------------
Tod Maffin, President
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Articles of Incorporation
2.2 Certificate of Amendment to Articles of Incorporation
2.3 Bylaws
6.1 Share Exchange Agreement dated March 13, 2000
6.2 Lease Agreement dated February 28, 2000
6.3 Form of Employment Agreement
27.1 Financial Data Schedule
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
RABATCO, INC.
For the purpose of forming this corporation under the laws of the State of
Nevada, the undersigned incorporators hereby state:
ARTICLE FIRST
Name
The name of the incorporation is: Rabatco
ARTICLE SECOND
Purposes and Duration
The purposes for which the corporation is formed are:
(a) To engage in any lawful business activity from time to time
authorized or approved by the board of directors of this
corporation;
(b) To act as principal, agent, partner or joint venturer or in any
other legal capacity in any transaction;
(c) To do business anywhere in the world; and
(d) To have and exercise all rights and powers from time to time
granted to a corporation by law.
The above purposes clauses shall not be limited by reference to or
inference from one another, but each purposes clause shall be construed as a
separate statement conferring independent purposes and powers upon the
corporation.
The duration of this corporation shall be perpetual.
<PAGE>
ARTICLE THIRD
Location
The county in the State of Nevada where the principal office for the
transaction of the business of the corporation is located is the County of
Clark, and the address of the principal office is: 3890 South Swenson, Suite
100, Las Vegas, Nevada 89109.
ARTICLE FOURTH
Directors
The number of directors of the corporation is three, until changed by an
amendment of these Articles of Incorporation or a bylaw duly adopted by the
shareholders of the corporation.
ARTICLE FIFTH
Names of First Directors and Incorporators
The names and addresses of the persons who are appointed to act as first
directors of the corporation, who are also the incorporators, are:
Joseph R. Laird, Jr.
3890 South Swenson, Suite 100
Las Vegas, NV 89109
Kenneth J. Fisher
3890 South Swenson, Suite 100
Las Vegas, NV 89109
Patricia J. Laird
3890 South Swenson, Suite 100
Las Vegas, NV 89109
ARTICLE SIXTH
Stock
The corporation is authorized to issue only one class of stock, which shall
be designated Capital Stock.
-2-
<PAGE>
The total number of shares of Capital Stock that the corporation is
authorized to issue is 100,000. The aggregate par value of all of said shares is
$25,000.00, and the par value of each such share is $0.25.
IN WITNESS WHEREOF, the undersigned incorporators, who are also the first
directors of the corporation, have executed these Articles of Incorporation on
June 7, 1977.
/s/ Joseph R. Laird, Jr.
--------------------------------
Joseph R. Laird, Jr.
/s/ Kenneth J. Fisher
--------------------------------
Kenneth J. Fisher
/s/ Patricia J. Laird
--------------------------------
Patricia J. Laird
-3-
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 7th day of June, 1977, before me, the undersigned, a Notary Public
in and for the County and State, residing therein, duly commissioned and sworn,
personally appeared Joseph R. Laird, J., Kenneth J. Fisher and Patricia J.
Laird, known to me [or proved on the basis of satisfactory evidence?] to be the
persons whose names are subscribed to the within Articles of Incorporation, and
acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ [illegible]
-------------------------------
Notary Public
EXHIBIT 2.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF RABATCO, INC.
We the undersigned, Ralph Randall Trover, President and Adrienne Sue Barnett,
Secretary of Rabatco , Inc. do hereby certify: That the Board of Directors of
said corporation at a meeting duly convened, held on the 20th day of June, 1998
adopted a resolution to amend the original articles as follows:
Article IV which presently reads as follows:
ARTICLE FOUR
Directors
The number of directors of the corporation is three until changed by an
amendment of these Articles of Incorporation or a by-law duly adopted by
the shareholders of the corporation.
Is hereby amended to read as follows:
ARTICLE FOUR
DIRECTORS
The Directors are hereby granted the authority to do any act on behalf
of the Corporation as may be allowed by law. Any action taken in good
faith, shall be deemed appropriate and in each instance where the Business
Corporation Act provides that the Directors may act in certain instances
where the Articles of Incorporation so authorize, such action by the
Directors, shall be deemed to exist in these Articles and the authority
granted by said Act shall be imputed hereto without the same specifically
having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9)
directors, as determined, from time to time, by the then existing Board of
Directors.
Article VI which presently reads as follows:
ARTICLE SIX
Stock
The corporation is authorized to issue only one class of stock, which shall
be designated Capital Stock.
The total number of shares of Capital Stock that the corporation is
authorized to issue is 100,000 shares. The aggregate par value of all of said
shares is $25,000.00, and the par value of each such share is $0.25.
<PAGE>
Is hereby amended to read as follows:
ARTICLE SIX AUTHORIZED
CAPITAL STOCK
The total authorized capital stock of the Corporation is 100,000,000
shares of Common Stock, with a par value of $0.001 (1 mil). All stock when
issued shall be deemed fully paid and non-assessable. No cumulative voting,
on any matter to which Stockholders shall be entitled to vote, shall be
allowed for any purpose.
The authorized stock of this corporation may be issued at such time,
upon such terms and conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this
Corporation.
THE FOLLOWING NEW ARTICLES ARE HEREBY ADOPTED
ARTICLE SEVEN
COMMON DIRECTORS
As provide by Nevada Revised Statutes 78.140, without repeating the
section in full here, the same is adopted and no contract or other
transaction between this Corporation and any of its officers, agents or
directors shall be deemed void or voidable solely for that reason. The
balance of the provisions of the code section cited, as it now exists,
allowing such transactions, is hereby incorporated into this Article as
though more fully set-forth, and such Article shall be read and interpreted
to provide the greatest latitude in its application.
ARTICLE EIGHT
LIABILITY OF DIRECTORS AND OFFICERS
No Director, Officer or Agent, to include counsel, shall be personally
liable to the Corporation or its Stockholders for monetary damage for any
breach or alleged breach of fiduciary or professional duty by such person
acting in such capacity. It shall be presumed that in accepting the
position as an Officer, Director, Agent or Counsel, said individual relied
upon and acted in reliance upon the terms and protections provided for by
this Article. Notwithstanding the foregoing sentences, a person
specifically covered by this Article, shall be liable to the extent
provided by applicable law, for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or for the payment of
dividends in violation of NRS 78.300
<PAGE>
ARTICLE NINE
ELECTION REGARDING NRS 78.378 - 78.3793 and 78.411-78.444
This Corporation shall NOT be governed by nor shall the provisions of
NRS 78.378 through and including 78.3793 and NRS 78.411 through and
including 78.444 in any way whatsoever affect the management, operation or
be applied in this Corporation. This Article may only be amended by a
majority vote of not less than 90% of the then issued and outstanding
shares of the Corporation. A quorum of outstanding shares for voting on an
Amendment to this article shall not be met unless 95% or more of the issued
and outstanding shares are present at a properly called and noticed meeting
of the Stockholders. The super-majority set-forth in this Article only
applies to any attempted amendment to this Article.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is 90,000 that the said change(s) and
amendment have been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ Ralph Randall Trover
--------------------------------------------
Ralph Randall Trover
President
/s/ Adrienne Sue Barnett
--------------------------------------------
Adrienne Sue Barnett
Secretary/Treasurer
State of Utah
County of Salt Lake
On ____________, personally appeared before me, a Notary Public, Ralph Randall
Trover and Adrienne Sue Barnett who acknowledged that they executed the above
instrument.
/s/ [illegible]
-------------------------------------------
Notary Public
[Notary Seal]
EXHIBIT 2.3
BY-LAWS
OF
RABATCO, INC.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Utah shall be
located in the Residence of the Presiding County of Salt Lake. The corporation
may have such other offices, either within or without the State of incorporation
as the board of directors may designate or as the business of the corporation
may from time to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the 1st day of
June. In each year, beginning with the year 1998 at the hour of 11:00 o'clock
A.M., for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than 45% percent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
<PAGE>
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 45 days before the
date of the meeting, either personally or be mail, by or at the direction of the
president, or the secretary, or the officer or persons calling the meeting, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, 5 days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting, of stockholders, such books shall be closed for at least 3
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 5 days
and, in case of a meeting of stockholders, not less than 3 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least 3 days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list; for a period of 5
days prior to such meeting, shall be kept on file at the principal office of the
corporation and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The original stock transfer book shall be prima facie
evidence as to who are the stockholders entitled to examine such list or
transfer books or to vote at the meeting, of stockholders.
7. QUORUM.
At any meeting of stockholders 80% of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of
<PAGE>
stockholders. If less than said number of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders, upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.
10. ORDER OF BUSINESS.
The order of business at a meetings of the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
2. NUMBER TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be one to nine (1-9). Each
director shall hold office until the next annual meeting of stockholders and
until his successor shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 10 days previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
6. QUORUM
At any meeting of the directors two shall constitute a quorum for the
transaction of business, but if less than said number is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
7. MANNER OF ACTING.
<PAGE>
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors. Each
such committee shall serve at the pleasure of the board.
<PAGE>
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors, meetings in one
<PAGE>
or more books provided for that purpose, see that all notices are duly given in
accordance with the provisions of these by-laws or as required, be custodian of
the corporate records and of the seal of the corporation and keep a register of
the post office address of each stockholder which shall be furnished to the
secretary by such stockholder, have general charge of the stock transfer books
of the corporation and in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit l such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS.
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of The corporation and in such
manner as shall from time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to
<PAGE>
the credit of the corporation in such banks, trust companies or other
depositaries as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, The
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
<PAGE>
ARTICLE VII - FISCAL YEAR END
The fiscal year of the corporation shall b on the 1st day of January in
each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding share in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting.
EXHIBIT 6.1
SHARE EXCHANGE AGREEMENT
MADE EFFECTIVE AS OF THE 13th DAY OF MARCH 2000 (the "Effective Date"),
BETWEEN: MINDFULEYE.COM SYSTEMS INC. a company incorporated under the laws
of the Province of British Columbia and having an office at 1100
- 888 Dunsmuir Street, Vancouver, British Columbia, V6C 3K4
("MindfulEye");
AND: TOD MAFFIN ("Mr. Maffin"), of 111 - 1045 Haro Street, Vancouver,
British Columbia, V6E 3Z8
TODD CUSOLLE ("Mr. Cusolle"), of 701 - 1433 Beach Avenue,
Vancouver, British Columbia, V6G 1Y3
RAY TORRESAN ("Mr. Torresan"), of 403 - 1000 Beach Avenue,
Vancouver, British Columbia, V6E 4M2
AMANDA KERR ("Ms. Kerr"), of 198 Aquarius Mews, Vancouver,
British Columbia, V6Z 2Y4
ROGER MUTIMER ("Mr. Mutimer"), of 128 - 2090 Scotia Street,
Vancouver, British Columbia, V5T 4T1; and
VARSHNEY CAPITAL CORP. ("Varshney Capital"), a company
incorporated under the laws of the Province of British Columbia
and having an office at 1304 - 925 West Georgia Street,
Vancouver, British Columbia, V6C 3L2
(collectively, the "Shareholders" and individually, a
"Shareholder");
AND: RABATCO INC., a Nevada corporation having an office at Suite 333
- 2838 Camino Del Rio North, San Diego, California, U.S.A.
92108-1789
("RABATCO");
WHEREAS:
The authorized share capital of MindfulEye consists of 100,100,000 shares
divided into 100,000 common shares of which 213 are issued and outstanding (the
"MindfulEye Shares") and 100,000,000 preferred shares, none of which are issued
or outstanding, with each Shareholder legally and beneficially owning the
following number of MindfulEye Shares:
Shareholder Number of MindfulEye Shares Held
----------- --------------------------------
Mr. Maffin 38
Mr. Cusolle 38
Mr. Torresan 38
Ms. Kerr 38
Mr. Mutimer 8
Varshney Capital 53
----
Total 213.
The Shareholders and Rabatco have agreed to exchange the MindfulEye Shares for
common shares of Rabatco, on the terms and conditions described in this
Agreement.
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree (the
"Agreement") as follows:
1. SHARE EXCHANGE
1.1 Subject to the terms and conditions of this Agreement, the Shareholders
shall transfer all of the MindfulEye Shares to Rabatco in exchange for 6,910,000
common shares of Rabatco (the "Rabatco Shares") issued at a deemed price per
share of US$0.01, and US$150,000 (the "Cash Portion").
1.2 Except as expressly noted otherwise, the transactions contemplated under
this Agreement shall be completed (the "Completion") at the offices of Rabatco's
solicitors, Messrs. Campney & Murphy, 2100 - 1111 West Georgia Street,
Vancouver, British Columbia, or at such other place as may be agreed between the
parties, at 10:00 o'clock a.m. local time in Vancouver, B.C., or at such other
time as may be agreed between the parties, (the "Time of Closing") on 20 March,
2000, or on such other date as may be agreed between the parties, (the "Closing
Date").
1.3 The Cash Portion shall be paid to the Shareholders as they may jointly
direct in writing as follows:
(a) US$50,000 on the Closing Date, by way of wire transfer, bank order,
certified cheque or solicitor's trust cheque; and
(b) US$100,000, without interest, upon successful launch of an internet
website to operate the business of MindfulEye to the satisfaction of
the board of directors of Rabatco; to be secured by a promissory note
(the "Promissory Note") issued by Rabatco on the Closing Date.
1.4 Prior to the Completion, Rabatco will undertake a financing (the
"Financing") to raise not less than US$2,257,500 for investment into MindfulEye
by issuing not more than 1,075,000 units at a price not less than US$2.10 per
unit, with each unit consisting of one common share of Rabatco and one-half
warrant. The total number of Rabatco common shares to be issued on completion of
the Financing is not to exceed 1,075,000 (the "Financing Shares"). In addition,
each holder of two one-half warrants would be entitle to acquire one further
common share of Rabatco at a price not less than US$2.10 in the first year after
issuance of the warrants, or for a price not less than US$2.50 in the second
year after issuance of the warrants. After two years, the warrants would expire
if not exercised.
2. CONDITIONS PRECEDENT
2.1 Rabatco's obligations to carry out the terms of this Agreement and to
complete its transactions contemplated under this Agreement are subject to the
fulfilment to the satisfaction of Rabatco of each of the following conditions
that:
(a) at the Time of Closing, the solicitors for MindfulEye shall provide an
opinion dated as of the Closing Date, substantially in the form of
Schedule A to this Agreement (the "MindfulEye Solicitor Opinion");
(b) at the Time of Closing, each of Mr. Cusolle, Mr. Maffin, Mr. Torresan
and Ms. Kerr shall enter into employment agreements with MindfulEye
(the "Employment Agreements") in the form of Schedule L to this
Agreement completed to reflect their
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<PAGE>
current compensation arrangements as shown in Schedule E to this
Agreement with such changes or additional benefits as Rabatco may
approve;
(c) as of the Time of Closing, each of the Shareholders and MindfulEye
(collectively, the "MindfulEye Group") shall have complied with all of
their respective covenants and agreements contained in this Agreement;
and
(d) as of the Time of Closing, the representations and warranties of each
of the MindfulEye Group contained in this Agreement or contained in
any certificates or documents delivered by any of them pursuant to
this Agreement shall be completely true as if such representations and
warranties had been made as of the Time of Closing.
The conditions set forth above are for the exclusive benefit of Rabatco and may
be waived by Rabatco in whole or in part at any time at or before the Time of
Closing.
2.2 The Shareholders' obligations to carry out the terms of this Agreement and
to complete the transactions contemplated under this Agreement are subject to
the fulfilment to their satisfaction of each of the following conditions that:
(a) immediately prior to the Time of Closing but before the Financing,
Rabatco's issued and outstanding share capital will be not more than
5,830,000 common shares and there will be no other options, warrants
or other rights to acquire common shares of Rabatco, except pursuant
to this Agreement and the Financing;
(b) at the Time of Closing, the solicitors for Rabatco shall provide an
opinion dated as of the Closing Date, substantially in the form of
Schedule B to this Agreement (the "Rabatco Solicitor Opinion");
(c) at the Time of Closing, the common shares of Rabatco will be quoted on
the Over the Counter Bulletin Board of NASDAQ (the "OTC Board");
(d) by the Time of Closing, Rabatco shall have arranged for and received
the Financing and at the Time of Closing Rabatco shall advance to
Mindful Eye not less than US$2,000,000, either as share capital or as
a loan at Rabatco's discretion, on such terms as Rabatco may in its
discretion impose;
(e) as of the Time of Closing, Rabatco shall have complied with all of its
covenants and agreements contained in this Agreement; and
(f) as of the Time of Closing, the representations and warranties of
Rabatco contained in this Agreement or contained in any certificates
or documents delivered by it pursuant to this Agreement shall be
completely true as if such representations and warranties had been
made by Rabatco as of the Time of Closing.
The conditions set forth above are for the exclusive benefit of the Shareholders
and may be waived by the Shareholders in whole or in part at or before the Time
of Closing.
2.3 The parties acknowledge and agree each with the other that this Agreement
and all of the transactions contemplated under this Agreement are subject to
receipt of any regulatory approvals that
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<PAGE>
may be required under applicable laws. If any such approvals are required but
are not obtained by the Closing Date, then this Agreement shall terminate and be
of no further force or effect.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
3.1 Each of the MindfulEye Group jointly and severally covenants and agrees with
Rabatco that each of the MindfulEye Group shall:
(a) from and including the Effective Date through to and including the
Time of Closing, permit Rabatco, through its directors, officers,
employees and authorized agents and representatives, at Rabatco's own
cost, full access to the books, records and property of MindfulEye
including, without limitation, all of the assets, contracts,
correspondence, accounts and minute books of MindfulEye, so as to
permit Rabatco to make such investigation ("Rabatco's Investigation")
of MindfulEye as Rabatco considers advisable;
(b) provide to Rabatco all such further documents, instruments and
materials and do all such acts and things as may be required by
Rabatco to obtain any regulatory approvals that may be required under
applicable laws;
(c) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of each of the
MindfulEye Group contained in this Agreement or any certificates or
documents delivered by any of them pursuant to this Agreement remain
true and correct;
(d) from and including the Effective Date through to and including the
Time of Closing, preserve and protect all of the goodwill, assets,
business and undertaking of MindfulEye and, without limiting the
generality of the foregoing, carry on the development of the assets of
MindfulEye in a reasonable and prudent manner; and
(e) from and including the Effective Date through to and including the
Time of Closing, keep confidential all discussions and communications
(including all information communicated therein) between the parties,
and all written and printed materials of any kind whatsoever exchanged
by the parties, except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by Rabatco, each of the MindfulEye Group shall
arrange for any director, officer, employee, authorized agent or
representative of any member of the MindfulEye Group to enter into,
and each of the MindfulEye Group themselves shall
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<PAGE>
enter into, a non-disclosure agreement with Rabatco in a form
acceptable to Rabatco acting reasonably.
3.2 Each of the MindfulEye Group jointly and severally covenants and agrees with
Rabatco that, from and including the Effective Date through to and including the
Time of Closing, each of the MindfulEye Group shall not:
(a) do any act or thing that would render any representation or warranty
of any of the MindfulEye Group contained in this Agreement or any
certificates or documents delivered by any of them pursuant to this
Agreement untrue or incorrect; nor
(b) sell, encumber or dispose of, or negotiate with any other person in
respect of a sale, encumbrance or disposition of, the MindfulEye
Shares or any other shares, goodwill, assets, business or undertaking
of MindfulEye.
3.3 Each of the MindfulEye Group jointly and severally acknowledges to and
agrees with Rabatco that Rabatco's Investigation shall in no way limit or
otherwise adversely affect the rights of Rabatco as provided for hereunder in
respect of the representations and warranties of each of the MindfulEye Group
contained in this Agreement or in any certificates or documents delivered by any
of them pursuant to this Agreement.
3.4 Each of Mr. Cusolle, Mr. Maffin, Mr. Torresan and Ms. Kerr covenant and
agree with Rabatco to enter into the Employment Agreements with MindfulEye at
the time of Closing.
3.5 Rabatco covenants and agrees with the MindfulEye Group that Rabatco shall:
(a) use its reasonable best efforts to obtain any regulatory approvals for
this Agreement and the transactions contemplated hereunder required by
applicable laws on or before the Closing Date;
(b) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of Rabatco
contained in this Agreement or in any certificates or documents
delivered by it pursuant to this Agreement remain true and correct;
(c) from and including the Effective Date through to and including the
Time of Closing, subject to its legal reporting obligations, keep
confidential all discussions and communications (including all
information communicated therein) between the parties, and all written
and printed materials of any kind whatsoever exchanged by the parties,
except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or (iv)
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<PAGE>
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by MindfulEye, Rabatco shall arrange for any
director, officer, employee, authorized agent or representative of
Rabatco to enter into, and Rabatco itself shall enter into, a
non-disclosure agreement with MindfulEye in a form acceptable to
MindfulEye acting reasonably;
(d) use its commercially reasonable best efforts to arrange for the
Financing; and
(e) as soon as reasonably practicable after the Time of Closing, deliver
to the MindfulEye Group all the books and records of Rabatco,
including all accounting records and bank and investment accounts.
3.6 Rabatco covenants and agrees with the MindfulEye Group that, from and
including the Effective Date through to and including the Time of Closing,
Rabatco shall not:
(a) do any act or thing that would render any representation or warranty
of Rabatco contained in this Agreement or any certificates or
documents delivered by it pursuant to this Agreement untrue or
incorrect;
(b) subject always to Rabatco's duty to fully comply with its legal
obligations, publish any press release or make any public filing
without first notifying the Vendors and giving the Vendors a
reasonable opportunity to review and provide comments regarding the
accuracy of the information in any such release or filing; nor
(c) enter into any agreement or commitment or obligation pursuant to which
Rabatco could be required to expend more than US$10,000, except:
(i) as contemplated by this Agreement or required to comply with
Rabatco's covenants hereunder;
(ii) with the prior written consent of the Vendors; or
(iii) in respect of professional fees for services rendered to
Rabatco in respect of the negotiation, settlement,
execution, implementation and enforcement of this Agreement
and the completion of the transactions contemplated herein;
(collectively, "Transaction Costs").
3.7 At the time of Closing, Rabatco will take all necessary corporate actions so
that as soon as practicable after Closing the officers and directors of Rabatco
will be:
Directors: Mr. Maffin
Mr. Cusolle
Mr. Torresan
Ms. Kerr
Mr. Praveen Varshney ("Mr. Varshney")
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<PAGE>
Officers: President: Mr. Maffin
Secretary: Ms. Kerr
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce Rabatco to enter into this Agreement and complete its
transactions contemplated hereunder, each of the Shareholders other than Mr.
Mutimer jointly and severally represents and warrants to Rabatco that:
(a) MindfulEye was duly incorporated under the laws of British Columbia
and:
(i) is not a "reporting company" within the meaning of section 1
of the British Columbia Company Act, R.S.B.C. 1996, Chap. 62
and is not subject to any statutory registration or filing
requirements applicable to public reporting companies;
(ii) has the power, authority and capacity to enter into this
Agreement and carry out its terms; and
(iii) is in good standing with respect to the filing of all annual
reports required under the laws of British Columbia;
(b) the Directors and Officers of MindfulEye are as follows:
(i) Mr. Maffin - Director and President;
(ii) Mr. Cusolle - Director;
(iii) Mr. Torresan - Director;
(iv) Ms. Kerr - Director and Secretary; and
(v) Mr. Varshney - Director
(c) the authorized and issued share capital of MindfulEye is as set forth
in Recital A of this Agreement;
(d) except for the MindfulEye Shares, there are no documents, instruments
or other writings of any kind whatsoever which constitute a security
of MindfulEye and, except as is provided for by operation of this
Agreement, there are no options, agreements or rights of any kind
whatsoever to acquire directly or indirectly any other shares of
MindfulEye;
(e) the Memorandum and Articles of MindfulEye have not been altered since
22 February 2000;
(f) all of the material transactions of MindfulEye which are required to
be recorded or filed in or with the books or records of MindfulEye
have been promptly and properly so recorded or filed and the minute
books of MindfulEye contain all records of the meetings and
proceedings of the shareholders and directors of MindfulEye since its
incorporation;
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<PAGE>
(g) MindfulEye hold all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
(h) MindfulEye is the registered and beneficial owner of all rights, title
and interest in and to all tangible and intangible property
(collectively the "Assets") associated with all business carried on by
MindfulEye, including without limitation the internet domain names
"MindfulEye.com" (the "Domain Name") and the other assets listed on
Schedule C to this Agreement, subject only to such qualifications and
limitations as are indicated in Schedule C;
(i) MindfulEye has good and marketable exclusive title to each of the
Assets free and clear of all liens, charges and encumbrances of any
kind whatsoever save and except those specified as "Permitted
Encumbrances" on Schedule C to this Agreement, and in particular, at
the Closing:
(i) MindfulEye will be the sole and exclusive legal and
beneficial owner of the Domain Name, free and clear of all
encumbrances whatsoever, and will not be a party to or bound
by any contract or any other obligation whatsoever that
limits or impairs its ability to sell, transfer, assign or
convey, or that otherwise affects, the Domain Name;
(ii) MindfulEye will be the registered owner of the Domain Name,
and all fees or other costs associated with maintaining the
registration of the Domain Name will have been paid for the
2000 calendar year and the registration of the Domain Name
will be in good standing with Network Solutions Inc.; and
(iii) no other person will have been granted any interest in or
right to use all or any portion of the Domain Name;
(j) each item of machinery and equipment of any kind whatsoever comprised
in the Assets is in reasonable operating condition and in a state of
reasonable maintenance and repair taking into account its age and use;
(k) all deposit, savings, investment and brokerage accounts and safety
deposit boxes of MindfulEye are listed on Schedule C attached hereto;
(l) MindfulEye has the corporate power to own the assets it owns, and to
carry on the business carried on by it, and is duly qualified to carry
on business in all jurisdictions in which it carries on business;
(m) the financial statements of MindfulEye for the period ending 31
December 1999 (collectively, the "Financial Statements"), copies of
which are attached hereto as Schedule D, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis and are true and correct in every material respect
and present fairly and accurately the financial position and results
of the operations of MindfulEye for the periods then ended, and there
has been no material adverse change to the financial position of
Mindful Eye since the date of the last of the Financial Statements;
-8-
<PAGE>
(n) save for any costs and expenses arising in the ordinary course of
business, all material outstanding liabilities, whether direct,
indirect, absolute, contingent or otherwise, whatsoever of MindfulEye
have been disclosed in writing to Rabatco prior to the Effective Date,
and the total liabilities of MindfulEye do not exceed US$350,000;
(o) except as disclosed in writing to Rabatco prior to Rabatco's execution
of this Agreement:
(i) no dividends or other distributions of any kind whatsoever
on any shares in the capital of MindfulEye has been made,
declared or authorized;
(ii) no new machinery or equipment of any kind whatsoever has
been ordered by, or installed or assembled on the premises
of, MindfulEye;
(iii) MindfulEye is not indebted to any of the Shareholders,
except in respect of miscellaneous expenses incurred on
behalf of MindfulEye which do not exceed, in the aggregate,
US$5,000;
(iv) none of the Shareholders or any other officer, director or
employee of MindfulEye is indebted or under obligation to
MindfulEye on any account whatsoever; and
(v) MindfulEye has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any kind whatsoever
of any person, firm or corporation of any kind whatsoever;
(p) since 31 December 1999, except as disclosed to Rabatco in writing
prior to the Effective Date:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of
MindfulEye, or any damage, loss or other change of any kind
whatsoever in circumstances materially affecting the
business or Assets of MindfulEye or the right or capacity of
MindfulEye to carry on its business;
(ii) MindfulEye has not waived or surrendered any right of any
kind whatsoever of material value; and
(iii) except as may be expressly permitted under this Agreement,
MindfulEye has not discharged, satisfied or paid any lien,
charge or encumbrance of any kind whatsoever or obligation
or liability of any kind whatsoever other than current
liabilities in the ordinary course of its business;
(q) the directors, officers, key employees and independent contractors and
consultants of MindfulEye, and all of their compensation arrangements
with MindfulEye, whether as directors, officers, employees,
independent contractors or consultants, are as listed on Schedule E to
this Agreement;
(r) no payments of any kind whatsoever have been made or authorized by
MindfulEye or Holdings directly or indirectly to or on behalf of any
of the Shareholders or any of the directors, officers, key employees,
independent contractors or consultants of MindfulEye
-9-
<PAGE>
except in accordance with those compensation arrangements specified on
Schedule E to this Agreement;
(s) there are no pension, profit sharing, group insurance or similar plans
or other deferred compensation plans of any kind whatsoever affecting
MindfulEye or Holdings other than those, if any, specified on Schedule
E to this Agreement;
(t) MindfulEye is not now, nor has it ever been, a party to any collective
agreement with any labour union or other association of employees of
any kind whatsoever, no collective bargaining agent has been certified
in respect of MindfulEye, and there is no application pending for
certification of a collective bargaining agent in respect of
MindfulEye;
(u) the contracts and agreements included on Schedule E to this Agreement
and those additional contracts and agreements specified on Schedule F
to this Agreement (collectively the "Material Contracts") constitute
all of the material contracts and agreements of MindfulEye;
(v) except as may be noted on the appropriate Schedule to this Agreement,
the Material Contracts are in good standing in all material respects
and not in default in any respect;
(w) MindfulEye has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way, or permitted any third party
access to any of the Assets the value of which may be compromised by
such access, including in particular the source code to any computer
software, any subscriber lists or any trade secret information
included in the Assets, except only in accordance with the terms of
the Material Contracts;
(x) no third party privacy or intellectual property rights, including
without limitation, copyright, trade secret or patent rights, were
violated in the creation, compilation or acquisition of, or are
violated by the use of, any of the Assets by MindfulEye or by any
party through whom MindfulEye acquired title or a license or to whom
MindfulEye has granted a license in respect of the Assets, and in
particular the use of the Domain Names by MindfulEye does not infringe
upon or induce or contribute to the infringement of any intellectual
property rights, domestic or foreign, of any other person;
(y) MindfulEye is not in material breach of any applicable law, ordinance,
statute, regulation, by-law, order or decree of any kind whatsoever
including, without limitation, any applicable securities laws;
(z) all tax returns and reports of MindfulEye that are required by law to
have been filed have been filed and are substantially true, complete
and correct and all taxes and other government charges of any kind
whatsoever of MindfulEye have been paid or disclosed in writing to
Rabatco before Rabatco entered into this Agreement;
(aa) MindfulEye has not:
(i) made any election under any applicable tax legislation with
respect to the acquisition or disposition of any property at
other than fair market value;
(ii) acquired any property for proceeds greater than the fair
market value thereof; or
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<PAGE>
(iii) disposed of anything for proceeds less than the fair market
value thereof;
(bb) MindfulEye has made all elections required to have been made under any
applicable tax legislation in connection with any dividends or other
distributions made by MindfulEye and all such elections were true and
correct and filed in the prescribed form and within the prescribed
time period;
(cc) adequate provision has been made for taxes payable by MindfulEye for
the current period for which tax returns are not yet required to be
filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by MindfulEye;
(dd) MindfulEye does not have any contingent tax liabilities of any kind
whatsoever, and there are no grounds which would prompt a reassessment
of MindfulEye, including for aggressive treatment of income or
expenses in earlier tax returns filed;
(ee) there are no amounts outstanding and unpaid for which MindfulEye has
previously claimed a deduction under any applicable tax legislation;
(ff) MindfulEye has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns
required by it to be made or filed under the provisions of all
applicable statutes requiring the making of collections, deductions,
remittances or payments of any kind whatsoever;
(gg) there are no actions, suits, judgements, investigations or proceedings
of any kind whatsoever outstanding, pending or known to be threatened
against or affecting MindfulEye at law or in equity or before or by
any federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency of any kind whatsoever
and there is no basis therefor;
(hh) MindfulEye has good and sufficient power, authority and capacity to
enter into this Agreement and complete its respective transactions
contemplated under this Agreement on the terms and conditions set
forth herein;
(ii) MindfulEye has taken all necessary or desirable actions, steps and
corporate and other proceedings to approve or authorize, validly and
effectively, the entering into of, and the execution, delivery and
performance of, this Agreement;
(jj) this Agreement has been duly executed and delivered by MindfulEye and,
assuming the due authorization, execution and delivery hereof by
Rabatco and the Shareholders, constitutes a legal, valid and binding
obligation of MindfulEye, enforceable against it in accordance with
its terms subject to:
(i) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditors'
rights generally; and
(ii) the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in
the discretion of a court;
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<PAGE>
(kk) except as disclosed to Rabatco, MindfulEye is not under any
obligation, contractual or otherwise, to request or obtain the consent
of any person, and no permits, licenses, certifications,
authorizations or approvals of, or notifications to, any federal,
state, municipal or local government or governmental agency, board,
commission or authority are required to be obtained by MindfulEye in
connection with the execution, delivery or performance by MindfulEye
of this Agreement or the completion of any of the transactions
contemplated herein, and complete and correct copies of any agreements
under which MindfulEye is obligated to request or obtain any such
consent have been provided to Rabatco;
(ll) the execution and delivery of this Agreement, the performance of its
obligations under this Agreement and the Completion will not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, any of the constating documents of
MindfulEye, or any of the terms of any indenture, mortgage,
agreement, lease, licence or other instrument of any kind
whatsoever to which any of the MindfulEye Group is a party
or by which any of them is bound, or any judgement or order
of any kind whatsoever of any court or administrative body
of any kind whatsoever by which any of them is bound; nor
(ii) result in the violation of any law or regulation applicable
to any of the MindfulEye Group;
(mm) MindfulEye has not incurred any liability for agency, brokerage,
referral or finder's fees, commissions or compensation of any kind
whatsoever with respect to this Agreement or any transaction
contemplated under this Agreement; and
(nn) the representations and warranties of the Shareholders contained in
this Agreement disclose all material facts known to each of them
specifically relating to the transactions contemplated under this
Agreement which, so far as the Shareholders are aware, materially and
adversely affect, or in the future may materially and adversely
affect, their respective abilities to perform their respective
obligations under this Agreement or the value of the MindfulEye Shares
or the Assets.
4.2 In order to induce Rabatco to enter into this Agreement and complete its
transactions contemplated hereunder, each of the Shareholders jointly and
severally represents and warrants to Rabatco that, in respect of that
Shareholder:
(a) that Shareholder has good and sufficient power, authority and capacity
to enter into this Agreement and complete the transactions
contemplated under this Agreement on the terms and conditions set
forth herein;
(b) that Shareholder has taken all necessary or desirable actions, steps
and corporate and other proceedings to approve or authorize, validly
and effectively, the entering into of, and the execution, delivery and
performance of, this Agreement;
(c) this Agreement has been duly executed and delivered by that
Shareholder and, assuming the due authorization, execution and
delivery hereof by Rabatco, MindfulEye and the
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<PAGE>
other Shareholders, constitutes a legal, valid and binding obligation
of that Shareholder, enforceable against it in accordance with its
terms subject to:
(i) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditors'
rights generally; and
(ii) the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in
the discretion of a court;
(d) except as disclosed to Rabatco, that Shareholder is not under any
obligation, contractual or otherwise, to request or obtain the consent
of any person, and no permits, licenses, certifications,
authorizations or approvals of, or notifications to, any federal,
state, municipal or local government or governmental agency, board,
commission or authority are required to be obtained by that
Shareholder in connection with the execution, delivery or performance
by that Shareholder of this Agreement or the completion of any of the
transactions contemplated herein, and complete and correct copies of
any agreements under which that Shareholder is obligated to request or
obtain any such consent have been provided to Rabatco;
(e) the MindfulEye Shares indicated in Recital A of this Agreement
opposite his, her or its name are and will on the Closing Date
immediately prior to Completion be validly issued and outstanding
fully paid and non-assessable common shares of MindfulEye registered
in the name of, and legally and beneficially owned by, that
Shareholder, free and clear of all voting restrictions, trade
restrictions, liens, claims, charges or encumbrances of any kind
whatsoever;
(f) the Shareholder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the Rabatco Shares and is able to bear the
economic risk of loss of the Shareholder's entire investment;
(g) Rabatco has provided to the Shareholder the opportunity to ask
questions and receive answers concerning the terms and conditions of
the issuance of the Rabatco Shares and the Shareholder has had access
to such information concerning Rabatco as the Shareholder has
considered necessary or appropriate in connection with the investment
decision to acquire the Rabatco Shares;
(h) the Shareholder is acquiring the Rabatco Shares for the Shareholder's
own account, for investment purposes only and not with a view to any
resale, distribution or other disposition of the Rabatco Shares in
violation of applicable United States securities laws;
(i) the Shareholder has not agreed to acquire the Rabatco Shares as a
result of any form of general solicitation or general advertising,
including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or broadcast
over radio, or television, or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising;
(j) the Shareholder is not a "U.S. Person", the definition of which
includes, but is not limited to, an individual resident in the United
States and an estate or trust of which any executor or administrator
or trustee, respectively, is a U.S. Person, any partnership or
corporation organized or incorporated under the laws of the United
States, and any
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<PAGE>
partnership or corporation organized or incorporated under the laws of
any foreign jurisdiction by a U.S. Person principally for the purposes
of investing in securities not registered under the United States
Securities Act of 1933 (the "1933 Act");
(k) the Shareholder was outside the United States at the time of execution
and delivery of this Agreement;
(l) no offers to sell the Rabatco Shares were made by any person to the
Shareholder while the Shareholder was in the United States; and
(m) the Rabatco Shares are not being acquired, directly or indirectly, for
the account or benefit of a U.S. Person or a person in the United
States.
4.3 The representations and warranties of each of the Shareholders contained in
this Agreement shall be true at the Time of Closing as though they were made at
the Time of Closing, and they shall survive the Completion and remain in full
force and effect thereafter for the benefit of Rabatco.
4.4 Each of the Shareholders acknowledges and agrees that:
(a) the Rabatco Shares have not been and will not be registered under the
1933 Act or the securities laws of any state of the United States or
other jurisdiction and that the exchange contemplated hereby is being
made in reliance on the Shareholder's representations and warranties
regarding the circumstances required for an exemption from such
registration requirements;
(b) the issuance of the Rabatco Shares has not been approved or
disapproved by the United States Securities and Exchange Commission,
any state securities agency, or any foreign securities agency, and
Rabatco is not registered under the United States Securities Exchange
Act of 1934 (the "Exchange Act");
(c) the certificates representing the Rabatco Shares will bear a legend
stating that such shares have not been registered under the 1933 Act
or the securities laws of any state of the United States and may not
be traded except in compliance with the 1933 Act and the Exchange Act;
and
(d) if the Shareholder decides to offer, sell or otherwise transfer any of
the Rabatco Shares, he will not offer, sell or otherwise transfer any
of the Rabatco Shares directly or indirectly, unless:
(i) the sale is to Rabatco;
(ii) the sale is made pursuant to the exemption from the
registration requirements under the 1933 Act provided by
Rule 144 thereunder or Regulation S, and in accordance with
any applicable state securities or "Blue Sky" laws; or
(iii) the Rabatco Shares are sold in a transaction that does not
require registration under the 1933 Act or any applicable
state laws and regulations governing the offer and sale of
securities, and he has prior to such sale furnished to
Rabatco an opinion of counsel to that effect reasonably
satisfactory to Rabatco.
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<PAGE>
4.5 Each of the Shareholders consents to Rabatco making a notation on its
records or giving instructions to any transfer agent of Rabatco to implement the
restrictions on transfer set forth and described herein.
4.6 Each of the Shareholders acknowledges and accepts that there may be material
tax consequences to a Shareholder in respect of an acquisition or disposition of
the Rabatco Shares, and that Rabatco gives no opinion and makes no
representation with respect to the tax consequences to the Shareholder under
United States, state, local or foreign tax law in respect of the Shareholder's
acquisition or disposition of the Rabatco Shares.
4.7 In order to induce the Shareholders to enter into this Agreement and
complete the transactions contemplated hereunder, Rabatco represents and
warrants to the Shareholders that, except as disclosed to MindfulEye prior to
the Effective Date:
(a) Rabatco was and remains duly incorporated and validly existing under
the laws of the State of Nevada, and Rabatco is in good standing with
respect to all filings required by the Nevada Secretary of State;
(b) the authorized capital of Rabatco consists of 100,000,000 shares with
a par value of $0.001 per share, of which not more than 5,830,000 (the
"Outstanding Shares") will be issued and outstanding as of the Closing
Date prior to the Financing;
(c) other than as contemplated in this Agreement, no further shares of
Rabatco will be issued after the Effective Date, and there are no
commitments, plans or arrangements of any kind whatsoever to issue any
further shares of Rabatco, nor are there any outstanding options,
warrants, convertible securities or other rights of any kind
whatsoever calling for the issuance of any of the unissued shares of
Rabatco;
(d) except for 5,830,000 of the common shares of Rabatco that are
currently issued, the Financing Shares, and the further shares to be
issued pursuant to this Agreement, there will be on the Closing Date
no documents, instruments or other writings of any kind whatsoever
which constitute a security of Rabatco;
(e) the Rabatco Shares to be issued on Completion will be, when issued,
validly issued as fully paid and non-assessable;
(f) Rabatco has good and sufficient power, authority and capacity to enter
into this Agreement and complete its transactions contemplated under
this Agreement on the terms and conditions set forth herein;
(g) the common shares of Rabatco are currently quoted on the OTC Board;
(h) Rabatco has taken all necessary or desirable actions, steps and
corporate and other proceedings to approve or authorize, validly and
effectively, the entering into of, and the execution, delivery and
performance of, this Agreement;
(i) this Agreement has been duly executed and delivered by Rabatco and,
assuming the due authorization, execution and delivery hereof by
MindfulEye and the Shareholders, constitutes a legal, valid and
binding obligation of Rabatco, enforceable against it in accordance
with its terms subject to:
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<PAGE>
(i) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditors'
rights generally; and
(ii) the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in
the discretion of a court;
(j) Rabatco is not under any obligation, contractual or otherwise, to
request or obtain the consent of any person, and no permits, licenses,
certifications, authorizations or approvals of, or notifications to,
any federal, state, municipal or local government or governmental
agency, board, commission or authority are required to be obtained by
Rabatco in connection with the execution, delivery or performance by
Rabatco of this Agreement or the completion of any of the transactions
contemplated herein, and complete and correct copies of any agreements
under which Rabatco is obligated to request or obtain any such consent
have been provided to the Vendors;
(k) the execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein by Rabatco,
and the completion of the transactions contemplated hereby, will not
constitute or result in a violation or breach of or default under:
(i) any term or provision of any of the memorandum, articles or
other constating documents of Rabatco; or
(ii) the terms of any indenture, agreement (written or oral),
instrument or understanding or other obligation or
restriction to which Rabatco is a party or by which it is
bound; or
(iii) any term or provision of any licenses, registrations or
qualifications of Rabatco or any order of any court,
governmental authority or regulatory body or any applicable
law or regulation of any jurisdiction;
(l) Rabatco is not a reporting issuer pursuant to the 1933 Act or the
Exchange Act;
(m) Rabatco has made all filings with the U.S. Securities and Exchange
Commission and all state securities regulators that it is required to
make (the "Public Reports"), each of the Public Reports complies with
United States securities laws in all material respects, and none of
the Public Reports, as of their respective dates, contained any untrue
statement of a material fact that would make the statements made
therein, in light of the circumstances under which they were made,
misleading;
(n) Rabatco's financial statements for the year ended 31 December 1999
("Rabatco Financial Statements"), true copies of which are attached
hereto as Schedule G, have been prepared in accordance with generally
accepted accounting principles, are true, correct and complete in all
respects and present fairly the financial condition of Rabatco as of
the date thereof, including the assets and liabilities of Rabatco as
of the date thereof, and the expenses of Rabatco for that fiscal
period;
(o) all financial transactions of Rabatco have been recorded in the
financial books and records of Rabatco in accordance with good
business practice, such financial books and
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<PAGE>
records form the basis for the Rabatco Financial Statements and the
Rabatco Financial Statements have been filed with the United States
Securities Exchange Commission;
(p) there are no actions, suits or proceedings, judicial or administrative
(whether or not purportedly on behalf of Rabatco) pending or, to the
best of the knowledge of Rabatco, threatened, by or against or
affecting Rabatco, at law or in equity, or before or by any court or
any federal, provincial, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and to the best of the knowledge of Rabatco,
there are no grounds on which any such action, suit or proceeding
might be commenced with any reasonable likelihood of success;
(q) subsequent to the respective dates as of which information is given in
the Public Reports, there has been no material adverse change, or any
fact known to Rabatco and not disclosed to the Shareholders that could
reasonably be expected to result in a material adverse change in the
business or financial condition of Rabatco and, except as disclosed in
the Public Reports, there is no litigation or governmental proceeding
to which Rabatco is a party or to which any property of Rabatco is
subject or that is pending or, to the best of the knowledge of
Rabatco, contemplated against Rabatco that might result in any
material adverse change in the business or financial condition of
Rabatco;
(r) Rabatco has not declared or paid any dividend or made any other
distribution on any of its shares of any class, or redeemed or
purchased or otherwise acquired any of its shares of any class, or
reduced its authorized capital or issued capital, or agreed to do any
of the foregoing, except that Rabatco has agreed to repurchase at
original issue price and cancel 920,000 common shares to reduce
Rabatco's issued and outstanding share capital to 5,830,000 common
shares by the Closing Date;
(s) Rabatco is not subject to any obligation to make any investment in or
to provide funds by way of loan, capital contribution or otherwise to
any person;
(t) at the Closing Time, Rabatco will have outstanding liabilities not
exceeding US$80,000, inclusive of Transaction Costs;
(u) Rabatco is not a party to or bound by any outstanding or executory
agreement, contract or commitment, whether written or oral with an
aggregate value of greater than US$5,000, except for Transaction Costs
or any contract, lease or agreement described or referred to in this
Agreement or in the Schedules hereto;
(v) to the best of its knowledge, Rabatco is not in violation of any
federal, state, municipal or other law, regulation or order of any
government or governmental or regulatory authority, domestic or
foreign;
(w) the representations and warranties and other factual statements of
Rabatco contained in this Agreement, and all information in the
Schedules hereto, taken as a whole, do not contain any false statement
of material fact or omit to state a material fact necessary to prevent
the statements made herein and therein from being misleading;
(x) to the best of the knowledge of Rabatco, there are no proceedings or
investigations outstanding or threatened by any securities regulatory
authority against Rabatco, its directors, officers or shareholders,
and there is no circumstance which exists which could
-17-
<PAGE>
reasonably be expected to lead to an investigation against Rabatco,
its directors, officers or shareholders; and
(y) attached as Schedule H is a complete list of all ongoing contracts,
bank accounts, and investment accounts of Rabatco.
4.8 The representations and warranties of Rabatco contained in this Agreement
shall be true at the Time of Closing as though they were made at the Time of
Closing, and they shall survive the Completion and remain in full force and
effect thereafter for the benefit of the Shareholder.
5. INDEMNITIES
5.1 Notwithstanding the completion of the transactions contemplated under this
Agreement or Rabatco's Investigation, the representations, warranties and
acknowledgements of any of the Shareholders contained in this Agreement or any
certificates or documents delivered by any of them pursuant to this Agreement
shall survive the Completion and shall continue in full force and effect
thereafter for the benefit of Rabatco. If any of the representations, warranties
or acknowledgements given by any of the Shareholders is found to be untrue or
there is a breach of any covenant or agreement in this Agreement on the part of
any of the MindfulEye Group, then the party or parties responsible shall jointly
and severally indemnify and save harmless Rabatco from and against any and all
liability, claims, debts, demands, suits, actions, penalties, fines, losses,
costs (including legal fees, disbursements and taxes as charged on a lawyer and
own client basis), damages and expenses of any kind whatsoever which may be
brought or made against Rabatco by any person, firm or corporation of any kind
whatsoever or which may be suffered or incurred by Rabatco, directly or
indirectly, arising out of or as a consequence of any such misrepresentation or
breach of warranty, acknowledgement, covenant or agreement. Without in any way
limiting the generality of the foregoing, this shall include any loss of any
kind whatsoever which may be suffered or incurred by Rabatco, directly or
indirectly, arising out of any material assessment or reassessment levied upon
MindfulEye for tax, interest and/or penalties relating to any period of business
operations up to and including the Closing Date and all claims, demands, costs
(including legal fees, disbursements and taxes as charged on a lawyer and own
client basis) and expenses of any kind whatsoever in respect of the foregoing.
5.2 Notwithstanding the completion of the transactions contemplated under this
Agreement or any investigation by the Shareholders, the representations,
warranties and acknowledgements of Rabatco contained in this Agreement or any
certificates or documents delivered by Rabatco pursuant to this Agreement shall
survive the Completion and shall continue in full force and effect thereafter
for the benefit of the Shareholders. If any of the representations, warranties
or acknowledgements given by Rabatco is found to be untrue or there is a breach
of any covenant or agreement in this Agreement on the part of Rabatco, then
Rabatco shall indemnify and save harmless the Shareholders from and against any
and all liability, claims, debts, demands, suits, actions, penalties, fines,
losses, costs (including legal fees, disbursements and taxes as charged on a
lawyer and own client basis), damages and expenses of any kind whatsoever which
may be brought or made against the Shareholders by any person, firm or
corporation of any kind whatsoever or which may be suffered or incurred by the
Shareholders, directly or indirectly, arising out of or as a consequence of any
such misrepresentation or breach of warranty, acknowledgement, covenant or
agreement. Without in any way limiting the generality of the foregoing, this
shall include any loss of any kind whatsoever which may be suffered or incurred
by the Shareholders, directly or indirectly, arising out of any material
assessment or reassessment levied upon Rabatco for tax, interest and/or
penalties relating to any period of business operations up to and including the
Closing Date and all claims, demands, costs (including legal fees, disbursements
and taxes as charged on a lawyer and own client basis) and expenses of any kind
whatsoever in respect of the foregoing.
-18-
<PAGE>
Subject to any regulatory approval that may be required, each of the
Shareholders may elect to receive in lieu of a cash settlement, common shares at
the simple average closing price for the common shares of Rabatco for the 30
trading days preceding the date of any award ordered by a court pursuant to this
indemnity.
6. CLOSING
6.1 At the Time of Closing, the MindfulEye Group shall deliver to the solicitors
for Rabatco:
(a) certified true copies of the resolutions of the directors of
MindfulEye and Varshney Capital evidencing that the directors of
MindfulEye and Varshney Capital have approved this Agreement and all
of the transactions of MindfulEye and Varshney Capital contemplated
hereunder, specifically referring to:
(i) the exchange and transfer of the MindfulEye Shares from the
Shareholders to Rabatco as provided for in this Agreement;
(ii) the execution of the Employment Agreements by MindfulEye;
(iii) the cancellation of the share certificates (the "Old Share
Certificates") representing the MindfulEye Shares held as
set forth in Recital A of this Agreement; and
(iv) the issuance of a new share certificate (the "New Share
Certificate") representing the MindfulEye Shares registered
in the name of Rabatco;
(b) the Old Share Certificates;
(c) the New Share Certificate;
(d) all minute books and seals of MindfulEye;
(e) all original and duplicate certificates evidencing registration
anywhere in the world of any interest in tangible or intangible
property included in the Assets;
(f) releases in the form of Schedule I to this Agreement (the "Releases")
from each of the Shareholders of all claims against MindfulEye for
outstanding amounts owing by MindfulEye on account of any loans,
bonuses, reimbursements, compensation, fees, royalties, dividends or
other consideration whatsoever;
(g) the Employment Agreements, completed and fully and duly executed;
(h) the MindfulEye Solicitor Opinion;
(i) certificates of confirmation from each of the Shareholders,
substantially in the form of Schedule J to this Agreement;
(j) the consent of Mr. Maffin to become a director and the President of
Rabatco, the consent of Ms. Kerr to become a director and the
Secretary of Rabatco, and the consents of Mr. Cusolle, Mr. Torresan
and Mr. Varshney to become directors of Rabatco; and
-19-
<PAGE>
(k) any other materials that are, in the opinion of the solicitors for
Rabatco, reasonably required to complete the transactions contemplated
under this Agreement.
6.2 At the Time of Closing, Rabatco shall deliver to the solicitors for the
Shareholders:
(a) certified true copies of the resolutions of the directors and, if
shareholder approval is required, of the shareholders of Rabatco,
evidencing that the directors and, as applicable, the shareholders, of
Rabatco have approved this Agreement and all of the transactions of
Rabatco contemplated hereunder, including the issuance of the Rabatco
Shares in exchange for the MindfulEye Shares;
(b) share certificates representing the Rabatco Shares registered in the
names of the Shareholders as jointly directed by the Shareholders in
writing;
(c) a certificate of confirmation signed by a director or officer of
Rabatco substantially in the form of Schedule K to this Agreement;
(d) the Rabatco Solicitor Opinion;
(e) the resignation of Mr. John A. Meyer as the sole Director and Officer
of Rabatco, effective on Completion; and
(f) all minute books and seals of Rabatco.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of the
essence of this Agreement and any waiver by the parties of this paragraph 7.1 or
any failure by them to exercise any of their rights under this Agreement shall
be limited to the particular instance and shall not extend to any other instance
or matter in this Agreement or otherwise affect any of their rights or remedies
under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the recitals
to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties hereto
in respect of the matters referred to herein and there are no representations,
warranties, covenants or agreements, expressed or implied, collateral hereto
other than as expressly set forth or referred to herein.
7.4 The headings in this Agreement are for reference only and do not constitute
terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms, require
performance by a party to this Agreement subsequent to the Closing Date of this
Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this Agreement
or any provision of this Agreement shall be valid and binding upon the parties
hereto unless such alteration, amendment, modification or interpretation is in
written form executed by the parties directly affected by such alteration,
amendment, modification or interpretation.
-20-
<PAGE>
7.7 Whenever the singular or masculine is used in this Agreement the same shall
be deemed to include the plural or the feminine or the body corporate as the
context may require.
7.8 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as any party may, either before or
after the Closing Date, reasonably require in order to carry out the full intent
and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under this
Agreement shall be in writing and shall be delivered by hand to the appropriate
party at the address as first set out above or to such other addresses or by
such other means as may be designated in writing by the parties hereto in the
manner provided for in this paragraph, and shall be deemed to have been received
on the date of delivery by hand, or if delivered by e-mail or telecopy, then on
the date transmission completes.
7.10 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia, and the parties
attorn to the non-exclusive jurisdiction of the courts of British Columbia for
the resolution of all disputes arising under this Agreement.
7.11 This Agreement may be signed by the parties in as many counterparts as may
be deemed necessary, each of which so signed shall be deemed to be an original,
and all such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Effective Date:
SIGNED, SEALED & DELIVERED )
by TOD MAFFIN in the presence of: )
)
) /s/ TOD MAFFIN
Signature of Witness ) ----------------------------------
) TOD MAFFIN
Name: )
--------------------------------)
Address: )
-----------------------------)
)
- ---------------------------------------)
Occupation: )
--------------------------)
SIGNED, SEALED & DELIVERED by )
TODD CUSOLLE in the presence of: )
)
) /s/ TODD CUSOLLE
Signature of Witness ) ----------------------------------
) TODD CUSOLLE
Name: )
--------------------------------)
Address: )
-----------------------------)
)
- ---------------------------------------)
Occupation: )
--------------------------)
-21-
<PAGE>
SIGNED, SEALED & DELIVERED by )
RAY TORRESAN in the presence of: )
)
) /s/ RAY TORRESAN
Signature of Witness ) ----------------------------------
) RAY TORRESAN
Name: )
--------------------------------)
Address: )
-----------------------------)
)
- ---------------------------------------)
Occupation: )
--------------------------)
SIGNED, SEALED & DELIVERED by AMANDA )
KERR in the presence of: )
)
)
) /s/ AMANDA KERR
Signature of Witness ) ----------------------------------
) AMANDA KERR
Name: )
--------------------------------)
Address: )
-----------------------------)
)
- ---------------------------------------)
Occupation: )
--------------------------)
SIGNED, SEALED & DELIVERED by ROGER )
MUTIMER in the presence of: )
)
) /s/ ROGER MUTIMER
Signature of Witness ) ----------------------------------
) ROGER MUTIMER
Name: )
--------------------------------)
Address: )
-----------------------------)
)
- ---------------------------------------)
Occupation: )
--------------------------)
THE CORPORATE SEAL of )
VARSHNEY CAPITAL CORP. was hereunto )
affixed in the presence of its )
authorized signatory(ies): )
)
) c/s
- ---------------------------------------)
Name: ---------------------------------)
Title: --------------------------------)
)
)
Name: ---------------------------------)
Title: --------------------------------)
-22-
<PAGE>
THE CORPORATE SEAL of )
MINDFULEYE SYSTEMS INC. was hereunto )
affixed in the presence of its )
authorized signatory(ies): )
)
) c/s
- ---------------------------------------)
Name: ---------------------------------)
Title: --------------------------------)
)
)
Name: ---------------------------------)
Title: --------------------------------)
EXECUTED by RABATCO, INC. by: )
)
/s/ JOHN MEYER )
- ---------------------------------------)
Name: ---------------------------------)
Title: )
-23-
<PAGE>
SCHEDULE A
MindfulEye Solicitor Opinion
(letterhead of solicitors for MindfulEye)
o, 2000
o
o
Attention: o
Dear Sirs:
Re: Share Exchange Agreement (the "Agreement") made effective as of the o day
of o, o, between Tod Maffin, Varshney Capital Corp., Tod Cusolle, Ray
Torresan, Amanda Kerr and Roger Mutimer (the "Shareholders"),
MindfulEye.com Systems Inc. ("MindfulEye"), and Rabatco Inc. ("Rabatco")
We are the solicitors for MindfulEye. We provide this opinion pursuant to
subparagraphs o and o of the Agreement. We have acted as counsel for MindfulEye
in connection with the negotiation, execution and completion of the Agreement.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
1. MindfulEye is a company duly incorporated and validly existing under the
laws of the Province of British Columbia. MindfulEye is in good standing
with respect to the filing of annual reports required under the British
Columbia Company Act.
2. MindfulEye has all requisite corporate power and authority to enter into
and to perform its obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by MindfulEye.
<PAGE>
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by MindfulEye will
conflict with or constitute a breach of or default under the constating
documents of MindfulEye or any commitment, agreement or other instrument to
which MindfulEye is a party or by which it is bound.
5. As at the Effective Date of the Agreement, the authorized capital of
MindfulEye consisted of _____ ______ shares [with a par value of ____ ].
6. All necessary corporate action and proceedings have been taken to effect
the valid transfer of the MindfulEye Shares to the Rabatco as contemplated
under the Agreement.
The opinion expressed is subject to the qualification that enforceability of the
Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
o
Per:
o
-2-
<PAGE>
SCHEDULE B
Rabatco Solicitor Opinion
(letterhead of solicitors for Rabatco)
o, 2000
o
o
Attention: o
Dear Sirs:
Re: Share Exchange Agreement (the "Agreement") made effective as of the o day
of o, o, between Tod Maffin, Varshney Capital Corp., Tod Cusolle, Ray
Torresan, Amanda Kerr and Roger Mutimer (the "Shareholders"),
MindfulEye.com Systems Inc. ("MindfulEye"), and Rabatco Inc. ("Rabatco")
We are the solicitors for Rabatco. We provide this opinion pursuant to
subparagraphs o and o of the Agreement. We have acted as counsel for Rabatco in
connection with the negotiation, execution and completion of the Agreement.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
1. Rabatco is a company duly incorporated and validly existing under the laws
of the State of Nevada. Rabatco is in good standing with respect to the
filing of annual reports required by the Nevada Secretary of State.
2. Rabatco has all requisite corporate power and authority to enter into and
to perform its obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by Rabatco.
<PAGE>
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by Rabatco will
conflict with or constitute a breach of or default under the constating
documents of Rabatco or any commitment, agreement or other instrument to
which Rabatco is a party or by which it is bound.
5. As at the Effective Date of the Agreement, the authorized capital of
Rabatco consisted of 100,000,000 common shares with a par value of $0.001.
6. All necessary steps and corporate action and proceedings have been taken to
effect the valid issuance of the Rabatco Shares to the Shareholder as
contemplated under the Agreement, and the Rabatco Shares have been validly
issued as fully paid and non-assessable.
The opinion expressed is subject to the qualification that enforceability of the
Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
o
Per:
o
-2-
<PAGE>
SCHEDULE C
MindfulEye Assets
All rights, title and interest in and to all tangible and intangible property
associated with all business (the "Business") carried on by MindfulEye including
any business carried on in association with any or all of the internet domain
names "MindfulEye.com", "MindfullEye.com", "InvestorTrack.com", RumorTrack.com",
"RumourTrack.com" and "MoodIndex.com" (the "Domain Names"), and all related
internet website developments (collectively, the "Websites"), including without
limitation:
(i) the contractual right to maintain registration of the Domain Names
with InterNIC (Network Solutions Inc.);
(ii) all URL's associated with the Domain Names or the Websites;
(iii) all databases, books and records relating to the Business including,
without limitation, all recorded information relating to customers of
the Business, and advertisers on and visitors to the Websites;
(iv) any existing patent rights and copyright in graphics and text
displayed at the Websites and in computer software relating to the
Websites or used in the Business;
(v) all trade-mark and trade name rights that MindfulEye may have anywhere
in the world in respect of the Business, the Websites or the Domain
Names;
(vi) all goodwill associated with the Business, the Websites or the Domain
Names;
(vii) all contracts, leases, licenses, permits credits, rights, accounts
receivable, cash and prepaid expenses;
(viii) all furniture and fixtures used in the Business; and
(ix) all inventory and equipment associated with the Business, including:
<PAGE>
Hardware Serial Number (if applicable)
- -------- -----------------------------
3x HP Surestore DAT 24G Ext. Tape GB21085971
2x 3 COM 10/100 PC Card
3 COM Etherlink III TP
ACER 8 Port 10 BASE-T hub
5x System Celeron 466A MHz 128k 814574
814575
814576
814644
814583
System Celeron 400A 128K 814663
2x System Pentium III 450 512K 814573
814795
2x System Pentium III 500 512K 814990
814588
Pentium III 500 MHz CPU 512k
IBM Netfinity server NF3500M10
6x ACER 10/100 PCI Network Card
Iomega Zip Drive Internal
HP LaserJet 1100 USLF001141
IBM Ultrastar 18 GB
ASUS 40x CDROM drive EIDE
Sony CRX120E CDR-W drive
2x Sound Blaster 128 PCI sound
VAIO Notebook slim PII
1 NB Panasonic CF47 PIII 9FMTA01897
2x 3COM Palm Pilots
2 OmniSky modems
Software Serial number (if applicable)
- -------- -----------------------------
M/S Windows 98 OEM SE Edition
MSDN Universal 6.0 W9X/NT CD
Trademarks
- ----------
Have research and applied for the following trademarks:
1. Moodindex
2. MindfulEye
Trademark lawyer:
Blake R. Wiggs
Oyen Wiggs Green & Mutala
480, The Station
601 West Cordova Street
Vancouver, BC V6B 1G1
Trademark researcher:
IntelPro - Thompson and Thompson
651 Notre-Dame Ouest, Suite 400
Montreal, Quebec H3C 1H9
-2-
<PAGE>
Domain Names URLs associated with domain names
- ------------ ---------------------------------
MindfulEye.com http://www.MindfulEye.com
MindfullEye.com http://www.MindfullEye.com
InvestorTrack.com http://www.InvestorTrack.com
RumorTrack.com http://www.RumorTrack.com
RumourTrack.com http://www.RumourTrack.com
MoodIndex.com http://www.MoodIndex.com
Furniture and Fixtures
- ----------------------
MindfulEye.com currently owns the following:
1. 4 desks
2. 4 cubicle desks
3. 4 workstation chairs
4. 5 task chairs
5. miscellaneous lighting fixtures (i.e., developer work lamps)
-3-
<PAGE>
SCHEDULE D
MindfulEye Financial Statements
-4-
<PAGE>
SCHEDULE E
MindfulEye Directors, Officers, Employees, Contractors and Consultants
-5-
<PAGE>
SCHEDULE F
MindfulEye Material Contracts
Contracting Party Terms of Contract
- ----------------- -----------------
SDM Realty Advisors Ltd. 5 yr. Rental agreement for new office
space at 300, 355 Burrard Street
(Marine Building).
Dave Edis, Programmer
Interactive Tools
702 - 1238 Seymour Street
Vancouver, BC V6B 6J3
Gisela Scholz, Office Planner
Integro Design
106 - 2815 Yew Street
Vancouver BC V6K 3H6
-6-
<PAGE>
SCHEDULE G
Rabatco Financial Statements
-7-
<PAGE>
SCHEDULE H
Rabatco Material Contracts, Bank Accounts and Investments
Material Contracts:
NIL
Bank Accounts:
Account No. 468 4677 (US$); and
Account No. 179 8506 (CDN$),
both at Bank of Montreal
595 Burrard Street, Vancouver, British Columbia
Investments:
NIL
-8-
<PAGE>
SCHEDULE I
Release
THIS RELEASE ("Release") is being executed and delivered as of o, by and on
behalf of o (the "Releasor") to and in favour of, and for the benefit of,
MindfulEye.com Systems Inc. ("MindfulEye") at the request of Rabatco Inc.
("Rabatco").
WHEREAS the Releasor, the Releasee, Rabatco and others entered into a Share
Exchange Agreement dated o (the "Agreement") and as a condition to the
completion of the transactions contemplated by the Agreement, the Releasor
agreed to execute and deliver this Release to and in favour of MindfulEye;
NOW THEREFORE THIS RELEASE WITNESSES that in order to induce MindfulEye and
Rabatco to consummate the transactions contemplated by the Agreement, and for
other valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by the Releasor), the Releasor hereby covenants and agrees as
follows:
1. Definitions.
1.1 The term "Associated Parties," when used herein with respect to a Releasor,
shall mean and include: (i) the Releasor's predecessors, successors,
executors, administrators, heirs and estate; (ii) the Releasor's past,
present and future assigns, agents and representatives; (iii) each entity
that the Releasor has the power to bind (by the Releasor's acts or
signature) or over which the Releasor directly or indirectly exercises
control; and (iv) each entity of which the Releasor owns, directly or
indirectly, at least 10% of the outstanding equity, beneficial,
proprietary, ownership or voting interests.
1.2 The term "Releasee" shall mean and include: (i) MindfulEye; (ii) each of
any direct and indirect subsidiaries of MindfulEye; (iii) each other
affiliate of MindfulEye; and (iv) the successors and past, present and
future assigns, directors, officers, employees, agents, attorneys and
representatives of the respective entities identified or otherwise referred
to in clauses "(i)" through "(iv)" of this sentence.
1.3 The term "Claims" shall mean and include all past, present and future
disputes, claims, controversies, demands, rights, obligations, liabilities,
actions and causes of action of every kind and nature, including: (i) any
unknown, unsuspected or undisclosed claim; (ii) any claim or right that may
be asserted or exercised by the Releasor in the Releasor's capacity as a
stockholder, director, officer or employee of the Releasor or in any other
capacity; and (iii) any claim, right or cause of action based upon any
breach of any express, implied, oral or written contract or agreement.
1.4 The term "Released Claims" shall mean and include each and every Claim that
(i) the Releasor or any Associated Party of the Releasor may have had in
the past or may now or in the future have against any of the Releasees and
(ii) has arisen directly or indirectly out of, or relates directly or
indirectly to, any circumstance, agreement, activity, action, omission,
event or matter occurring or existing on or prior to the date of this
Release excluding such Releasor's rights, if any, under the Agreement.
<PAGE>
2. Release.
2.1 The Releasor, on the Releasor's own behalf and for each of the Releasor's
Associated Parties, hereby generally, irrevocably, unconditionally and
completely releases and forever discharges each of the Releasees from, and
hereby irrevocably, unconditionally and completely waives and relinquishes,
each of the Released Claims.
3. Representations and Warranties.
3.1 The Releasor represents and warrants that:
(i) the Releasor has not assigned, transferred, conveyed or otherwise
disposed of any Claim against any of the Releasees, or any direct
or indirect interest in any such Claim, in whole or in part;
(ii) to the best of the Releasor's knowledge, no other person or
entity has any interest in any of the Released Claims;
(iii) no Associated Party of the Releasor has or had any Claim against
any of the Releasees;
(iv) no Associated Party of such Releasor will in the future have any
Claim against any of the Releasees that arises directly or
indirectly from or relates directly or indirectly to any
circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or before the date of this
Release;
(v) this Release has been duly and validly executed and delivered by
the Releasor;
(vi) this Release is a valid and binding obligation of the Releasor
and the Releasor's Associated Parties, and is enforceable against
the Releasor and each of the Releasor's Associated Parties in
accordance with its terms; and
(vii) there is no action, suit, proceeding, dispute, litigation, claim,
complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or,
to the best of the knowledge of the Releasor, threatened against
the Releasor or any of the Releasor's Associated Parties that
challenges or would challenge the execution and delivery of this
Release or the taking of any of the actions required to be taken
by the Releasor under this Release.
4. Indemnification.
4.1 Without in any way limiting any of the rights or remedies otherwise
available to the Releasee, the Releasor shall indemnify and hold
harmless the Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee, charge or expense
(including attorneys' fees) that is directly or indirectly suffered or
incurred at any time by the Releasee, or to which the Releasee
otherwise becomes subject at any time, and that directly or indirectly
relates to or arises out of or by virtue of (a) any failure on the part
of the Releasor to observe, perform or abide by, or any other breach
of, any restriction, covenant, obligation, representation, warranty or
other provision contained herein; or (b) the assertion or purported
assertion of any of the Released Claims by the Releasor or any of the
Releasor's Associated Parties.
-2-
<PAGE>
5. Miscellaneous.
5.1 This Release sets forth the entire understanding of the parties relating to
the subject matter hereof and supersedes all prior agreements and
understandings among or between the Releasor and any of the Releasees
relating to the subject matter hereof.
5.2 If any provision of this Release or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction,
then (i) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect
the validity or enforceability of such provision or part thereof under any
other circumstances or in any other jurisdiction, and (iii) such invalidity
or enforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Release. Each
provision of this Release is separable from every other provision of this
Release, and each part of each provision of this Release is separable from
every other part of such provision.
5.3 This Release shall be construed in accordance with, and governed in all
respects by, the laws of the Province of British Columbia and federal laws
of Canada applicable therein.
5.4 Whenever required by the context, the singular number shall include the
plural, and vice versa; the masculine gender shall include the feminine and
neuter genders; and the neuter gender shall include the masculine and
feminine genders.
IN WITNESS WHEREOF, the Releasor has caused this Release to be executed as of
the date first above written.
- ---------------------------------
3-
<PAGE>
SCHEDULE J
Certificate of Confirmation
Pursuant to subparagraph o of the Share Exchange Agreement made effective as of
the o day of o, o (the "Agreement") between Tod Maffin, Varshney Capital Corp.,
Tod Cusolle, Ray Torresan, Amanda Kerr and Roger Mutimer, MindfulEye.com Systems
Inc. and Rabatco Inc. ("Rabatco"), the undersigned hereby confirms to Rabatco
that the representations and warranties of the undersigned contained in the
Agreement or contained in any certificates or documents delivered by the
undersigned pursuant to the Agreement are true and correct in every respect as
of the Time of Closing of the Agreement being o o'clock a.m. local time in
Vancouver, B.C. on the o, 2000.
Dated at o, this o, o.
-------------------------------------
o
<PAGE>
SCHEDULE K
Certificate of Confirmation
Pursuant to subparagraph o of the Share Exchange Agreement made effective as of
the o day of o, o (the "Agreement") between Tod Maffin, Varshney Capital Corp.,
Tod Cusolle, Ray Torresan, Amanda Kerr and Roger Mutimer, MindfulEye.com Systems
Inc. (collectively the "MindfulEye Group") and Rabatco Inc., the undersigned
hereby confirms to the MindfulEye Group that the representations and warranties
of Rabatco contained in the Agreement or contained in any certificates or
documents delivered by Rabatco pursuant to the Agreement are true and correct in
every respect as of the Time of Closing of the Agreement being o o'clock a.m.
local time in Vancouver, B.C. on the o, 2000.
Dated at o, this o, o.
Rabatco Inc.
Per:
-------------------------------------
o, Director
<PAGE>
SCHEDULE L
MINDFULEYE.COM SYSTEMS INC.
1100 - 888 Dunsmuir Street
Vancouver, B.C., V6C 3K4
_______, 2000
To: o
Re: Employment Agreement
This Agreement contains the terms and conditions of your employment with
MindfulEye.com Systems Inc. (the "Company").
You will be employed for a term (the "Term") of two years commencing on _____,
2000, unless your employment is terminated or the Term is extended in accordance
with the provisions of this Agreement.
1. Definitions
In this Agreement:
(a) "Affiliate" has the same meaning as in the British Columbia Company
Act or any successor legislation, as amended from time to time.
(b) "Agreement" means this letter agreement and schedules attached to this
letter agreement, as amended or supplemented from time to time.
(c) "Board" means the board of directors of the Company.
(d) "Business of the Company" means the business of collecting, analyzing
and reporting on news and public opinion, through operation of
web-sites on the Internet, or otherwise.
(e) "Cause" includes:
(i) any wilful failure by you in the performance of any of your
duties under this Agreement;
(ii) your conviction of a crime (indictable level or penalized by
incarceration or a lesser crime involving moral turpitude),
or any act involving money or other property involving the
Company or any other member of the Group that would
constitute a crime in the jurisdiction involved;
(iii) any act of fraud, misappropriation, dishonesty, embezzlement
or similar conduct against the Company or an Affiliate or
any customer of the Company or an Affiliate;
<PAGE>
(iv) the use of illegal drugs or the habitual and disabling use
of alcohol or drugs;
(v) any threatened or actual attempt by you to secure any
personal profit in connection with the Business of the
Company or the corporate opportunities of any member of the
Group except as may be expressly approved in writing in
advance by the Company, in its discretion;
(vi) any act which is materially injurious to the Business of the
Company; or
(vii) your failure to devote adequate time to the Business of the
Company, or conduct by you amounting to insubordination or
inattention to, or substandard performance of your duties
and responsibilities under this Agreement, or any other
material breach of any of the terms of this Agreement, which
remains uncured after the expiration of ten days following
the delivery of written notice of such failure or conduct to
you by the Company.
(f) "Company" means MindfulEye.com Systems Inc., a company formed under
the laws of British Columbia.
(g) "Competitive Business" means any business or enterprise that is in
competition with the Business of the Company.
(h) "Confidential Information" means all confidential or proprietary
facts, data, techniques and other information relating to the Business
of the Company which may before or after the date of this Agreement be
disclosed to you by the Company or by any other member of the Group or
which may otherwise come within your knowledge or which may be
developed by you in the course of your employment or from any other
Confidential Information.
(i) "Group" means the Company, Rabatco Inc. ("Rabatco") and their
Affiliates.
(j) "Intellectual Property Rights" means all rights in respect of
intellectual property including, without limitation, all patent,
industrial design, copyright, integrated circuit topography, know-how,
trade secret, privacy and trade-mark rights, to the extent those
rights may subsist anywhere in the universe.
(k) "Permanent Disability" occurs if (i) you are unable to perform your
duties under this Agreement for a period of 60 consecutive days as
certified by a physician chosen by the Company and acceptable to you,
acting reasonably, or (ii) you become entitled to disability
retirement benefits under the Canada Pension Plan or recover benefits
under any long term disability plan or policy maintained by the
Company.
(l) "Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency or entity
however designated or constituted.
-2-
<PAGE>
2. Employment
The terms of your employment will be as follows:
(a) Position and Responsibilities: You will be employed by the Company in
the position set out on Schedule A to this Agreement. You will perform
and fulfil the duties and responsibilities set out on Schedule A, or
that the Board may prescribe from time to time and that are reasonably
consistent with your position.
(b) Scope of Duties: During your employment, you will devote the whole of
your time, attention and abilities during normal business hours to the
duties hereby granted and accepted and you will give the Company the
full benefit of your knowledge, expertise, technical skill and
ingenuity.
(c) Salary: During the term of your employment, you will receive an annual
gross salary in the amount set out on Schedule A to this Agreement and
payable in accordance with the Company's standard salary payment
schedule. You will also receive such other benefits as may be
specified on Schedule A. Payment of your Salary will be subject to
source deductions and other deductions required to be deducted and
remitted under applicable provincial or federal laws of Canada or
Company policy. Other benefits will be subject to applicable laws,
which may include a requirement for regulatory approval.
(d) Vacation Entitlement: You will receive paid vacation in the amount set
out on Schedule A to this Agreement. Your vacation must be taken in
accordance with the Company's vacation policy in effect from time to
time.
(e) Medical, Insurance and Other Benefits: You will be entitled to
participate in the Company's standard benefit program which includes
medical, dental, life and disability insurance as are now or may
hereafter be established by the Company for the benefit of its
employees, as specified in Schedule A.
(f) Extension of Term: Unless the Company provides you with written notice
that the Company does not wish to extend the Term of this Agreement
for an additional period, the Term of this Agreement will, subject to
your consent, be deemed to be extended for an additional one year
period on the same terms and conditions as provided for under this
Agreement, unless otherwise agreed to in writing.
3. Assignment of Interest in Inventions
As consideration for your employment with the Company, you covenant and agree as
follows:
(a) Disclosure: You will make prompt and full disclosure to the Company of
any discovery, invention, development, production, process or
improvement that may relate to the Business of the Company and that is
conceived, made, improved upon or participated in by you, solely or
jointly, in the course of or relating to or resulting from your
employment with the Company or with any other member of the Group (the
"Inventions").
-3-
<PAGE>
(b) Assignment: Your acceptance of the terms of this Agreement constitutes
your absolute, unconditional and irrevocable assignment and transfer
of, and agreement to assign and transfer, all past, present and future
right, title, benefit and interest in and to all Intellectual Property
Rights in respect of the Inventions. You hereby waive in favour of the
Company all claims of any nature whatsoever that you now or hereafter
may have for infringement of any Intellectual Property Rights for the
Inventions so assigned to the Company. To the extent that copyright
may subsist in the Inventions, you hereby waive all past, present and
future moral rights you may have. You agree that the Company will hold
all Intellectual Property Rights in respect of the Inventions for the
exclusive benefit of the Company and you agree not to claim or apply
for registration or challenge the Company's registration of, any such
Intellectual Property Rights.
(c) Intellectual Property Protection: By your acceptance you irrevocably
agree the Inventions and all related Intellectual Property Rights will
be the absolute and exclusive property of the Company. The Company may
apply for patent, copyright or other intellectual property protection
in the Company's name or, where such procedure is proper, in your
name, anywhere in the world. You will, at the Company's request,
execute all documents and do all such acts and things considered
necessary by the Company to obtain, confirm or enforce any
Intellectual Property Rights in respect of the Inventions. If the
Company requires but is unable to secure your signature for any such
purpose in a timely manner, you hereby irrevocably designate and
appoint the Company and any duly authorized officer or agent of the
Company as your agent and attorney, to act for you and in your behalf
and stead to execute any such documents and to do all other lawfully
permitted acts to carry out the intent of this provision, with the
same legal force and effect as if executed or done by you.
4. Obligations of Employment
You further covenant and agree as follows:
(a) Performance and Duty to the Company: Throughout your employment you
will well and faithfully serve the Company and use all reasonable
endeavours to promote the interests of the Company. You will act
honestly, in good faith and in the best interests of the Company. You
will adhere to all applicable policies of the Company.
(b) Business of the Company: You will not, during your employment with the
Company, engage in any business, enterprise or activity that is
contrary to or detracts from the due performance of the Business of
the Company.
(c) Confidentiality: You will retain all Confidential Information
developed, utilized or received by the Company and each other member
of the Group in the strictest confidence and will not disclose or
permit the disclosure of Confidential Information in any manner other
than in the course of your employment with and for the benefit of the
Company or as required by law or a regulatory authority having
jurisdiction. You will not use Confidential Information for your own
personal benefit or permit it to be used for the benefit of any Person
other than the Company, either during your employment with the Company
or thereafter. You will take all reasonable precautions to prevent any
Person from having unauthorized access to Confidential Information or
use of it. In particular, you will not copy, modify or part with any
Confidential Information, in whole or in part,
-4-
<PAGE>
except with the written approval of the Company or as may be required
to carry out your duties under this Agreement. All copies of
Confidential Information, and all documents and electronic or other
records which now or hereafter may contain Confidential Information,
are and will remain the exclusive and absolute property of the
Company.
(d) Exceptions: Any obligations specified in subsection 4(c) will not
apply to any information:
(i) presently in the public domain;
(ii) that becomes part of the public domain through no fault of
your own; or
(iii) the disclosure of which is required by applicable laws or
the order of a court or regulatory authority having
jurisdiction.
(e) Restrictions: This Agreement has been entered into in the course of an
arm's length transaction whereby Rabatco acquired all the issued and
outstanding shares of the Company from the shareholders of Rabatco
including you, in exchange for a certain number of shares in the
capital of Rabatco. To ensure that the Group receives and keeps the
goodwill associated with the business of Company, you agree that at
all times during your employment with the Company and for a period of
twenty-four months after the termination of your employment, you will
not, except with the prior written consent of the Company, which
consent may be withheld in the Company's sole discretion:
(i) either individually or in conjunction with any Person, as
principal, agent, director, officer, employee, investor or
in any other manner whatsoever, directly or indirectly,
engage in or become financially interested in a Competitive
Business in North America;
(ii) either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or appropriate or attempt
to solicit, divert or appropriate to any Competitive
Business, any customer or actively sought prospective
customer of the Company or any customer with whom the
Company or any other member of the Group has had dealings
relating to the Business of the Company, or with whom you
have dealt, or with whom you have supervised negotiations or
business relations, or about whom you have acquired
Confidential Information in the course of your employment by
the Company; nor
(iii) either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or hire away, or attempt
to solicit, divert, or hire away, any independent contractor
or any person employed by the Company or any other member of
the Group or persuade or attempt to persuade any such
individual to terminate his or her employment with the
Company.
(f) Tolling: You agree that if you breach any of the covenants contained
in subsection 4(e), the running of the period of the restrictions
described in the covenant breached will be tolled during the
continuation of any breach by you, and the running of period of the
restriction will begin again only upon your compliance with the terms
of the covenant breached.
-5-
<PAGE>
(g) Acknowledgement: You represent and warrant to the Company that you are
not subject to any agreement with any other entity that would prevent
you from getting involved or participating in the Business of the
Company or from soliciting any personnel or customers of such entity
on behalf of another business.
(h) No Damaging Conduct: You will not directly or indirectly impair or
seek to impair the reputation of the Company or any other member of
the Group, nor any relationships that the Company or any other member
of the Group has with its employees, customers, suppliers, agents or
other parties with which the Company or any other member of the Group
does business or has contractual relations, either during or after
your employment by the Company.
(i) No Personal Benefit: You will not receive or accept for your own
benefit, either directly or indirectly, any commission, rebate,
discount, gratuity or profit from any Person having or proposing to
have one or more business transactions with the Company or any other
member of the Group, without the prior written approval of the Board,
in its discretion.
(j) Customer Contacts: During your employment you will communicate and
channel to the Company all knowledge, business and customer contacts
and any other information that could concern or be in any way
beneficial to the Business of the Company. Any such information
communicated to the Company as aforesaid will be and remain the
property of the Company notwithstanding the subsequent termination of
your employment.
(k) Return of Company Property: Upon termination of your employment, you
will promptly return to the Company all Company property including all
written information, tapes, discs or memory devices and copies
thereof, and any other material on any medium in your possession or
control pertaining to the Business of the Company, without retaining
any copies or records of any Confidential Information whatsoever. You
will also return any keys, pass cards, identification cards or other
property belonging to the Company.
5. Termination
(a) Your employment may only be terminated prior to expiry of the Term as
follows:
(i) Mutual Agreement: Your employment may be terminated upon the
mutual written agreement by the parties.
(ii) Permanent Disability: Your employment will terminate in the
event of your Permanent Disability.
(iii) With Cause: The Company may terminate your employment for
Cause, immediately after delivery by the Company to you of a
notice of termination of your employment for Cause, in which
case you will not be entitled to receive any further
compensation (except for compensation, if any, accrued under
this Agreement up to the date of termination of your
employment and unpaid at the date of such
-6-
<PAGE>
termination), severance pay, notice, payment in lieu of
notice or damages of any kind and you hereby release all
claims and entitlements thereto, without limitation.
(iv) Resignation: If for any reason you should wish to leave the
Company you will provide the Company sixty days' prior
written notice of your intention.
(v) Without Cause: The Company may terminate your employment at
any time without Cause by providing you with the greater of
the following:
(A) three months' written notice or payment in lieu of
notice; or
(B) the minimum notice or payment in lieu of notice
prescribed by the Employment Standards Act (British
Columbia) or any successor legislation form time to
time.
You will not be entitled to receive any further severance
pay, notice, payment in lieu of notice or damages of any
kind and you will not be entitled to receive any further
compensation (except for compensation, if any, accrued under
this Agreement up to the date of termination of your
employment and unpaid at the date of such termination) and
you hereby release all claims and entitlements thereto
including, without limitation, any claims and entitlements
under the Employment Standards Act (British Columbia).
Payments in lieu of notice will be subject to all source
deductions and other deductions required to be deducted and
remitted under applicable provincial or federal laws of
Canada or Company policy.
6. Agreement Voluntary and Equitable
You acknowledge that you have had the opportunity to obtain independent legal
advice regarding this Agreement, that you have carefully considered and
understand the terms of this Agreement and consider them to be mutually fair and
equitable, and that you have executed this Agreement voluntarily and of your own
free will.
7. Irreparable Harm
You acknowledge and agree that any breach of any provision of section 3 or
section 4 of this Agreement by you will cause irreparable harm to the Company
and in addition to all of the remedies available to the Company by law, the
Company will be entitled to equitable relief including without limitation,
injunctive relief to ensure your compliance with section 3 and section 4 of this
Agreement.
8. Your Claims
The existence of any claim, demand, action or cause of action by you against the
Company or any other member of the Group, whether based on this Agreement or
otherwise, will not constitute a defense to the enforcement by the Company of
its rights under this Agreement.
9. Prior Relationship
You absolutely, unconditionally and irrevocably waive and release any claim that
you may have had up to the date of this Agreement based on your prior
relationship with the Company, if any, as a director, officer, employee, or
independent contractor, including without limitation any claim for any employee
benefits, holiday pay, termination notice or severance pay in lieu of notice,
and you agree not to advance
-7-
<PAGE>
or permit any such claim to be advanced and will indemnify and save the Company
and Group harmless in respect of any such claim or any other liabilities or
costs that the Company or Group may suffer as a result of any court action,
decision, judgement or ruling or any ruling by a governmental authority having
jurisdiction, in respect of your prior relationship with the Company.
10. Assignment and Enurement
You may not assign this Agreement, any part of this Agreement or any of your
rights under this Agreement without the prior written consent of the Company,
which may be withheld in its discretion. This Agreement enures to the benefit of
and is binding upon you and the Company and your respective heirs, executors,
administrators, successors and permitted assigns.
11. Severability
If any provision or portion of this Agreement is determined to be invalid or
unenforceable for any reason, then that provision or portion will be severed
from this Agreement. The rest of this Agreement will remain in full force and
effect.
12. Entire Agreement
This Agreement contains the whole agreement between you and the Company with
respect to your employment by the Company, and there are no representations,
warranties, collateral terms or conditions, express or implied, other than as
set forth in this Agreement. This Agreement supersedes any written or oral
agreement or understanding between you and the Company. No change or
modification of this Agreement will be valid unless it is in writing and
initialled by all parties.
13. Notice
Any notice required or permitted to be given hereunder must be in writing and
will be sufficiently given or made if delivered or sent by registered mail to
the address of the parties set out on page 1 hereof. Any notice so given will be
deemed to have been given and to have been received on the day of delivery if it
is a business day and otherwise on the next succeeding business day or, if
mailed, on the third business day following the mailing thereof (excluding each
day during which there exists any interruption of postal services due to strike,
lockout or other cause). Addresses for notice may be changed by giving notice in
accordance with this section.
14. Non-waiver
No failure or delay by you or the Company in exercising any power or right under
this Agreement will operate as a waiver of such power or right. Any consent or
waiver by you or by the Company to any breach or default under this Agreement
will be effective only in the specific instance and for the specific purpose for
which it was given.
15. Survival of Terms
Except for subsections 2(a) to 2(e), the provisions of this Agreement will
survive the termination of your employment.
-8-
<PAGE>
16. Further Assistance
The parties will execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
17. Time
Time is of the essence of this Agreement.
18. Governing Laws
This Agreement will be construed in accordance with and governed by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
19. Counterparts
This Agreement may be executed in two or more counterparts, each of which will
be deemed to be an original and all of which will constitute one Agreement.
MINDFULEYE.COM SYSTEMS INC.
By: -------------------------------
Name: ------------------------------
Title: -----------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ______, 2000.
- ------------------------------------
o
-9-
<PAGE>
SCHEDULE A
Employee's Name o
Commencement Date: o
Position: o
Duties & Responsibilities o
Salary: o
Stock Options: o
Paid Vacation: o
Other Benefits (if any) o
MINDFULEYE.COM SYSTEMS INC.
By: -------------------------------
Name: ------------------------------
Title: -----------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ______, 2000.
- ------------------------------------
o
EXHIBIT 6.2
Lease
BY THIS dated 28th day of February, 2000.
Marine Building Holdings Ltd. and OMERS Realty Corporation, collectively
as LANDLORD upon and in consideration of the covenants, terms, and conditions
contained in the LEASE and which are implied, hereby demises and leases to
MindfulEye.com Systems Inc.
as TENANT those PREMISES outlined in red on Schedule 1 attached, in the BUILDING
known as the Marine Building constructed (or being constructed -- this portion
struck out of original) on LAND described as:
Parcel Identifier 002-512-602, Lot "1", Except Part in Plan 18529, Block 1,
District Lot 185, Plan 92, and
Parcel Identifier 002-512-629, Lot "2", Except Part in Plan 18529, Block 1,
District Lot 185, Plan 92,
- agreed to contain a Rentable Area of 4,920 square feet/metres on the
third (3rd) floor(s) of said BUILDING
- FOR A term of five (5) years
- from a COMMENCEMENT DATE of April 1, 2000
- and expiring on March 31, 2005
- for an ANNUAL RENT of
- $16.00 per rentable square foot per annum net for the period April 1,
2000 to March 31, 2002
- $18.00 per rentable square foot per annum net for the period April 1,
2002 to March 31, 2005
- [with review and adjustment (if any) at the commencement of the
years of the TERM] - this portion struck out of original
- and other payments in accordance with the LEASE
Use of Premises
The Premises shall be used and occupied only as business offices for the
business of Tenant as initially conducted in the Premises, or for such other
purpose as Landlord may specifically authorize in writing.
The following appendices are attached to and form part of the Lease:
Schedule 1 - Plan of Premises
Schedule 2 - Project Supplement with definitions.
ARTICLE 1
GRANT OF LEASE
1.01 Demise
Landlord leases the Premises to Tenant, and Tenant leases the Premises from
Landlord, to have and to hold during the Term, subject to the provisions hereof
<PAGE>
-2-
1.02 Covenants
Landlord covenants to keep, observe and perform all of the terms and conditions
to be kept, observed and performed by Landlord under this Lease. Tenant
covenants to pay the Rent when due, and to keep, observe and perform all of the
terms and conditions to be kept, observed and performed by Tenant under this
Lease.
1.03 Quiet Enjoyment
Landlord shall warrant and defend Tenant in the quiet enjoyment and possession
of the Premises during the Term, subject to the provisions of this Lease.
1.04 Use of Common Areas
During Normal Business Hours, Tenant, its employees, customers, invitees and
others requiring communication with Tenant in connection with the operation of
its business shall have the use in common with others entitled thereto of the
Common Areas, provided that the Common Areas shall at all times be subject to
the exclusive control of Landlord.
1.05 Use of Premises
The Premises shall be used and occupied for the use and purpose identified on
page 1 of this Lease, or for such other purpose as Landlord may specifically
authorize in writing.
1.06 Consent
Unless otherwise provided, whenever consent or approval of Landlord or Tenant is
required under the provisions of this Lease, such consent or approval shall not
be unreasonably withheld or delayed.
1.07 Compliance with Laws
Tenant shall at all times, use and occupy the Premises in accordance and
compliance with all laws, by-laws, regulations, directions and orders of every
governmental authority having jurisdiction and with all requirements of the
insurers of the Project and their advisory organizations, and Tenant's insurers,
and shall not commit, suffer or permit any act or omission which shall breach
any thereof. If any such governmental authorities or insurers or insurers'
advisory organizations require changes, Tenant shall make same at its own
expense, but subject to such approvals of Landlord as are required pursuant to
the provisions of this Lease.
1.08 Nuisance
Tenant shall not cause or maintain any nuisance in or about the Premises, and
shall keep the Premises free of debris, rodents, vermin and anything of a
dangerous, noxious or offensive nature, or which could create a fire hazard
(through undue load on electrical circuits or otherwise) or cause undue
vibration, heat or noise.
1.09 Abandonment
Tenant shall not vacate or abandon the Premises at any time during the Term.
ARTICLE 2
RENT
2.01 Payment of Rent
(a) Tenant acknowledges and agrees that the Annual Rent shall be
completely net to Landlord, and Tenant shall, to the complete
indemnification of Landlord, pay all costs and expenses relating or
attributable to the Premises and the conduct of business therein,
without limitation including Tenant's Proportionate Share of Operating
Costs for the Building, and Other Charges.
(b) All amounts payable by Tenant to Landlord under this Lease (without
limitation including Tenant's Proportionate Share of Operating Costs
for the Building, and Other Charges) shall constitute and be deemed to
be Rent and shall be payable and recoverable as Rent, and shall be
payable, when due, in legal tender of Canada, without deduction or
rights of set-off, and without demand or, where so specified, upon
notice or invoice, at such place as Landlord from time to time may
designate, and Landlord shall have all rights against Tenant for
default in any payment as in the case of arrears of Annual Rent.
Tenant's obligation to pay Rent shall survive the expiration or
earlier termination of this Lease, until fully discharged.
(c) Tenant shall make payments required under this Lease within the period
of time specified, or if a time period is not specified, within a
reasonable period of time.
<PAGE>
-3-
2.02 Early Occupancy
If Tenant begins to conduct business in any portion of the Premises before the
Commencement Date, Tenant shall not be obliged to pay to Landlord on the
Commencement Date a rental in respect of the portion so used for the period from
the date Tenant begins to conduct business therein to the Commencement Date,
[which rental shall be that proportion of Annual Rent for the first year of the
Term which the number of days in such period bears to 365, and which the area of
the portion so used bears to the area of the Premises. The - this portion struck
out of original] All other terms and provisions of this Lease shall be
applicable during such period. [ , without limitation including that Tenant
shall, mutatis mutandis proportionately contribute to Operating Costs for the
Building during such period. - this portion struck out of original]
2.03 Delayed Occupancy
If Landlord is delayed in giving possession of the Premises to Tenant, then,
unless such delay is principally caused by or attributable to Tenant, its
servants, agents or contractors, Tenant shall take possession of the Premises on
the date when Landlord delivers such possession, and this Lease shall commence
on the first day of the month next following and shall thenceforth ensue until
the date of expiration aforesaid. This Lease shall not be void or voidable nor
shall Landlord be liable to Tenant for any loss or damage resulting from any
delay in delivering such possession to Tenant, but no Rent shall be payable by
Tenant for the period prior to such deferred commencement date except pursuant
to Section 2.02. If the delay is principally caused by or attributable to
Tenant, its servants, agents or contractors, then Tenant shall pay Rent pursuant
to the provisions of this Lease from the Commencement Date without reduction,
abatement or deferral.
2.04 Payment of Annual Rent
Annual Rent shall be paid to Landlord in equal monthly instalments payable in
advance on the first day of each calendar month, with the first instalment to be
paid on the Commencement Date.
2.05 Payment of Operating Costs
(a) Tenant shall pay its Proportionate Share of Operating Costs for the
Building as next provided.
(b) On or about the Commencement Date, and the beginning of each Fiscal
Year thereafter, Landlord shall compute and deliver to Tenant a bona
fide estimate of Tenant's Proportionate Share of Operating Costs for
the Building for the appropriate period and, without further notice.
Tenant shall pay to Landlord equal monthly instalments of such
estimate of Tenant's Proportionate Share of Operating Costs for the
Building simultaneously with instalments of Annual Rent during such
period.
(c) Unless delayed by causes beyond Landlord's reasonable control,
Landlord shall deliver to Tenant within 120 days after the end of each
Fiscal Year a statement certified to be correct by Landlord, (the
"Statement") setting out in reasonable detail the amount of Operating
Costs for the Building for such Fiscal Year and Tenant's Proportionate
Share thereof. If the aggregate of instalments of Tenant's
Proportionate Share of Operating Costs for the Building actually paid
by Tenant to Landlord during such Fiscal Year differs from the amount
of Tenant's Proportionate Share of Operating Costs for the Building
for such Fiscal Year in accordance with the Statement, Tenant shall
pay or Landlord shall credit the difference without interest within 30
days after the date of delivery of the Statement.
(d) If Tenant disagrees with the accuracy of the Operating Costs for the
Building or Tenant's Proportionate Share thereof as set forth in the
Statement, Tenant shall nevertheless make payment in accordance with
the Statement, but Tenant shall, within 30 days of delivery of the
Statement, advise Landlord thereof and the disagreement shall
immediately be referred by Landlord for prompt decision by a public
accountant, architect, insurance broker or other professional
consultant who in the opinion of Landlord, acting reasonably, is best
qualified to assess and determine the matter and who shall be deemed
to be acting as an expert(s) and not as an arbitrator(s) and whose
determination shall be final and binding on Landlord and Tenant,
unless within 21 days of the determination either party elects to
submit the matter to arbitration pursuant to applicable law. The cost
of the expert(s) and of any arbitration shall be borne equally by
Landlord and Tenant. Any adjustment required to any previous payment
made by Tenant or Landlord by reason of any final decision shall be
made, without interest, within 30 days thereof.
(e) Neither party may claim a re-adjustment in respect of Operating Costs
for a period if based upon any error or computation or allocation
except by notice delivered to the other party within 6 months after
the date of delivery of the Statement.
(f) If the Term expires or the Lease is otherwise terminated on a date
other than the last day of the Fiscal Year, Tenant's Proportionate
Share of Operating Costs for the Building shall be adjusted on a per
diem basis, based on and calculated at the time of delivery of the
next Statement after such date. If the aggregate of instalments of
Operating Costs actually paid by Tenant to Landlord during the period
up to and including the expiry or earlier termination date differs
from the amount of Tenant's Proportionate Share of Operating Costs for
the Building payable for the period up to such date, Tenant shall pay
or Landlord shall refund the difference without interest within 30
days after the date of delivery of the Statement.
2.06 Payment of Other Charges
Tenant shall make payments to Landlord of Other Charges which pursuant hereto
are the responsibility of Tenant.
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ARTICLE 3
OPERATION OF THE PROJECT
3.01 Standards
During the Term, Landlord shall operate and maintain the Project in accordance
with all applicable laws and regulations, and with high standards of efficient
and prudent property management from time to time prevailing for buildings in a
project similar in use, type, and location.
3.02 Services to Premises
Landlord shall (with participation by Tenant by payment of Tenant's
Proportionate Share of Operating Costs for the Building) provide in the
Premises:
(a) heat, ventilation and air conditioning as required for the comfortable
use and occupancy of the Premises during Normal Business Hours;
(b) janitorial services, including window washing, but excluding
dry-cleaning of drapes and shampooing of carpets, to keep the Premises
in a clean and tidy condition, provided that Tenant shall leave the
Premises in a reasonably tidy condition at the end of each business
day;
(c) replacement of building standard fluorescent tubes, light bulbs,
ballasts, and starters as required from time to time as a result of
normal usage; and
(d) electric power for normal lighting and small business office
equipment.
3.03 Building Services
Landlord shall (with participation by Tenant by payment of Tenant's
Proportionate Share of Operating Costs for the Building) provide in the Project:
(a) hot and cold or tempered running water and necessary supplies in
public washrooms sufficient for the normal use thereof;
(b) elevator or escalator service for access to and egress from the
Premises;
(c) heat, ventilation, air conditioning, lighting, electric power, and
janitorial services in the Common Areas; and
(d) a general directory board, under the exclusive control of Landlord, on
which Tenant shall be entitled to have its name shown.
3.04 Maintenance, Repair and Replacement
Landlord shall (with participation by Tenant by payment of Tenant's
Proportionate Share of Operating Costs for the Building) operate, maintain,
repair and replace the systems, facilities, and equipment necessary for the
proper operation of the Project and for the provision of services under this
Article (except as such may be installed by or be the property or responsibility
of Tenant), and shall be responsible for and shall expeditiously maintain and
repair the foundations, structures, exteriors, and roofs of the Project and,
pursuant to Article 7, repair damage to the Project which Landlord is obligated
to insure against under this Lease, provided that:
(a) if all or part of such systems, facilities and equipment are destroyed,
damaged or impaired, Landlord shall have a reasonable time in which to
complete the necessary repair or replacement, and during that time shall be
required only to maintain such services as are reasonably possible in the
circumstances;
(b) following initial installation and any significant alteration of
partitioning or installations, proper operation of heating and air handling
systems will require balancing and rebalancing;
(c) Landlord may temporarily discontinue such services or any of them at such
times as may be necessary due to causes (except lack of funds) beyond the
reasonable control of Landlord;
(d) Landlord shall use reasonable diligence in carrying out its obligations
under this Article, but shall not be liable under any circumstances for any
consequential damage to any person or property for any failure to do so;
(e) Landlord shall not be liable for damage to any person or property,
fixtures, furnishings, or equipment or claims for loss of business, or
other loss or damage suffered or caused by failure of the mechanical or
electrical systems of the Project, or interruption in the supply of power
or other services, or malfunction of the sprinkler system, or bursting or
leaking of sewer pipes or of gas, steam, or water, or leakage of any type;
<PAGE>
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(f) no reduction or discontinuance of services under this Article shall be
construed as an eviction of Tenant, or a breach of the covenant of quiet
enjoyment, or release Tenant from any of its obligations under this Lease;
(g) nothing contained herein shall derogate from the provisions of Article 7;
and
(h) Landlord shall be deemed to have observed and performed the terms and
conditions to be performed by Landlord under this Lease, including those
relating to the provision of utilities and services, if in so doing it acts
in accordance with a directive, policy or request of a governmental or
quasi-governmental authority serving the public interest in the fields of
energy, environment, conservation or security.
3.05 Additional Services
(a) If from time to time requested in writing by Tenant and to the extent
that it is reasonably able to do so, Landlord shall provide in the
Premises services in addition to those set out in this Article, except
that Tenant shall be solely responsible for the cost thereof and shall
within 10 days of receipt of an invoice for any such additional
service pay Landlord therefor at such reasonable rates as Landlord may
from time to time establish.
(b) Tenant shall not, without Landlord's prior written consent, install or
permit in the Premises, equipment (including telephone equipment)
which generates sufficient heat to affect the temperature otherwise
maintained in the Premises by the air conditioning system as normally
operated. If Tenant should do so, Landlord may install supplementary
air conditioning units, facilities or services in the Premises, or
modify its air conditioning system, as may in Landlord's reasonable
opinion be required to maintain proper temperature levels, and Tenant
shall pay Landlord for all Outlays within 10 days of receipt of an
invoice therefor.
(c) If Landlord shall from time to time reasonably determine that the use
of electricity or any other utility or service in the Premises is
materially disproportionate to the use of other tenants, Landlord may
separately charge Tenant for the excess costs attributable to such
disproportionate use and Tenant shall pay Landlord the amount thereof
within 10 days of receipt of an invoice therefor. Tenant may and, at
Landlord's request, Tenant shall, install and maintain at Tenant's
expense, metering devices for checking the use of such utility or
service in the Premises.
3.06 Alterations by Landlord
Landlord may from time to time:
(a) make repairs, replacements, changes or additions to the structure,
systems, facilities and equipment in the Premises or the Project where
necessary to serve the Premises or the Project;
(b) make changes in or additions to any part of the Project not in or
forming part of the Premises; and
(c) change or alter the location of the Common Areas;
provided that in doing so, Landlord shall not disturb or interfere with Tenant's
use of the Premises and operation of its business any more than is reasonably
necessary in the circumstances and shall repair any damage to the Premises
caused thereby.
3.07 Access by Landlord
Tenant shall permit Landlord to enter the Premises outside Normal Business
Hours, and during Normal Business Hours where such entry will not unreasonably
disturb or interfere with Tenant's use of the Premises and operation of its
business, to examine, inspect, and show the Premises to persons wishing to lease
them, to provide services or make repairs, replacements, changes or alterations
as set out in this Lease, and to take such steps as Landlord may deem necessary
for the safety, improvement or preservation of the Premises or the Project.
Landlord shall, whenever possible, consult with or give reasonable notice to
Tenant prior to such entry, and shall use its best efforts to observe security
and safety measures reasonably requested by Tenant from time to time, but such
entry shall not be construed as an eviction of Tenant, or a breach of the
covenant of quiet enjoyment, and shall not release Tenant from any of its
obligations under this Lease.
3.08 Name of Building
Landlord may determine and specify one or more names, numbers, or like
designations, by which the Building or Project (or any component thereof) shall
be known and identified. Landlord shall have the right after 30 days' notice to
Tenant, to change any such name, number or designation of the Building or
Project, without liability to Tenant.
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ARTICLE 4
MAINTENANCE OF THE PREMISES
4.01 Condition of Premises
Tenant shall (subject to fair wear and tear, provided that nothing herein shall
require Landlord to remedy such fair wear and tear) maintain the Premises and
all improvements therein in good order and condition, including, without
limitation:
(a) repainting and redecorating the Premises and dry-cleaning drapes and
shampooing of carpets at reasonable intervals as needed; and
(b) making repairs, replacements and alterations as needed.
4.02 Failure to Maintain Premises
If Tenant fails to perform any obligation under this Article, then on not less
than 10 days' notice to Tenant, (except in the event of an emergency as
determined by Landlord, acting reasonably, in which case entry may be made
immediately) Landlord may enter the Premises and perform or cause performance of
such obligation without liability to Tenant for any loss or damage to Tenant
thereby occasioned, and Tenant shall pay Landlord for all Outlays plus 20% of
such for overhead and supervision, within 10 days of receipt of an invoice
therefor, and the entry and performance of such obligations by Landlord shall
not be construed as an eviction of Tenant, or a breach of the covenant of quiet
enjoyment, and shall not release Tenant from any of its obligations under this
Lease. Tenant shall not be entitled to any compensation for any inconvenience,
nuisance or discomfort occasioned by such entry.
4.03 Alterations by Tenant
(a) Tenant may from time to time at its own expense make changes,
additions and improvements in the Premises to better adapt the
Premises to its business, provided that any such change, addition or
improvement shall:
(i) comply with the requirements of any governmental or
quasi-governmental authority having jurisdiction;
(ii) be made only with the prior written consent of Landlord;
(iii) be equal or exceed the then current building standard for
the Project as established by Landlord; and
(iv) be carried out only by persons selected by Tenant and
approved in writing by Landlord, who shall, if required by
Landlord, deliver to Landlord before commencement of the
work, an authorized building permit from the applicable
municipality, performance and payment bonds, and proof of
workers' compensation and public liability and property
damage insurance coverage, with Landlord named as an
additional insured, with companies and in amounts and with
coverages and in form reasonably satisfactory to Landlord,
and which shall remain in effect during the entire period in
which the work will be carried out and for a reasonable
period of time thereafter.
(b) Subject to compliance with such reasonable rules and regulations as
Landlord may make from time to time, Tenant and its contractors shall
have access to the Building and the Premises for purposes of
undertaking the work approved pursuant to sub-section (a), provided
such work shall be undertaken and completed with all reasonable
diligence; and such work shall, save as Landlord acting reasonably may
otherwise require or direct that same be done by Landlord's
contractors at Tenant's expense, be done by contractors selected by
Tenant, provided that there shall be no conflict caused thereby with
any union or other contract to which Landlord or its contractor(s) may
be a party, and in the event that Tenant's contractors or workmen
cause such conflict Tenant shall forthwith remove them from the
Project.
(c) It is understood and agreed that Landlord shall have no responsibility
or liability whatsoever with respect to any such work or attendant
materials left or installed in the Project, and shall be reimbursed
for any Outlays, and for any delays caused Landlord or its
contractor(s) directly or indirectly as a result thereof. Tenant shall
be solely responsible for the removal of any and all construction
refuse or debris resulting from such work with such removal to occur
only after Normal Business Hours.
(d) Any increase in Taxes, fire or casualty insurance premiums for the
Project attributable to such change, addition or improvement shall be
borne by Tenant. Tenant shall promptly repair at its own expense any
damage to the Premises or the Project, without limitation including
the property of others, resulting from such changes, additions or
improvements.
4.04 Builders' Liens
Tenant shall pay before delinquency all costs for work done, without limitation
including materials supplied, or caused to be done by Tenant in the Premises
which could result in any lien or encumbrance on Landlord's interest in the
Project or any part thereof, and shall keep the title to the Project and every
part thereof free and clear of any lien, certificate of lis pendens or
encumbrance in respect of such work or material, and shall
<PAGE>
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indemnify and hold harmless Landlord against all Outlays. Tenant shall
immediately notify Landlord of any charge, lien, claim of lien or other action
of which it has or reasonably should have knowledge and which affects the title
to the Project or any part thereof, and shall cause the same to be removed
within 15 days (or such additional time as Landlord may allow in writing),
failing which Landlord may take such action as Landlord deems necessary to
remove the same and Tenant shall pay Landlord for all Outlays within 10 days of
receipt of an invoice therefor.
4.05 Signs
All signs shall be at Tenant's expense and any sign, or lettering or design of
Tenant which is visible from the exterior of the Premises shall be subject to
approval by Landlord, and shall conform to the uniform pattern of identification
or signs for tenants in the Project as prescribed by Landlord. Tenant shall not
inscribe or affix any sign, lettering or design in the Premises or Project which
is visible from the exterior of the Project.
4.06 Tenant's Property
(a) Tenant may install in the Premises its usual trade fixtures and
personal property in a proper manner, provided that no such
installation shall interfere with or damage the mechanical or
electrical systems or the structure of the Building. If Tenant is not
then in default hereunder. Tenant's Property installed in the Premises
by Tenant may be removed from the Premises
(i) from time to time in the ordinary course of Tenant's
business or in the course of reconstruction, renovation, or
alteration of the Premises by Tenant, and
(ii) during a reasonable period prior to the expiration of the
Term, provided that Tenant shall promptly repair at its own
expense any damage to the Premises or the Project resulting
from such installation or removal.
(b) For purposes of this Lease the expression "Tenant's Property" (whether
owned or leased by Tenant and whether or not affixed to the Premises)
shall mean personal property, trade fixtures and fittings, furniture
and furnishings, supplies, inventories and merchandise, and equipment
and systems from time to time installed, provided and used by Tenant
in the Premises for the conduct of its business.
4.07 Leasehold Improvements
(a) Provided that nothing in this Section shall inhibit Tenant's rights
pursuant to Section 4.03 to make alterations or pursuant to Section
4.06 to install and replace Tenant's Property, all Leasehold
Improvements in or about the Premises shall upon the completion
thereof, whether by or at the instance or cost of Landlord or Tenant,
forthwith and without more be and become the absolute property of
Landlord without compensation therefor, but without Landlord having or
thereby accepting any responsibility in respect of the maintenance,
repair, replacement or removal thereof (other than pursuant to
Articles 6 and 7 hereof) which shall be Tenant's responsibility.
(b) For purposes of this Lease the expression "Leasehold Improvements"
shall include, without limitation, all improvements, installations,
alterations and additions from time to time made, erected or installed
in the Building by or for or on behalf of Tenant, or any previous or
other occupant of the Premises including, without limitation, all
partitioning, doors and hardware, mechanical, electrical and utility
installations, light fixtures, floor and window coverings,
decorations, finishes and fixtures, howsoever affixed and whether
movable or immovable, excepting only Tenant's Property.
ARTICLE 5
TAXES
5.01 Landlord's Taxes
Landlord shall (with participation by Tenant by payment of Tenant's
Proportionate Share of Operating Costs for the Building) pay Taxes, (except any
payable by Tenant) before delinquency Landlord may to the fullest extent
permitted by law and provided it diligently prosecutes any contest or appeal of
Taxes, defer payment of Taxes or defer compliance with any statute, by-law, or
regulation in connection with the levying and payment of Taxes.
5.02 Allocation
If there are not separate assessments of Taxes for the Premises or Building,
Landlord shall allocate Taxes to the Building and any other of the Project
Components covered by or included in an assessment covering the Land or the
Building, on an equitable basis having regard, without limitation, to the
various uses and values of the subject Project Components, any separate
assessments that may have been rendered by the taxing authority, and any
assessment principles known, or prescribed by any lawful taxing authority.
<PAGE>
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5.03 Tenant's Taxes
Tenant shall pay before delinquency every tax, assessment, license fee, excise
fee and other charge (excluding income tax), however described, which is
imposed, levied, assessed or charged by any governmental or quasi- governmental
authority having jurisdiction and which is payable in respect of the Term or
upon or on account of:
(a) separate assessments of or in respect of the Premises;
(b) operations at, occupancy of, or conduct of business in or from the
Premises by or with the knowledge of Tenant;
(c) Tenant's Property or fixtures or personal property in the Premises
which do not belong to Landlord;
(d) the Rent paid or payable by Tenant to Landlord for the Premises or for
the use and occupancy of all or any part thereof; and (e) any tax or
duty imposed upon Landlord which is measured by or based in whole or
in part directly upon the Rent payable under this Lease whether
existing at the date hereof or hereafter imposed by any governmental
authority including, without limitation, goods and services tax, value
added tax, business transfer tax, retail sales tax, federal sales tax,
excise taxes or duties or any tax similar to the foregoing.
provided that if Landlord so elects by notice to Tenant, Tenant shall add any
amounts payable under this Section to the monthly instalments of Annual Rent
payable and Landlord shall remit such amounts to the appropriate authorities.
5.04 Right to Contest
Tenant shall have the right to contest in good faith the validity or amount of
any tax, assessment, licence fee, excise fee or other charge which it is
responsible to pay under Section 5.03 or 5.05, provided that no contest by
Tenant may involve the possibility of forfeiture, sale or disturbance of
Landlord's interest in the Premises or Project and that upon the final
determination of any contest by Tenant, Tenant shall immediately pay and satisfy
the amount found to be due, together with any costs, penalties and interest.
5.05 Additional Taxes
If by reason of any act or election of Tenant, or any subtenant, licensee or
occupant of the Premises (except Landlord after election by Landlord of any
right to sublease pursuant to this Lease), the Project, Building or Premises or
any part thereof shall be assessed an increased rate or assessment, Tenant shall
pay before delinquency the amount by which the resulting Taxes exceed those
which would otherwise have been payable.
ARTICLE 6
INSURANCE
6.01 Landlord's Insurance
(a) During the Term, Landlord shall maintain (with participation by Tenant
by payment of Tenant's Proportion-ate Share of Operating Costs for the
Building) insurance on the Project and all property and interest of
Landlord in the Project, including, without limitation, Leasehold
Improvements, but excluding Tenant's Property, with coverage and in
amounts and in respect of risks which are from time to time acceptable
to a prudent owner of a project similar in age, use, type, and
location and from time to time insurable at reasonable premiums. When
obtainable without payment of additional premium (or if Tenant shall
pay any such additional premium) all policies for such insurance shall
waive any right of subrogation against Tenant and its officers,
directors, partners and employees. Landlord shall review its insurance
in consultation with an independent, professional insurance broker not
less frequently than every three years and may on the recommendation
of such insurance broker effect insurance subject to reasonable
deductibles to be borne by the insured in the event of a claim
arising. Nothing herein shall preclude Landlord effecting so-called
"all risks" property insurance, or effecting blanket insurance in
respect of the Project and any other properties of which Landlord is
the owner or tenant, or in which Landlord has an insurable interest.
Landlord shall allocate (in circumstances where the insurer or the
insurer's agent fails to do so) the cost of premiums to the Building
and any other of the Project Components (and such other properties as
may be appropriate), covered by the insurance policy on an equitable
basis having regard, without limitation, to the various uses and
values of the subject Project Components, and any other properties so
included, and the recommendation of Landlord's insurance broker.
(b) Provided that:
(i) if in the opinion of Landlord any Leasehold Improvements do
not constitute a finishing of the Premises in a manner which
would have general utility but are specially or peculiarly
adapted for Tenant's use, or if the insuring of any of the
Leasehold Improvements in the Premises involves, or would in
the opinion of Landlord's insurance broker involve a premium
exceeding that for the insuring of Leasehold Improvements
normal in the Building, or any special stipulations or
conditions of a policy of insurance are imposed or involved
in the
<PAGE>
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insurance thereof, Landlord may from time to time elect, by
written notice to Tenant, not to insure or cause to be
insured any such Leasehold Improvements, in which event
Landlord shall not be required to insure such Leasehold
Improvements;
(ii) if from time to time the insuring of the Leasehold
Improvements in the Premises (other than those which
Landlord may have elected not to insure or cause to be
insured as aforesaid) requires a premium or an allocated
part of a premium, as established either by the insurer or
by the estimate of Landlord's insurance broker, which
exceeds the average premium cost per unit of area for
insuring Leasehold Improvements normal to the Building,
Landlord may from time to time charge the excess premium
cost to Tenant and Tenant shall make prompt payment therefor
upon receipt of invoices from Landlord.
(c) Upon the request of Tenant from time to time Landlord will furnish a
statement as to the perils in respect of which and the amounts to
which the Building and the Leasehold Improvements in the Premises have
been insured, and Tenant shall be entitled at reasonable times upon
reasonable notice to Landlord to inspect copies of the relevant
portions of all policies of insurance in effect and a copy of any
relevant opinions of Landlord's insurance broker.
6.02 Tenant's Insurance
During the Term Tenant shall maintain at its own expense:
(a) comprehensive general public liability insurance (including bodily
injury, death and property damage) on an occurrence basis with respect
to the business carried on or in or from the Premises and Tenant's use
and occupancy thereof, which insurance shall contain a cross liability
clause, and include Landlord as an additional insured and shall
protect Landlord in respect of claims by or through Tenant as if
Landlord was separately insured; and shall be for not less than
$2,000,000 inclusive limits for personal injury or property damage in
respect of each occurrence, or such higher limits as Landlord's
insurance broker may reasonably require from time to time;
(b) insurance in respect of fire and other perils as are from time to time
defined in the usual endorsement covering Tenant's Property and such
Leasehold Improvements (if any) as Landlord may have elected not to
insure, which insurance shall include Landlord as a named insured as
its interests may appear with respect to insured Leasehold
Improvements and provide that any proceeds recoverable in the event of
loss to Leasehold Improvements shall be payable to Landlord (but
Landlord agrees to make available such proceeds towards the repair or
replacement of the insured property if this Lease is not terminated
pursuant to any other provision hereof);
(c) water damage and such other insurance of the Premises, its contents
and appurtenances, and the business conducted as Tenant deems
necessary without limitation in respect of damage or deprivation
contemplated in Section 3.04 (e), or as would, in the opinion of
Landlord acting reasonably, be carried by a prudent operator of
premises similar in use, type, and location.
All such policies of insurance shall provide Landlord with 30 days' prior notice
of material amendment or cancellation and to any additional extent required
waive any right of subrogation against Landlord and its directors, officers and
employees.
6.03 Use of Proceeds
Tenant agrees that in the event of damage or destruction to the Premises covered
by insurance required to be taken out by Tenant pursuant to Section 6.02 or
otherwise, Tenant shall use the proceeds of such insurance for the purpose of
repairing or restoring such damage or destruction. In the event of damage to or
destruction of the Project or the Building entitling Landlord to terminate the
Lease pursuant to this Lease, then, if the Premises have been damaged or
destroyed, Tenant shall pay to Landlord all of its insurance proceeds relating
to any Leasehold Improvements in the Premises which Tenant was required to
insure and if the Premises have not been damaged or destroyed, Tenant shall
deliver to Landlord, in accordance with the provisions of the Lease, all
Leasehold Improvements and the Premises.
6.04 Landlord May Place Insurance
If requested by Landlord, Tenant shall from time to time promptly deliver to
Landlord evidence that insurance pursuant to Section 6.02 is in effect. If
Tenant fails to take out or to keep in force any insurance referred to in
Section 6.02, or should any such insurance not be approved by either Landlord or
a mortgagee, and Tenant shall not diligently rectify the deficiency within 2
business days after notice by Landlord to Tenant (stating, if Landlord or the
mortgagee does not approve of such insurance, the reasons therefor), Landlord
shall have the right, without assuming any obligation in connection therewith,
to effect such insurance at the sole cost of Tenant and Tenant shall pay
Landlord for all Outlays within 10 days of receipt of an invoice therefor.
6.05 Increase in Insurance Premiums
Tenant shall not permit, keep, use, sell or offer for sale in or upon the
Premises or Project any article which may be prohibited by any fire insurance
policy in force from time to time covering the Premises or the Project. If (a)
the occupancy of the Premises, (b) the conduct of business in the Premises, or
(c) any acts or omissions of Tenant in the Project or any part thereof, causes
or results in any increase in premiums for the insurance carried from time to
time by Landlord with respect to the Project, Tenant shall pay Landlord for any
such increase within 10 days of
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receipt of an invoice for such additional premiums from Landlord. In determining
whether increased premiums are caused by or result from the use or occupancy of
the Premises, a schedule issued by the organization computing the insurance rate
on the Project showing the various components of such rate, shall be conclusive
evidence of the several items and charges which make up such rate. Tenant shall
comply promptly with all requirements of the insurer's advisory organizations
now or hereafter in effect or of the insurers pertaining to or affecting the
Premises or the Project.
6.06 Cancellation of Insurance
If any insurance policy upon the Project or any part thereof shall be cancelled
or shall be threatened by the insurer to be cancelled, or the coverage
thereunder reduced in any way by the insurer by reason of the use or occupancy
of or any article, material or equipment brought upon or stored or maintained in
the Premises or any part thereof by Tenant or by any assignee or subtenant of
Tenant, or by anyone permitted by Tenant to be upon the Premises, (other than
Landlord or an agent, representative or designate of Landlord), and if Tenant
fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within 2 business days after notice
thereof by Landlord, Landlord may, at its option, either (a) re-enter and take
possession of the Premises forthwith by leaving upon the Premises a notice in
writing of its intention so to do and thereupon Landlord shall have the same
rights and remedies as are contained in this Lease for events of default, or (b)
enter upon the Premises and remedy the condition giving rise to such
cancellation, threatened cancellation or reduction, without limitation or
restriction including removal of any offending article, and
Tenant shall pay Landlord for all Outlays within 10 days of receipt of an
invoice therefor. Landlord shall not be liable for any damage or injury caused
to any property of Tenant or of others located on the Premises as a result of
such entry. Subject to this Section, any such entry by Landlord shall not be
construed as an eviction of Tenant or a breach of the covenant of quiet
enjoyment and shall not release Tenant from any of its obligations under this
Lease.
ARTICLE 7
DAMAGE BY FIRE
7.01 Limited Damage to Premises
If all or part of the Premises are rendered untenantable by damage from fire or
other casualty which, in the reasonable opinion of the Architect, can be
substantially repaired under applicable laws and governmental regulations within
180 days from the date of such casualty (employing normal construction methods
without overtime or other premium), Landlord shall forthwith at its expense
repair such damage exclusive of damage to Tenant's Property.
7.02 Major Damage to Premises
If all or part of the Premises are rendered untenantable by damage from fire or
other casualty whether to the Premises, the Building, or the Project which, in
the reasonable opinion of the Architect, cannot be substantially repaired under
applicable laws and governmental regulations within 180 days from the date of
such casualty (employing normal construction methods without overtime or other
premium), then either Landlord or Tenant may elect to terminate this Lease as of
the date of such casualty by notice delivered to the other not more than 10
working days after receipt of the Architect's opinion, failing which, Landlord
shall forthwith at its expense, repair such damage other than damage to Tenant's
Property.
7.03 Abatement
The Rent payable by Tenant hereunder shall be proportionately reduced to the
extent that the Premises are untenantable by Tenant for its business, from the
date of such casualty until the earlier of:
(a) 5 days after completion by Landlord of the repairs to the Premises (or
part thereof rendered untenantable) or the end of such extended period
as in the opinion of the Architect, Tenant, acting diligently and
expeditiously, would reasonably require to repair other improvements
which Tenant may have installed (to the extent same may have been
damaged) or,
(b) Tenant again uses the Premises (or part thereof rendered untenantable)
in its business;
provided however that Rent payable by Tenant hereunder shall not be reduced if
the damage is caused by any act or omission of Tenant, its agents, servants,
employees or any other person entering upon the Premises under express or
implied invitation of Tenant.
7.04 Major Damage to Building
If all or a part (whether or not including the Premises) of the Building or the
Project is rendered untenantable by damage from fire or other casualty to such a
material or substantial extent that, in the opinion of Landlord, the Building
should be totally or partially demolished, whether or not to be reconstructed in
whole or in part, Landlord may elect to terminate this Lease as of the date of
such casualty (or on the date of notice if the Premises are unaffected by such
casualty) by notice delivered to Tenant not more than 60 days after the date of
such casualty and thereupon Tenant shall have 60 days within which to vacate the
Premises.
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7.05 Reconstruction by Landlord
If all or any part of the Premises are at any time rendered untenantable as set
out in this Article, and neither Landlord or Tenant elect to terminate this
Lease in accordance with the rights granted herein, Landlord shall, following
such destruction or damage, commence diligently to reconstruct, rebuild or
repair that part of the Project or the Premises or the Building which was
damaged or destroyed, but only to the extent required above. If Landlord elects
to repair, reconstruct or rebuild, Landlord may repair, reconstruct or rebuild
according to plans and specifications and working drawings other than those used
in the original construction of the Project. The Premises, as repaired or
re-built, will have reasonably similar facilities and services to those in the
Premises prior to the damage or destruction having regard, however, to the age
of the Project at such time. 7.06 Architect's Certificate
Whenever for any purpose of this Article an opinion or certificate of the
Architect is required, the same shall be given in writing to both Landlord and
Tenant. Landlord covenants that it shall request such opinion or certificate
promptly following the event which gives need for same and shall cause the
Architect to act diligently and expeditiously. The certificate of the Architect
shall bind the parties:
(a) whether or not the Premises are untenantable and the extent of such
untenantability; and
(b) the time required for and the date upon which the Landlord's work or
Tenant's work of reconstruction or repair is commenced or completed or
substantially completed and the date when the Premises are rendered
tenantable.
7.07 Limitation of Landlord's Liability
Except as specifically provided in this Article, there shall be no reduction or
abatement of Rent and Landlord shall have no liability to Tenant by reason of
any injury to or interference with Tenant's business or property arising from
fire or other casualty, howsoever caused, or from the making of any repairs
resulting therefrom in or to any portion of the Building, Project, or Premises.
ARTICLE 8
INJURY TO PERSON OR PROPERTY
8.01 Indemnity of Landlord
(a) Tenant agrees that Landlord shall not be liable for any bodily injury
or death of, or loss or damage to any property belonging to, Tenant or
its employees, contractors, invitees or licensees or any other person
in, on or about the Project unless resulting from the actual fault,
privity or negligence of Landlord, but in no event shall Landlord be
liable:
(i) for any damage caused or occasioned through smoke or water,
or by steam, gas, rain or snow which may leak into, issue or
flow from any part of the Project or from the pipes or
plumbing works, without limitation including the sprinkler
system, therein or from any other place or quarter or for
any damage caused by or attributable to the condition or
arrangement of any electric or other wiring or of sprinkler
heads or for any damage caused by anything done or omitted
by any other tenant;
(ii) without limitation for any act or omission (including theft,
malfeasance or negligence) on the part of any agent,
contractor or person from time to time employed by it to
perform janitor services, security services, delivery
services, supervision or any other work in or about the
Premises or the Project; or
(iii) for loss or damage, however caused, to money, securities,
negotiable instruments, books, files, papers or other
valuables of Tenant.
(b) Tenant shall indemnify and save harmless Landlord in respect of:
(i) all claims for bodily injury or death, property damage or
other loss or damage arising from the conduct of any work by
or any act or omission of Tenant or any assignee, subtenant,
agent, employee, contractor, invitee or licensee of Tenant,
and in respect of all costs, expenses and liabilities
incurred by Landlord in connection with or arising out of
all such claims, without limitation including the expenses
of any action or proceeding pertaining thereto;
(ii) any loss, cost expense or damage suffered or incurred by
Landlord arising from any breach by Tenant of any of its
obligations under this Lease; and
(iii) all costs, expenses and Outlays that may be incurred or paid
by Landlord in enforcing against Tenant the covenants,
agreements and representations of Tenant set out in the
Lease.
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ARTICLE 9
ASSIGNMENT AND SUBLETTING BY TENANT
9.01 Conditions
(a) Except as specifically provided in this Article, Tenant shall not
assign or transfer this Lease or any interest therein, or in any way
part with possession of all or any part of the Premises, or permit all
or any part of the Premises to be used or occupied by any other
person. Any assignment , transfer, or subletting or purported
assignment, transfer, or subletting except as specifically provided
herein shall be null and void and of no force and effect and shall
render null and void as at and from the time thereof any options or
rights to renew this Lease, any options or rights to additional space
and any options or rights to parking space.
(b) If and whenever Tenant shall wish or purport or propose to assign this
Lease, or sublet all or part of the Premises, Tenant shall furnish
Landlord all such information, particulars and documents as Landlord
may reasonably require.
(c) Landlord may withhold its consent to an assignment of this Lease or a
sublease of all or part of the Premises by Tenant to any tenant in a
building which is owned or managed by Landlord or any affiliate of
Landlord; or
to an assignee, subtenant, occupier, or other person whatsoever,
inconsistent, in the opinion of Landlord, with the character of the
Building, the Project, or its other tenants; or if Section 9.04 has
not been complied with; or to any assignee or subtenant which does not
propose to occupy and use the Premises for the conduct therein of its
own business.
(d) The rights and interests of Tenant under this Lease shall not be
assignable by operation of law without Landlord's written consent,
which consent may be withheld in Landlord's discretion.
(e) No assignment, transfer, or subletting (or use or occupation of the
Premises by any other person) whether or not permitted under this
Article shall in any way release or relieve Tenant of its obligations
under this Lease unless such release or relief is specifically granted
by Landlord to Tenant in writing.
(f) Landlord's consent to an assignment, transfer, or subletting (or use
or occupation of the Premises by any other person) shall not be deemed
to be a precedent or a consent to any subsequent assignment, transfer,
subletting, use, or occupation.
(g) Landlord's expenses and Outlays incurred in the consideration of any
assignment or subletting, or any request therefor, and any
documentation attendant on any consent of Landlord, shall be borne by
Tenant.
9.02 Assignment
Tenant may not assign this Lease or in any manner transfer or convey all or any
part of its interest in this Lease or the Premises without the prior written
consent of Landlord, which shall not be unreasonably withheld if the same is:
(a) to an assignee who is a purchaser of all of the business of Tenant
that is conducted in the Premises, a parent, or wholly owned
subsidiary company of Tenant, a company which results from the
reconstruction, consolidation, amalgamation or merger of Tenant, or a
partnership in which Tenant (or not less than one-half of the
principals thereof) has a substantial interest, if such assignee shall
covenant with Landlord to observe and perform and comply with each and
every covenant, term and condition in this Lease imposed on Tenant, or
undertaken, made, or assumed by Tenant; or
(b) to any other assignee if Section 9.04 has been complied with, and
Landlord has not exercised its rights thereunder.
9.03 Subletting
Tenant, with Landlord's prior written consent and subject to Section 9.01 and
Section 9.04, may sublet all or any part of the Premises to a sublessee who will
not be inconsistent with the character of the Building, the Project, and its
other tenants.
9.04 First Offer to Landlord
If Tenant wishes to assign this Lease (except as set out in Sub-section (a) of
Section 9.02) or sublet all or any part of the Premises, Tenant shall first
offer in writing to assign or sublet (as the case may be) to Landlord for the
same period and upon the same conditions except that the last day of the Term
shall be excluded, that Landlord shall pay no consideration for the assignment
or sublease, and that every assignment or sublease to Landlord shall be without
profit to Tenant, and the Rent payable by Landlord shall be the Rent payable
hereunder apportioned pro tanto to the portion(s) of the Premises affected plus
only a reasonable allowance in respect of improvements and equipment in such
portion(s) as agreed between the parties or failing agreement determined by
arbitration pursuant to applicable law. Notwithstanding the foregoing Tenant
may, in respect of expansion space taken by Tenant to accommodate future
requirements of Tenant, sublet space, not exceeding in aggregate 30% of the area
of the Premises, without first offering such expansion space to Landlord if the
rent payable by the subtenant shall not be less than the rate then being asked
by Landlord for space in the Building, and the term of the subtenancy shall not
be more than 3 years.
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9.05 Corporate Control
If and while Tenant is a corporation whose shares are not listed on any
recognized stock exchange or which has less than 25 shareholders, in the event
at any time during the Term it is proposed that any part or all of the shares or
the voting rights of shareholders be transferred by any means whatsoever, or
treasury shares be issued, or any such transfer or issue shall occur, so as to
result in a change of the control of said corporation, such a transfer or
issuance shall be deemed to be an assignment of this Lease and all of the
provisions of this Article and all of the provisions of the Lease relating to
assignment, default and termination shall apply mutatis mutandis. Tenant shall
make available to Landlord, or its lawful representatives, all corporate books
and records of Tenant for inspection at all reasonable times in order to
ascertain whether there has been any change in the control of Tenant.
9.06 Relocation
Landlord shall have the right at any time and from time to time during the Term
to change the location of the Premises and to move Tenant to other similar space
in the Building of equivalent or better area and finish, provided that all costs
of the move shall be borne by Landlord; the Rent for such alternative space
shall be no greater than the Rent payable for the Premises hereunder; and the
provisions of this Lease shall, except where clearly inappropriate, continue in
all respects save only that such alternative space shall be substituted as the
Premises hereunder.
ARTICLE 10
SALE AND MORTGAGE BY LANDLORD
10.01 Transfers by Landlord
(a) Subject to the rights of Tenant under this Lease, nothing in this
Lease shall restrict the right of Landlord to sell, convey, assign or
otherwise deal with all or a part of the Land, Building, or the
Project.
(b) A sale, conveyance, or assignment of the Land, Building, or the
Project shall, to the extent they are assumed by the transferee or
assignee, operate to release Landlord of liability from and after the
effective date thereof upon all of the covenants, terms, and
conditions of this Lease express or implied, except as such may relate
to the period prior to such effective date, and Tenant shall to the
extent aforesaid, thereafter look solely to Landlord's successor in
interest in and to this Lease. This Lease shall not be affected by any
such sale, conveyance, or assignment, and Tenant shall attorn to
Landlord's successor in interest thereunder.
10.02 Subordination and Attornment
(a) This Lease and all the rights of Tenant hereunder are subject and
subordinate to all mortgages and deeds of trust and all instruments
similar or supplemental thereto creating a charge or encumbrance and
now or hereafter existing on or which now or hereafter may affect the
Project or the Building, and to all renewals, modifications,
consolidations, replacements and extensions thereof and to every
charge or lien resulting or arising therefrom and to every advance
made or to be made thereunder (collectively referred to herein as a
"Mortgage") and Tenant, whenever requested by Landlord or any
mortgagee, or any trustee under a deed of trust or mortgage or any
holder of a charge of encumbrance or any purchaser, their successors
or assigns (collectively referred to herein as a "Mortgagee"), shall
acknowledge the same and attorn to the Mortgagee as a tenant upon all
the terms of this Lease and give further assurances as may be
necessary.
(b) Landlord shall use all reasonable efforts to obtain an agreement from
the Mortgagee, in form binding on the Mortgagee, that so long as no
default exists nor any event has occurred which has continued to exist
for such period of time (after notice, if any, required by the Lease)
as would entitle Landlord to terminate the Lease, or would cause,
without further action of Landlord, the termination of the Lease, or
would entitle Landlord to dispossess Tenant thereunder, the Lease
shall not be terminated nor shall Tenant's use, possession, or
enjoyment of the Premises be interfered with, nor shall the leasehold
estate granted by the Lease be affected in any manner in any
foreclosure or any action or proceeding instituted under or in
connection with the Mortgage, or at law, and this Lease shall remain
effective as against the Mortgagee who shall be bound by the terms of
this Lease.
(c) Upon attornment, this Lease shall continue in full force and effect as
a direct lease between Mortgagee and Tenant, upon all of the same
covenants, terms, and conditions as set forth in this Lease except
that, after such attornment, the Mortgagee shall not be:
(i) liable for any act or omission of any prior landlord; or
(ii) subject to any offsets or defenses which Tenant might have
against any prior landlord; or
(iii) bound by any prepayment by Tenant of more than one month's
instalment of Rent, or by any previous modification of this
Lease, unless such prepayment or modification shall have
been approved in writing by the Mortgagee, or such
prepayment shall have been made pursuant to the provisions
of this Lease.
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10.03 Execution of Instruments
Tenant shall, upon request, execute and deliver any and all instruments further
evidencing such subordination and (where applicable hereunder) such attornment
notwithstanding any previous subordination, postponement or attornment that may
have been given.
10.04 Status Statement
Each of Landlord and Tenant shall at any time and from time to time, at the
expense of the party requesting the statement, forthwith after 20 days' notice
from the other, execute, acknowledge, and deliver a written statement which may
be relied upon by a prospective transferee or encumbrancee of all or any part of
the Project, or the leasehold estate created hereby, certifying:
(a) that this Lease is in full force and effect, subject only to such
modifications (if any) as may be set out in such statement;
(b) whether Tenant is in possession of the Premises and paying Rent as
provided in this Lease;
(c) the dates (if any) as to which Rent is paid; and
(d) there are not, to such party's knowledge, any uncured defaults on the
part of the other party hereunder, or specifying such defaults if any
are claimed.
ARTICLE 11
EXPROPRIATION
11.01 Definitions
In this Article,
(a) "Expropriated" means the taking of property for any public or
quasi-public use under any statute or by any right of expropriation or
condemnation or purchased under threat of such taking.
(b) "Expropriation Date" means the date on which the pertinent authority
takes possession of property which has been Expropriated.
11.02 Total Taking of Premises
If during the Term, all of the Building or the Project shall be Expropriated,
this Lease shall automatically terminate on the Expropriation Date.
11.03 Partial Taking of Premises
If any portion of the Premises (but less than the whole thereof) is
Expropriated, and no rights of termination herein conferred are timely
exercised, the Term shall terminate with respect to the portion so taken on the
Expropriation Date. In such event, the Rent payable hereunder with respect to
such portion so taken shall abate and the Rent thereafter payable with respect
to the remainder not so taken shall be adjusted pro rata by Landlord in order to
account for the resulting reduction in the area of the Premises from the
Expropriation Date.
11.04 Partial Taking of Project
If during the Term, part of the Building or the Project is Expropriated, then:
(a) if in the reasonable opinion of Landlord substantial alteration or
reconstruction of the Building is necessary or desirable as a result
thereof, whether or not the Premises are or may be affected, Landlord
shall have the right to terminate this Lease by giving the Tenant 30
days' notice of such termination; and
(b) if more than one-third of the area of the Premises is Expropriated
Landlord and Tenant shall each have the right to terminate this Lease
by giving the other 30 days' notice thereof; and
(c) if either party exercises its right of termination hereunder, this
Lease shall terminate on the date stated in the notice, provided,
however, that no termination pursuant to notice hereunder may occur
later than 90 days after the Expropriation Date.
11.05 Surrender
On any such Expropriation Date under this Article, Tenant shall immediately
surrender to Landlord the Premises or portion thereof as the case may be and all
interest therein under this Lease. Landlord may re-enter and take possession of
the Premises or such portion thereof and remove
<PAGE>
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Tenant therefrom, and the Rent shall abate on the date of termination, except
that if the Expropriation Date differs from the date of termination. Rent shall
abate on the former date in respect of the portion taken. After such
termination, and on notice from Landlord stating the Rent then owing (if any),
Tenant shall forthwith pay Landlord such Rent.
11.06 Awards
If the Project or any part thereof is Expropriated, Landlord shall be entitled
to receive and retain the entire award or consideration for the affected lands
and improvements, and Tenant shall not have, nor advance any claim against
Landlord for the value of its property or its leasehold estate or the unexpired
Term, or for costs of removal or relocation, or business interruption expense or
any other damages arising out of such taking or purchase, but nothing herein
shall give Landlord any interest in or preclude Tenant from seeking and
recovering on its own account from the pertinent authority any award or
compensation attributable to the taking or purchase of Tenant's Property,
chattels or trade fixtures, or the removal or relocation of its business and
effects, or the interruption of its business. If any award made or compensation
paid to either party specifically includes an award or amount for the other, the
party first receiving the same shall promptly account therefor to the other.
ARTICLE 12
RULE AND REGULATIONS
12.01 General Purpose
Subject to Section 12.04, Landlord may from time to time make and from time to
time modify by amendment, deletion, addition, recission or replacement, rules
and regulations for the safety, use, care, and cleanliness of the Project, the
comfort and convenience of tenants and other persons in the Project, the
preservation of good order and efficient management, and the control of Common
Areas, Delivery Facilities, Parking Facilities, Retail Concourse, any Project
Component, construction activities, movement in and out of the Project, delivery
and shipping, and other services and functions.
12.02 Loading and Delivery
(a) Landlord may from time to time pursuant to this Article make and
modify regulations for the orderly and efficient operation of the
Delivery Facilities, and may require the payment of reasonable charges
for storage and for delivery services provided by Landlord.
(b) The delivery and shipping of merchandise, supplies, fixtures, and
other materials or goods of whatsoever nature to or from the Premises
and all loading, unloading and handling thereof shall in any event be
done only at such times, in such areas, by such means, and through
such elevators, entrances, malls and corridors, as are designated by
Landlord.
(c) Landlord accepts no liability and is hereby relieved and released by
Tenant in respect of the operation of the Delivery Facilities, or the
adequacy thereof, or of the acts or omissions of any person or persons
engaged in the operation thereof, or in the acceptance, holding,
handling, delivery or dispatch of any goods for or on behalf of
Tenant. or for any claim of Tenant by reason of damage, loss, theft,
or acceptance, holding, handling, delivery or dispatch, or failure of
any acceptance, holding, handling or dispatch, or any error,
negligence or delay therein.
12.03 Construction Procedures
Landlord may from time to time pursuant to this Article make and modify
regulations for the orderly, efficient and expeditious conduct of alterations
pursuant to Section 4.03 and other construction work. Without limiting the
generality of the foregoing, such regulations may prescribe reasonable
provisions for:
(a) submission, examination and approval of drawings, plans and
specifications and standards to be observed;
(b) supervision and co-ordination of such work with any work of Landlord
and other work proceeding and avoidance of undue noise and vibration;
(c) protection of property, preservation of warranties, compliance with
pertinent by-laws and codes, and procuring of permits; (d) deliveries,
access, hours of work, material and equipment hoisting and storage,
use of power, heating, and washroom facilities, clean-up and
screening; and
(e) customary insurance and charges relating to above.
12.04 Repugnancy
Such rules and regulations aforesaid shall:
(a) not conflict with and negate the terms of this Lease;
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(b) be reasonable and conform to good standards of property management;
(c) have general application to the Project other than tenants whose use
is different to that of Tenant;
(d) not impose charges, fees or costs which are not customary or
competitive; and
(e) be effective only upon delivery of a copy thereof to Tenant at the
Premises.
12.05 Observance
Tenant shall at all times comply with, and shall cause its employees, agents,
contractors, licensees and invitees to comply with the rules and regulations
from time to time in effect. 12.06 Non-Compliance
Landlord shall use reasonable efforts (but shall not be required to institute
legal proceedings) to secure compliance by all tenants and other persons with
the rules and regulations from time to time in effect, but shall not be
responsible to Tenant for failure of any person to comply with such rules and
regulations.
ARTICLE 13
COMMUNICATION
13.01 Notices
Any notice from one party to the other shall be in writing and shall be deemed
duly served if delivered to a responsible employee of the party being served, or
dispatched by telegraph, telex, telecopier, facsimile or like electronic means
(provided dispatch, receipt and content thereof can be established and
evidenced) or if mailed by registered or certified mail addressed to Tenant at
the Premises (or if Tenant has departed from, vacated or abandoned the Premises
by attaching a copy to the main door thereof) or to Landlord at the place from
time to time established for the payment of Rent. Any notice shall be deemed to
have been given at the time of delivery or, if mailed, 7 days after the date of
mailing thereof. Either party shall have the right to designate by notice, in
the manner established in this Section, a change of address or one additional
address to which copies of notices are to be mailed. For purpose of this
Section, the expression "Notice" shall, without limitation, include any request,
response, statement, or other communication to be given by one party to the
other.
13.02 Authority for Action
Landlord may act in any matter provided for herein by its property manager.
Tenant may (and, if required by Landlord, shall) designate in writing one or
more persons to act on its behalf in any matter relating to this Lease and may
from time to time change, by notice to Landlord, such designation. In the
absence of any such designation, the person with whom the Landlord's property
manager customarily deals shall be deemed to be authorized to so act on behalf
of Tenant.
13.03 Withholding of Consent
A party's sole remedy if the other unreasonably withholds or delays any consent
or approval required by the provisions hereof shall be an action for specific
performance, and the other party shall not be liable for damages.
ARTICLE 14
DEFAULT
14.01 Force Majeure
Notwithstanding anything to the contrary contained in this Lease, if either
party hereto is bona fide delayed or hindered in or prevented from the
performance of any term, covenant or act required hereunder by reason of
strikes, labour troubles, inability to procure materials or services, power
failure, restrictive governmental laws or regulations, riots, insurrection,
sabotage, rebellion, war, act of God, or other reasons whether of a like nature
or not, which is not the fault of the party delayed in performing work or doing
acts required under the terms of this Lease, nor due to that party's failure or
inability to make payment, then performance of such term, covenant, or act, is
excused for the period of the delay, and the party so delayed shall be entitled
to perform such term, covenant or act within the appropriate time period after
the expiration of the period of such delay. The provisions of this Article shall
not operate to excuse Tenant from the prompt payment of Rent, or any other
payments required by this Lease.
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14.02 Events of Default
If and whenever:
(a) part or all of the Rent hereby reserved is not paid when due, and such
default continues (inclusive of and not in addition to any period or
days of grace by law or custom prescribed or allowed) for 7 days after
notice thereof; or
(b) the Term, or any goods, chattels, or equipment of Tenant on the
Premises are taken or exigible in execution or in attachment, or if a
writ of execution is issued against any thereof; or
(c) Tenant becomes insolvent or commits an act of bankruptcy or becomes
bankrupt, or takes the benefit of any statute that may be in force for
bankrupt or insolvent debtors, or becomes involved in voluntary or
involuntary winding-up proceedings, or if a receiver shall be
appointed for any business, property, affairs, or revenues of Tenant;
or
(d) Tenant makes a bulk sale of its goods, or moves or commences,
attempts, or threatens to move its goods, chattels, inventories or
equipment out of the Premises (other than in the normal course of its
business), or ceases to conduct business from the Premises; or
(e) Tenant shall or shall purport or attempt to assign this Lease or
sublet all or part of the Premises in contravention of Article 9, or,
without the prior consent of Landlord, the Premises shall be used or
occupied by any persons other than Tenant or its permitted assigns or
subtenants, or for any use other than that for which they are leased,
or if the Premises shall be vacated or abandoned, or remain unoccupied
for 15 days or more while capable of being occupied; or
(f) Tenant fails to observe, perform and keep each and every of the
covenants, terms and conditions herein contained or otherwise to be
observed, performed and kept by Tenant (other than payment of Rent)
and persists in such failure after 10 days' notice by Landlord
requiring that Tenant remedy, correct, desist or comply (or if any
such breach would reasonably require more than 10 days to rectify,
unless Tenant commences rectification within the 10 days' notice
period and thereafter promptly and effectively and continuously
proceeds with the rectification of the breach);
then, and in any of such cases, at the option of Landlord, the full
amount of the current month's and the next ensuing three months'
instalments of Annual Rent shall immediately become due and payable
and Landlord may immediately distrain for the same, together with any
arrears then unpaid, and Landlord may, without notice or any form of
legal process, forthwith re-enter upon and take possession of the
Premises or any part thereof in the name of the whole and remove and
sell Tenant's goods, chattels, and equipment therefrom, any rule of
law or equity to the contrary notwithstanding, and Landlord may seize
and sell such goods, chattels and equipment of Tenant as are in the
Premises or have been removed therefrom and may apply the proceeds
thereof to all Rent to which Landlord is then entitled under this
Lease. Any such sale may be effected in the discretion of Landlord by
public auction or otherwise, and either in bulk or by individual item,
or partly by one means and partly by another, all as Landlord in its
entire discretion may decide. If any of the Tenant's Property is
disposed of as provided in this Article, 10 days' prior notice to
Tenant of disposition shall be deemed to be commercially reasonable.
14.03 Interest and Costs
Tenant shall pay to Landlord interest calculated and payable at a rate equal to
the lesser of the prime commercial lending rate of the chartered bank with which
Landlord conducts its banking for the Project from time to time plus five per
cent per annum on a per diem basis, or the maximum rate permitted by applicable
law, upon all Rent required to be paid hereunder from the due date for payment
thereof until the same, including this interest, is fully paid and satisfied.
Tenant shall indemnify Landlord against and shall pay on demand all Outlays
incurred in enforcing payment thereof, and in obtaining possession of the
Premises after default of Tenant or upon expiration or earlier termination of
the Term, or in enforcing any covenant, term or condition herein contained.
14.04 Landlord's Right to Perform Covenants
All covenants, terms and conditions to be performed by Tenant under any of the
provisions of this Lease shall be performed by Tenant, at Tenant's sole cost and
expense, and without any abatement of Rent. If Tenant shall fail to perform any
act on its part to be performed hereunder, and such failure shall continue for
10 days after notice thereof from Landlord (or immediately in the case of an
emergency of which Tenant has knowledge), Landlord may (but shall not be
obligated so to do) perform such act without waiving or releasing Tenant from
any of its obligations relative thereto. Tenant shall pay Landlord on demand for
all Outlays, together with interest thereon at the rate set out in this Article
from the date each such payment was made or each such cost was incurred by
Landlord, until paid in full.
14.05 Waiver of Exemption and Redemption
Notwithstanding anything contained in any statute now or hereafter in force
limiting or abrogating the right of distress, none of Tenant's goods, chattels
or equipment on the Premises at any time during the continuance of the Term
shall be exempt from levy by distress for Rent in arrears, and upon any claim
being made for such exemption by Tenant or in a distress made by Landlord, this
Article may be pleaded as an estoppel against Tenant in any action brought to
test the right to the levying upon any such goods, chattels or equipment as are
named as exempted in any such statute. Tenant hereby waiving all and every
benefit that could or might have accrued to Tenant under and by virtue of any
such statute but
<PAGE>
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for this Lease. Landlord may seize Tenant's goods, chattels or equipment at any
place to which Tenant or any other person may have removed them from the
Premises in the same manner as if such goods, chattels or equipment had remained
in the Premises. Tenant hereby expressly waives any and all rights of redemption
being granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the Premises by reason of the violation by Tenant of any
of the covenants, terms or conditions of this Lease or otherwise.
14.06 Termination
If and whenever Landlord is entitled to or does re-enter, Landlord may:
(a) terminate this Lease by giving notice thereof, or
(b) relet the Premises or any part thereof (for a term or terms shorter or
longer than the remainder of the Term) as agent of Tenant and receive
rent therefor,
and in such event Tenant shall forthwith vacate and surrender the Premises.
14.07 Payments
If the Landlord shall re-enter or if this Lease shall be terminated, Tenant
shall pay to Landlord on demand:
(a) Rent up to the time of re-entry or termination, whichever shall be the
later, plus accelerated Annual Rent as in Section 14.02 provided; and
(b) as damages for the loss of income of Landlord expected to be derived
from the Premises:
(i) the amounts (if any) by which the Rent which would have been
payable under this Lease exceeds the payments (if any)
received by Landlord from other tenants in the Premises,
payable on the first day of each month during the period
which would have constituted the unexpired portion of the
Term had it not been terminated; or
(ii) if elected by Landlord by notice to Tenant at or after
re-entry or termination, a lump sum amount equal to the Rent
which would have been payable under this Lease from the date
of such election during the period which would have
constituted the unexpired portion of the Term had it not
been terminated, reduced by the rental value of the Premises
for the same period, established by reference to the terms
and conditions upon which Landlord re-lets them if such
re-letting is accomplished within a reasonable period after
termination, and otherwise established by reference to all
market and other relevant circumstances, such Rent and
rental value being reduced to present worth at an assumed
interest of 10% per annum on the basis of Landlord's
estimates and assumptions of fact which shall govern unless
shown to be erroneous.
14.08 Remedies Cumulative
No reference to nor exercise of any specific right or remedy by Landlord shall
preclude Landlord from exercising or invoking any remedy without limitation
including any rights to require specific performance, to obtain an injunction,
and to recover damages, whether allowed at law or in equity or expressly
provided for herein. No such remedy shall be exclusive or dependent upon any
other remedy, but Landlord may from time to time exercise any one or more of
remedies independently or in combination.
ARTICLE 15
SURRENDER AND TERMINATION
15.01 Surrender of Possession
Upon the expiration or earlier termination of the Lease, Tenant shall
immediately quit and surrender possession of the Premises in substantially the
condition in which Tenant is required to maintain the Premises excepting only
reasonable wear and tear, and damage covered by Landlord's insurance. Upon such
surrender, all right, title and interest of Tenant in the Premises shall cease.
15.02 Tenant's Property, Personal Property and Improvements
Subject to Tenant's rights under Section 4.06, after the expiration or earlier
termination of the Lease, all of Tenant's Property, personal property and
improvements remaining in the Premises shall be deemed conclusively to have been
abandoned by Tenant and may be appropriated, sold, destroyed or otherwise
disposed of by Landlord without notice or obligation to compensate Tenant or to
account therefor, and Tenant shall pay Landlord for all Outlays within 10 days
of receipt of an invoice therefor. Landlord may at its option, require Tenant to
remove all or part of the Leasehold Improvements, partitioning or other tenant
improvements made or installed in the Premises, and may require Tenant to
restore the Premises to their original condition before the making or
installation of the partitioning or other tenant improvements.
<PAGE>
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15.03 Merger
The voluntary or other surrender of this Lease by Tenant or the sublease of
space by Tenant to Landlord or the cancellation of this Lease by mutual
agreement of Tenant and Landlord shall not operate as a merger, but shall, at
Landlord's option, terminate all or any subleases and subtenancies or operate as
an assignment to Landlord of all or any subleases or subtenancies. Landlord's
options hereunder shall be exercised by notice to Tenant and all known
subtenants in the Premises or any part thereof.
15.04 Payments After Expiration or Termination
No payments of money by Tenant to Landlord after the expiration or earlier
termination of the Lease or after the giving of any notice (other than a demand
for payment of money) by Landlord to Tenant, shall reinstate, continue or extend
the term or make ineffective any notice given to Tenant prior to the payment of
such money. After the service of notice or the commencement of a suit, or after
final judgement granting Landlord possession of the Premises, Landlord may
receive and collect any sums of Rent due, and the payment thereof shall not make
ineffective any notice, or in any manner affect any pending suit or any
judgement theretofore obtained.
15.05 Holding Over
(a) If Tenant remains in possession of the Premises after the expiration
or earlier termination of the Lease, a tenancy from year-to-year shall
not be created, and Tenant shall be deemed to be occupying the
Premises on a month-to-month tenancy only, at a monthly rental equal
to the Rent, which is payable or accrues hereunder on an instalment or
monthly or periodic basis, but nothing contained in this Article shall
be construed to limit or impair any of Landlord's rights of re-entry
or eviction or constitute a waiver thereof.
(b) Any such month-to-month tenancy may be terminated by Landlord or
Tenant on the last day of any calendar month by delivery of 30 days'
advance notice of termination to the other.
(c) Any such month-to-month tenancy shall be subject to all other terms
and conditions of this Lease except any right of extension or renewal,
and except any right of Tenant to require, after the expiration or
earlier termination of the Lease, any reconciliation, adjustment or
repayment of amounts paid or payable on an estimated or contingent
basis, which amounts, or any thereof, may, at the option of Landlord,
be deemed final payments or accruals in respect of the month for which
they are paid or due.
ARTICLE 16
AMENDMENT AND WAIVER
16.01 Amendment or Modification
No amendment, modification, or supplement to this Lease shall be valid or
binding unless set out in writing and executed by the parties hereto in the same
manner as the execution of this Lease.
16.02 No Implied Surrender or Waiver
No provisions of this Lease shall be deemed to have been waived by a party
unless such waiver is in writing signed by that party. A party's waiver of a
breach of any term or condition of this Lease shall not prevent a subsequent act
or Waiver or omission which would have originally constituted a breach, from
having all the force and effect of any original breach. Landlord's receipt of
Rent with knowledge of a breach by Tenant of any term or condition of this Lease
shall not be deemed a waiver of such breach. Landlord's failure to enforce
against Tenant or any other tenant any rule or regulation made under Article 12
shall not be deemed a waiver of such rule and regulation. No act or thing done
by Landlord, its agents or employees during the Term, without limitation
including inspection, repair, re-entry, or sale or leasing (or attempts thereat)
of all or any part of the Premises shall be deemed a constructive termination of
this Lease or an acceptance of a surrender of the Premises, or an eviction of
Tenant or a breach of the covenant of quiet enjoyment and no agreement to accept
a surrender of the Premises shall be valid, unless in writing signed by
Landlord. The delivery of keys to any of Landlord's agents or employees shall
not operate as a termination of this Lease or a surrender of the Premises. No
payment by Tenant, or receipt by Landlord, of a lesser amount than the Rent due
hereunder shall be deemed to be other than on account of the earliest stipulated
Rent, nor shall any endorsement or statement on any cheque or any communication
accompanying any cheque, or payment of Rent, be deemed an accord and
satisfaction, and Landlord may accept such cheque or payment without prejudice
to Landlord's right to recover the balance of such Rent or pursue any other
remedy available to Landlord. The acceptance by Landlord of Rent or any
instalment or proportion of Rent from any person other than Tenant shall not be
construed as a recognition or acceptance of the right of such person to use or
occupy the Premises, nor as a waiver of any of Landlord's rights hereunder.
ARTICLE 17
INTERPRETATION
17.01 Time
Time is of the essence of this Lease and every part hereof and schedule hereto.
<PAGE>
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17.02 Obligations as Covenants
Each obligation of Landlord or Tenant expressed in this Lease, even though not
expressed as a covenant, is considered to be a covenant for all purposes.
17.03 Severability
Should any provision of this Lease be or become invalid, void, illegal or not
enforceable, it shall be considered separate and severable from the Lease and
the remaining provisions shall remain in force and be binding upon the parties
hereto as though such provision had not been inserted.
17.04 Governing Law
This Lease shall be interpreted under and is governed by the laws of the
Jurisdiction in which the Land is located.
17.05 Grammatical Conformance
The necessary grammatical changes required to make the provisions of this Lease
apply to all genders and to corporations, associations, partnerships, or
individuals, and in the plural sense where a party may comprise more than one
entity, will be assumed in all cases as though in each case so fully expressed.
17.06 Headings and Captions
The indices, article headings, and section headings are inserted for convenience
of reference only and are not to be considered when interpreting this Lease.
17.07 Extended Meanings
The words "hereof", "herein" and similar expressions used in any Article,
Section or paragraph of this Lease relates to the whole of this Lease and not to
that Article, Section or paragraph only, unless otherwise expressly provided.
ARTICLE 18
CONTRACTUAL
18.01 Entire Agreement
This Lease contains the entire agreement between Landlord and Tenant concerning
the Premises and the subject matter of this Lease, and Tenant acknowledges that
it has not relied upon any representations, warranties, covenants, agreements,
conditions or understandings except such as are set out in this Lease.
18.02 Relationship of Parties
Nothing contained in this Lease shall create any relationship between the
parties hereto other than that of lessor and lessee, and it is acknowledged and
agreed that Landlord does not in any way or for any purpose become a partner of
Tenant in the conduct of its business, or a joint venturer, or a member of a
joint or common enterprise with Tenant.
18.03 Joint and Several Liability
If Tenant hereunder comprises more than one person or corporation then all
representations, warranties, conditions, covenants and undertakings on the part
of Tenant hereunder shall be joint and several representations, warranties,
conditions, covenants, agreements and undertakings of each and all such persons
and corporations.
18.04 Successors Bound
Except as otherwise provided, the covenants, terms and conditions contained in
this Lease shall apply to the benefit of and bind the heirs, executors,
administrators, successors, and assigns of the parties hereto.
18.05 Registration
Neither Tenant nor anyone on Tenant's behalf or claiming under Tenant shall
register this Lease or any assignment or sublease of this Lease or any document
evidencing any interest of Tenant in the Lease or the Premises, against the Land
or any part thereof.
<PAGE>
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18.06 Division of Project
(a) Landlord shall be entitled to sever the Land into separate parcels, or
to consolidate the Land with other parcels, and after completion of
such severance or consolidation the definitions of "Land" and
"Project" shall be read to correspond to such change. The separate
parcels of the Land on severance may be owned by or may be treated as
if they were owned by separate entities other than Landlord. Landlord
may in its discretion create and grant rights and easements among
separate parcels or Project Components and may register same as
encumbrances.
(b) (i) Landlord may from time to time, if in the opinion of
Landlord more efficient or economical operation of the
Project or more equitable distribution of Operating Costs
will result, establish Project Components (of which the
Building shall be one) and divide, apportion, and allocate
Operating Costs among such Project Components.
(ii) In any such division, apportionment and allocation of
Operating Costs, Landlord shall charge any item which
relates exclusively to one of the Project Components
directly to that Project Component only, and, in respect of
items which do not exclusively relate to any single Project
Component, Landlord shall divide, apportion and allocate
same to all Project Components affected thereby, on an
equitable basis having regard, without limitation, to the
various uses and values of the subject Project Components,
to prudent practices of property management, to the
provisions of this Lease, and to generally accepted
accounting and engineering principles. The aggregate so
directly charged or divided, apportioned and allocated to
the Building is herein called the "Operating Costs for the
Building".
(iii) If such treatment would result in a more equitable and
compatible recognition of the cost of their respective
usage, Landlord may similarly, mutatis mutandis, charge,
divide, apportion and allocate Operating Costs, or Operating
Costs for the Building, among office, retail and other
differing elements of the Building.
Tenant hereby accepts this Lease of the Premises, to be held by it as Tenant
subject to the covenants, conditions, and restrictions set forth herein and
implied. Tenant's taking of possession of all or any portion of the Premises
shall be conclusive evidence as against Tenant that the Premises or such portion
thereof of which possession is taken are in satisfactory condition on the date
of taking possession, subject only to latent defects and to deficiencies (if
any) listed in writing in a notice delivered by Tenant to Landlord not more than
30 days after the later of the date of taking possession or the Commencement
Date.
<PAGE>
-22
IN WITNESS WHEREOF, LANDLORD AND TENANT HAVE EXECUTED AND DELIVERED THIS LEASE
BY AUTHORIZED SIGNATURES, AND BY AFFIXING CORPORATE SEALS WHEN APPLICABLE,
EFFECTIVE THE DATE INDICATED ON PAGE 1 OF THIS LEASE AGREEMENT.
TENANT
MindfulEye.com Systems Inc.
- ------------------------------ Per: -------------------------------------
Witness (if not a corporation)
Title: -----------------------------------
Per: -------------------------------------
Title: -----------------------------------
LANDLORD
MARINE BUILDING HOLDINGS LTD. and
OMERS REALTY CORPORATION
by their Agent
SDM REALTY ADVISORS LTD.
Per: -------------------------------------
Title: -----------------------------------
Per: -------------------------------------
Title: -----------------------------------
<PAGE>
PROJECT SUPPLEMENT
PART ONE - DEFINITIONS
1. In this Lease, unless the context or content otherwise requires:
"Annual Rent" means the amount so identified on Page 1 of this Lease.
"Architect" means such firm of independent professional architects or
engineers engaged by Landlord from time to time in regard to the Project,
including any consultant appointed by the Landlord or Architect.
"Article" means an Article of this Lease.
"Building" means that building so identified on Page 1 of this Lease, being
the Project Component in which the Premises are situated.
"Clause" means a numbered subdivision of a Part of this Schedule.
"Commencement Date" means the date so identified on Page 1 of this Lease.
"Common Areas" means at any time those portions of the Project which are
not leased or designated for lease by Landlord to tenants but are provided
(and which may be changed from time to time) to be used in common by
Landlord, Tenant, and other tenants of the Project (or by the sublessees,
agents, employees, customers or licensees of Landlord, Tenant and such
other tenants) whether or not the same are open to the general public, and
shall, without limiting the generalities aforesaid, include all
improvements, fixtures, chattels, equipment, systems, decor, signs,
facilities, utilities, or landscaping contained therein or maintained or
used in connection therewith, and also all pedestrian and vehicular exits
and entrances, and all malls, courtyards, passageways, hallways, stairways
and public washrooms, and any elevators and escalators, and any pedestrian
walkway system, park, bus stop, transportation facility or other public
facility for which Landlord is subject to obligations from time to time in
its capacity as owner of the Project.
"Delivery Facilities" means those portions of the Common Areas on or below
street level of the Project as are from time to time designated by Landlord
as facilities to be used in common by Landlord, tenants of the Project, and
others, for the purposes of loading, unloading, delivery, dispatch and
holding of merchandise, goods, and materials entering or leaving the
Project and giving vehicular access thereto.
"Fiscal Year" means a twelve-month period from time to time determined by
Landlord at the end of which Landlord's financial statements for the
Project are prepared and audited.
"Land" means the land on which the Building is constructed, as so
identified on Page 1 of this Lease, subject to the provisions of Section
18.06 of this Lease.
"Landlord" means that party or parties so identified on Page 1 of this
Lease.
"Lease" means this lease document (including without limitation all of its
schedules, attachments and appendices) and every properly executed
instrument which by its terms amends, modifies, or supplements it.
"Leasehold Improvements" has the meaning prescribed in Section 4.07(b) of
the Lease.
"Normal Business Hours" means the hours from 8:00 a.m. to 6:00 p.m. Monday
through Friday, excluding days which are legal or statutory holidays in the
jurisdiction where the Project is located, or such other reasonable hours
as Landlord may stipulate from time to time in respect of one or more or
all Project Components.
"Operating Costs" has the meaning defined, distinguished, prescribed or
identified in Clause 1 of Part Two of this Schedule.
"Operating Costs For the Building" has the meaning prescribed in Section
18.06 of the Lease.
"Other Charges" means all amounts other than Annual Rent and Operating
Costs, which are payable by Tenant under this Lease, without limitation
including Outlays.
"Outlays" means any and all costs of any nature or kind whatsoever,
incurred by Landlord as a direct or indirect result of failure by Tenant to
perform its obligations under this Lease, or for account of Tenant pursuant
to this Lease.
<PAGE>
-2-
"Parking Facilities" means that part of the Project containing parking
facilities with vehicular access thereto without limitation including
parking spaces, ramps, circulation space, vehicular entrances and exits,
the structural elements thereof and services, facilities and systems
contained in or servicing the Parking Facilities.
"Premises" means the space so identified on Page 1 of this Lease
(approximately shown in outline on Schedule 1), having the agreed area
shown on Page 1, but specifically excluding any part of the roof or
exterior of the Project.
"Project" means the Land, and all improvements and buildings (without
limitation including the Building and any other Project Components) and all
equipment and facilities erected thereon or situate therein from time to
time together with all such other land, easements, licenses, leases or
rights (if any) contiguous, convenient, adjacent or appurtenant to the
Land, and like improvements, buildings, equipment and facilities thereon or
therein, which Landlord may from time to time own, develop, or operate as
an entity integrated with the Building.
"Project Components" means the segments of the Project (of which the
Building shall be one and which together comprise the whole Project) which
may be designated by Landlord from time to time
"Proportionate Share" has the meaning prescribed in Clause 2 of Part Two of
this Schedule.
"Rent" means the aggregate of all amounts payable by Tenant to Landlord
under this Lease for and relating to but not limited to:
(a) Annual Rent;
(b) Operating Costs;
(c) Other Charges; and
(d) Percentage Rent in leases of space in the Retail Concourse and other
leases which provide therefor.
"Rentable Area" has the meaning determinable from Clause 3 of Part Two of
this Schedule.
"Retail Concourse" means the floors or areas (if any) of the Project
whether located on the ground level, or any upper or lower level as
designated from time to time by Landlord for occupation and use as retail
stores, service or financial outlets, restaurants, cafeterias, kiosks and
like commercial purposes (sometimes called retail space) together with all
improvements, equipment, facilities, escalators, Installations, systems and
services and all public areas in or adjacent to the Retail Concourse or
which serve or are for the benefit of the Retail Concourse, and any
alteration, expansion or reduction thereto or thereof.
"Section" means any numbered subdivision of an Article.
"Taxes" means the aggregate of all taxes, duties and imposts, without
limitation including property, school, and local improvement taxes, rates,
charges, levies, assessments and capital taxes, payable by Landlord and
imposed by any competent governmental authority upon or in respect of the
Project and all improvements thereon or services therein or on account of
its ownership thereof, and any other amounts which are imposed in lieu of,
or in addition to any such Taxes, whether of the foregoing character or not
and whether in existence at the Commencement Date or not, together with all
expenses incurred by Landlord in contesting in good faith the imposition,
amount or payment of any of them, but excluding any income, profits. excess
profits, and business tax imposed upon the income of Landlord and any other
impost of a similar nature charged or levied against Landlord, except to
the extent that such is levied in lieu of taxes, rates, charges, or
assessments in respect of the Project or improvements thereon, or the
ownership or operation thereof by Landlord.
"Tenant" means that party or parties so identified on Page 1 of this Lease.
"Tenant Property" has the meaning prescribed in Section 4.06(b) of this
Lease.
"Term" means the period of time so identified on Page 1 of this Lease.
"Use" means that permitted and restricted usage identified on Page 1 of
this Lease,
2. (a) "Unit of Area" means a conventional component of expressing or
measuring the aggregate area of space, denoted either in square metres
(metric system) or square feet (imperial system) or computed in the
equivalent relationship or conversion of one to the other, in all
cases limited to two decimal figures.
(b) Landlord may for any purpose of this Lease, without limitation
including any measurement of Rentable Area or any formula prescribed
in this Lease, substitute. or convert on or more or all unit(s) of
area using conversion factors of .0929 square feet to square metres
and 10.7639 square metres to square feet.
<PAGE>
-3-
PART TWO - OPERATING COSTS
1. For purposes of this Lease and subject to the provisions of Section 18.06:
"Operating Costs" means the aggregate amount, without duplication, of all
costs and charges incurred by or on behalf of Landlord during the Fiscal
Year in operating, supervising, securing, repairing, managing, and
maintaining the Project in good repair as a first class facility, as
established in accordance with generally accepted accounting principles and
confirmed in a certificate of Landlord, including, without limitation:
(a) all costs, charges, wages, salaries and expenses which are
attributable to the operation, management, supervision, security,
repair, and maintenance of the Project, including, without limitation,
wages, salaries, and other amounts paid or payable to and for all
on-site personnel; and Taxes (except where same are paid by individual
tenants pursuant to Section 5.03 and 5.05 of the Lease);
(b) the applicable and equitable amortization (properly allocable to such
fiscal year) of all costs incurred after the date any space in the
Building was first occupied by any tenant for:
(i) any capital improvement to the Project required by any
change in the laws, rules, regulations or orders of any
governmental or quasi-governmental authority having
jurisdiction, or incurred by Landlord principally to reduce
Operating Costs, or
(ii) any replacement not charged to Operating Costs in the year
in which incurred of any equipment, floor covering or system
in the Building, or
(iii) any repairs, including without limitation structural repairs
and repairs to the exterior, roof or equipment of the
Building not charged to operating costs in the year in which
incurred,
which costs shall be amortized over the useful life of the subject
capital improvement, replacement or repair plus interest on the
unamortized balance at the prime commercial lending rate of the
chartered bank with which Landlord conducts its banking for the
Project from time to time or such higher rate as Landlord may be
required to pay on borrowed funds;
(c) all other costs of repairs, maintenance and replacements to the
Project, without limitation including painting, renovations, repair
and replacement of carpet, snow clearing, and gardening and
landscaping;
(d) the total of the costs and amounts paid for all gas, steam or other
fuel used in heating and cooling the Project, all electricity
furnished to the Project (except for electricity furnished to and paid
for by individual tenants), all hot and cold water, telephone and
other utility costs used in the operation, supervision, repair,
security and maintenance of the Project (except where any of these is
chargeable to individual tenants by reason of their extraordinary
consumption);
(e) all costs of insuring the Project and the improvements, equipment, and
other property in the Project and such other insurance in respect of
the Project as Landlord from time to time reasonably determines;
(f) audit fees and the cost of accounting services incurred in the
preparation of the Statements required to be furnished by Landlord
pursuant to this Lease, and in the computation of Rent and other
charges payable by tenants of the Project; and
(g) a charge for onsite or offsite administration and management
including, without limitation, the fair market rental value of onsite
premises or the rent paid by Landlord for offsite premises at which
such functions are performed,
but the following costs shall be specifically excluded:
(i) Outlays;
(ii) Capital improvements, replacements, additions, or
alterations to the Project or its equipment except as
provided in sub-clause (b) above;
(iii) repair and replacement resulting from inferior or deficient
design, workmanship, or materials in the initial
construction of the Project or for which Landlord is
reimbursed by insurers or pursuant to warranties;
(iv) interest on and capital retirement of debt;
(v) repair or maintenance done for the direct account of other
tenants and of unleased space; and
<PAGE>
-4-
(vi) tenant improvements, tenant allowances and leasing
commissions.
2. For purposes of this Lease:
"Proportionate Share"
(a) means a fraction, which has as its numerator the Rentable Area of the
Premises, and has as its denominator the total Rentable Area of the
Project, calculated by Landlord in accordance with the method of
measurement described in Clause 3 below.
(b) Provided that, if and whenever pursuant to Section 18.06 of the Lease,
Landlord shall have established and designated Project Components, in
respect of operating costs which pertain only to a Project Component,
the denominator aforesaid shall be the total Rentable Area of such
areas as comprise that Project Component.
(c) If and whenever the Building shall have been established and
designated a Project Component, "Operating Costs for the Building"
shall have the meaning indicated in Section 18.06, and sub-clause (b)
above shall govern apportionment thereof.
(d) In calculating Operating Costs for the Building for any Fiscal Year,
if and while less than 95% of the Building is occupied by tenants,
then the amount of Operating Costs shall be deemed for the purposes of
this Schedule to be increased to an amount equal to Operating Costs
which normally would be expected to have been incurred had occupancy
of the Building been 95% during period(s) when vacancies existed, to
the intent that, after allowing for a periodic vacancy factor of 5%,
the cost of services actually provided by Landlord to the Premises
will be recovered by Landlord from Tenant, while Landlord will absorb
the costs incurred in or attributable to Rentable Areas which are not
occupied.
3. Method of Measurement of Rentable Area. If not specified herein or
otherwise or by agreement determined, Rentable Areas shall be measured as
below prescribed.
(a) For Office Space - Single Tenancy Floors
The Rentable Area for premises on a single tenancy floor in the
Building (if any), shall be calculated (from dimensioned Architect's
drawings) to the inside face of the glass, whenever the area of the
exterior Building walls, as measured from the interior between the
floor and finished ceiling, is at least 50% glass or, if not, to the
inside finish of permanent exterior Building walls. It shall include
all space within exterior building walls except for stairs, elevator
shafts, flues, pipe shafts, and vertical ducts forming part of the
basic Building service areas and their enclosing walls. No deduction
shall be made for washrooms, janitor closets, air conditioning rooms,
fan closets, or electrical or telephone cupboards within and servicing
that floor, or for any mail conveyor chutes or other rooms, corridors,
stairways, or areas available to the subject lessee on that floor for
its use, furnishings, or personnel, or for any columns, whether
internal, corner or perimeter columns, located wholly or partially
within that space, or for reveals, or for any enclosures around the
periphery of the Building used for the purpose of cooling, heating, or
ventilating.
(b) For Office Space - Multiple Tenancy Floors
The Rentable Area for premises on a multiple tenancy floor in the
Building (if any), shall be calculated (from dimensioned Architect's
drawings) from the inside face of the glass or permanent exterior
walls as described in subclause (a) for a single tenancy floor, to the
face of permanent interior walls, or, as the case may be, to the
centre line of demising partitions. If contained within the subject
premises no deduction shall be made for washrooms, columns, janitor
closets, air conditioning rooms, fan closets, or electrical or
telephone cupboards, or for any mail conveyor chutes or other rooms,
corridors, stairways, or areas exclusively available to the subject
lessee for its use, furnishings, or personnel, or for reveals, or for
any enclosures around the periphery of the Building used for the
purpose of cooling, heating, or ventilating. There shall be added to
the-area so measured an area equal to the product of multiplying.
(i) a fraction in which the numerator is the Rentable Area of
the subject premises, so calculated, and the denominator is
the aggregate of all Rentable Areas, measured according to
this sub-clause (b), of space on that floor; by
(ii) the area obtained when such denominator is deducted from the
Rentable Area of the subject floor if measured according to
sub-clause (a).
(c) For Retail Space
The Rentable Area of retail space in the Building (if any), shall be
calculated (from dimensioned Architect's drawings) from the inside
face of permanent exterior walls, to the centre line of demising
partitions, or, as the case may be, to the face of permanent interior
walls, or to the centre line of a predetermined lease line (usually
referred to as the storefront line) in the case of retail space facing
onto either an interior public mall or corridor or onto a public
street or lane. No deduction shall be made for vestibules inside the
permanent exterior Building walls or inside the pre-determined lease
line or for
<PAGE>
-5-
washrooms, columns, janitor closets, air conditioning rooms, fan
closets, or electrical or telephone cupboards within the subject
premises; or for any other rooms, corridors, or areas exclusively
available to the subject lessee for its use, furnishings, or
personnel, or for any enclosures around the periphery of the Building
used for the purpose of cooling, heating or ventilating.
(d) Total Area of the Building
The total Rentable Area of the Building shall be calculated (from
dimensioned Architect's drawings) and shall be the aggregate area of
the Building rentable as office or retail space, excluding all storage
and parking areas. The area for offices shall be calculated as if the
Building were entirely occupied by tenants renting single tenancy
floors on each floor of the Building. The total Rentable Area of the
Building shall be adjusted from time to time to give effect to any
structural, functional, or other changes affecting the Building.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 GRANT OF LEASE..........................................................................................1
1.01 Demise...................................................................................................1
1.02 Covenants................................................................................................2
1.03 Quiet Enjoyment..........................................................................................2
1.04 Use of Common Areas......................................................................................2
1.05 Use of Premises..........................................................................................2
1.06 Consent..................................................................................................2
1.07 Compliance with Laws.....................................................................................2
1.08 Nuisance.................................................................................................2
1.09 Abandonment..............................................................................................2
ARTICLE 2 RENT....................................................................................................2
2.01 Payment of Rent..........................................................................................2
2.02 Early Occupancy..........................................................................................3
2.03 Delayed Occupancy........................................................................................3
2.04 Payment of Annual Rent...................................................................................3
2.05 Payment of Operating Costs...............................................................................3
2.06 Payment of Other Charges.................................................................................3
ARTICLE 3 Operation of the Project................................................................................4
3.01 Standards................................................................................................4
3.02 Services to Premises.....................................................................................4
3.03 Building Services........................................................................................4
3.04 Maintenance, Repair and Replacement......................................................................4
3.05 Additional Services......................................................................................5
3.06 Alterations by Landlord..................................................................................5
3.07 Access by Landlord.......................................................................................5
3.08 Name of Building.........................................................................................5
ARTICLE 4 MAINTENANCE OF THE PREMISES.............................................................................6
4.01 Condition of Premises....................................................................................6
4.02 Failure to Maintain Premises.............................................................................6
4.03 Alterations by Tenant....................................................................................6
4.04 Builders' Liens..........................................................................................6
4.05 Signs....................................................................................................7
4.06 Tenant's Property........................................................................................7
4.07 Leasehold Improvements...................................................................................7
ARTICLE 5 TAXES...................................................................................................7
5.01 Landlord's Taxes.........................................................................................7
5.02 Allocation...............................................................................................7
5.03 Tenant's Taxes...........................................................................................8
5.04 Right to Contest.........................................................................................8
5.05 Additional Taxes.........................................................................................8
ARTICLE 6 INSURANCE...............................................................................................8
6.01 Landlord's Insurance.....................................................................................8
6.02 Tenant's Insurance.......................................................................................9
6.03 Use of Proceeds..........................................................................................9
6.04 Landlord May Place Insurance.............................................................................9
6.05 Increase in Insurance Premiums...........................................................................9
6.06 Cancellation of Insurance...............................................................................10
ARTICLE 7 DAMAGE BY FIRE.........................................................................................10
7.01 Limited Damage to Premises..............................................................................10
7.02 Major Damage to Premises................................................................................10
7.03 Abatement...............................................................................................10
7.04 Major Damage to Building................................................................................10
7.05 Reconstruction by Landlord..............................................................................11
7.06 Architect's Certificate.................................................................................11
7.07 Limitation of Landlord's Liability......................................................................11
ARTICLE 8 INJURY TO PERSON OR PROPERTY...........................................................................11
8.01 Indemnity of Landlord...................................................................................11
ARTICLE 9 ASSIGNMENT AND SUBLETTING BY TENANT....................................................................12
9.01 Conditions..............................................................................................12
9.02 Assignment..............................................................................................12
9.03 Subletting..............................................................................................12
9.04 First Offer to Landlord.................................................................................12
9.05 Corporate Control.......................................................................................13
9.06 Relocation..............................................................................................13
ARTICLE 10 SALE AND MORTGAGE BY LANDLORD.........................................................................13
10.01 Transfers by Landlord...................................................................................13
10.02 Subordination and Attornment............................................................................13
10.03 Execution of Instruments................................................................................14
10.04 Status Statement........................................................................................14
ARTICLE 11 EXPROPRIATION.........................................................................................14
11.01 Definitions.............................................................................................14
11.02 Total Taking of Premises................................................................................14
11.03 Partial Taking of Premises..............................................................................14
11.04 Partial Taking of Project...............................................................................14
11.05 Surrender...............................................................................................14
11.06 Awards..................................................................................................15
ARTICLE 12 RULE AND REGULATIONS..................................................................................15
12.01 General Purpose.........................................................................................15
12.02 Loading and Delivery....................................................................................15
12.03 Construction Procedures.................................................................................15
12.04 Repugnancy..............................................................................................15
12.05 Observance..............................................................................................16
12.06 Non-Compliance..........................................................................................16
ARTICLE 13 COMMUNICATION.........................................................................................16
13.01 Notices.................................................................................................16
13.02 Authority for Action....................................................................................16
13.03 Withholding of Consent..................................................................................16
ARTICLE 14 DEFAULT...............................................................................................16
14.01 Force Majeure...........................................................................................16
14.02 Events of Default.......................................................................................17
14.03 Interest and Costs......................................................................................17
14.04 Landlord's Right to Perform Covenants...................................................................17
14.05 Waiver of Exemption and Redemption......................................................................17
14.06 Termination.............................................................................................18
14.07 Payments................................................................................................18
14.08 Remedies Cumulative.....................................................................................18
ARTICLE 15 SURRENDER AND TERMINATION.............................................................................18
15.01 Surrender of Possession.................................................................................18
15.02 Tenant's Property, Personal Property and Improvements...................................................18
15.03 Merger..................................................................................................19
15.04 Payments After Expiration or Termination................................................................19
15.05 Holding Over............................................................................................19
ARTICLE 16 AMENDMENT AND WAIVER..................................................................................19
16.01 Amendment or Modification...............................................................................19
16.02 No Implied Surrender or Waiver..........................................................................19
ARTICLE 17 INTERPRETATION........................................................................................19
17.01 Time....................................................................................................19
17.02 Obligations as Covenants................................................................................20
17.03 Severability............................................................................................20
17.04 Governing Law...........................................................................................20
17.05 Grammatical Conformance.................................................................................20
17.06 Headings and Captions...................................................................................20
17.07 Extended Meanings.......................................................................................20
ARTICLE 18 CONTRACTUAL...........................................................................................20
18.01 Entire Agreement........................................................................................20
18.02 Relationship of Parties.................................................................................20
18.03 Joint and Several Liability.............................................................................20
18.04 Successors Bound........................................................................................20
18.05 Registration............................................................................................20
18.06 Division of Project.....................................................................................21
</TABLE>
EXHIBIT 6.3
EMPLOYMENT AGREEMENT
BETWEEN: MINDFULEYE.COM SYSTEMS INC. (the "Company" and
___________________________ ("Employee")
The Company hereby hires the Employee on the terms and conditions set forth in
this agreement.
1. Probation - The Employee agrees that she is on probation during the first 90
days of employment at the Company, and that the Company may terminate her
employment at any time without notice during this period. This condition does
not apply if this agreement is being made with an existing employee that has
provided greater than 90 days of service to the Company.
2. Salary and Benefits - The Company shall pay the Employee that amount fixed
from time to time, payable in instalments on the ___th and last day of each
month, less all applicable deductions. Retroactive to __________, your annual
salary will be $______, which will be reviewed approximately every 26 weeks in
conjunction with a full performance review. The employee shall be entitled to
three weeks paid vacation per year. No later than ____________, the company
begin paying monthly Medical Service Plan premiums directly to the Government of
British Columbia on the behalf of the employee.
3. Background checks - The Employee hereby authorizes the Company to conduct all
investigations about the Employee it deems necessary, including but not limited
to employment and character references, authentication of credentials and
qualifications, work style and skill testing.
4. Duties - The Employee will report to Todd Cusolle. The Company reserves the
right to require the Employee to assume new and varied duties and
responsibilities or to alter the reporting relationship or the geographic
location of employment from time to time. Any changes that may occur pursuant to
this paragraph will not affect or change any other part of this agreement. The
Employee agrees that the hours of work will vary and may be irregular and will
be those hours required to meet the objectives of the Employee's employment.
5. Company Policies - The Employee agrees to comply with all rules and
restrictions that the Company may impose from time to time, commonly referred to
as Company Policies.
6. Confidentiality - The Employee agrees that she/he will, during the course of
his/her employment with the Company and forever afterward, keep confidential and
refrain from using, directly or indirectly, all confidential and proprietary
information known or used by the Company in its business ("Confidential
Information"), including without limitation, (1) concepts, techniques,
processes, designs, cost data, software programs, algorithms, formulas,
development or experimental work, work in process, and other technical know-how
or trade secrets, (2) information concerning business opportunities, including
without limitation all business plans, and ventures considered by the Company,
whether or not pursued, (3) customer information, including without limitation
customer names and addresses, markets, pricing data and knowledge of the
Company's contracts with its customers, and (4) financial information, including
without limitation the Company's organizational structure, costs, sales, income,
profits, salaries and wages.
The Employee acknowledges that the Company receives confidential or
proprietary information from third parties for certain limited purposes. The
Employee agrees to hold such information in the strictest of confidence and not
to use such information for the benefit of anyone other than the Company or such
third party, without the express authorization of a Director of the Company, and
then only in accordance with the terms pursuant to which such information was
provided.
The Employee hereby certifies that she/he has not and will not bring to the
Company or use or incorporate into any work product any property of a third
party, including without limitation confidential information or trade secrets.
While employed by the Company, the Employee shall honour all obligations that
the Employee has to a former employer or third party.
<PAGE>
- 2 -
7. Non-competition - The Employee agrees that he/she will not, without the prior
written consent of the Company, for a period of six months from the termination
of her/his employment with the Company, regardless of whether the termination is
a breach of this agreement, either individually or in conjunction with any other
person, firm, association or corporation, solicit business from any past,
present or potential client of the Company, nor engage or be employed in any
business in competition with the Company within the Canadian Provinces of
British Columbia, Alberta and Ontario or the states of Washington, Oregon, and
California. The Employee agrees that there can be no further geographical limits
to this covenant not to compete due to the nature of the business of the
Company.
8. Non-Solicitation - The Employee agrees that for a period of one year
following the termination of this agreement, the Employee will not solicit or
hire or take away, directly or indirectly, any employee of or contractor to the
Company.
9. Intellectual Property - The Employee agrees that all know-how, software,
improvements, discoveries or inventions, (whether or not deemed patentable or
copyrightable), copyrights and other intellectual property ("Works") conceived,
devised, made, developed or perfected by her/him during the period of his/her
employment and related in any way to the Company's business, including
development and research being carried on by the Company, shall be promptly
disclosed to and are the sole and absolute property of the Company. To the
extent that the Employee authors a work to which a copyright could be claimed,
the Employee hereby waives in perpetuity any moral rights that the Employee may
have in such work.
The Employee agrees to keep and maintain adequate and current written
copies and records of all work done by the Employee with respect to the
Company's business, which records and copies shall be available at all times to
the Company and are agreed to be the sole property of the Company. In addition,
the Employee shall ensure that all work product is backed up as a safeguard
against loss or destruction, and that such backups are maintained in accordance
with Company policy as modified from time to time.
10. Return of Materials and Equipment - The Employee shall return to the
Company, immediately upon termination of her/his employment, regardless of how
that termination should occur, all designs, devices, equipment, documents,
specifications, business documents, computers and software, lists, records,
files (electronic or otherwise) and all other material received during the
course of employment from the Company or relating in any way to the Company's
business or its' Confidential Information, including all copies of these items
however made or obtained.
11. Termination - Unless an employee is terminated for cause, the Company's
maximum liability for any severance pay in lieu of notice shall be limited to
the number of weeks of severance pay specified in the British Columbia
Employment Standards Act in force at the time of termination.
DATED:
/s/ [Illegible]
- -------------------------------(seal)
Signature
Name - please print
MindfulEye.com Systems Inc.
/s/ [Illegible]
- -------------------------------
By its authorized signatory
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,411
<SECURITIES> 0
<RECEIVABLES> 2,397
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,808
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,963
<CURRENT-LIABILITIES> 27,049
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (289,086)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 289,086
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289,086)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
