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IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THIS FORM 10-K IS BEING FILED IN
PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number 0-19596
SLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-36-32297
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30 ROCKEFELLER PLAZA, SUITE 4314, NEW YORK, NEW YORK 10112-4399
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 332-1610
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK,
PAR VALUE $.01
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: YES X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 31, 1996 was $18,094,607.
As of March 31, 1996, 18,859,679 shares of the Registrant's Common Stock, $.01
par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
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PAGE
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PART I
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Item 1. Business .............................................................. 1
Item 2. Properties ............................................................ 6
Item 3. Legal Proceedings ..................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ................... 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . 8
Item 6. Selected Financial Data ............................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 10
Item 8. Financial Statements and Supplementary Data ........................... 15
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure .................................................. 44
PART III
Item 10. Directors and Executive Officers of the Registrant .................... 44
Item 11. Executive Compensation ................................................ 46
Item 12. Security Ownership of Certain Beneficial Owners and Management ........ 53
Item 13. Certain Relationships and Related Transactions ........................ 54
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ....... 55
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PART I
ITEM 1. BUSINESS
OVERVIEW
The continuing operations of SLM International, Inc. and its subsidiaries
(collectively, the "Company") include the design, development, manufacturing and
marketing of a wide range of sporting goods products. The Company is a leading
manufacturer of hockey and inline products marketed under the CCM brand name,
and licensed sports apparel under the CCM and #1 Apparel names. The Company
maintains a diversified mix of products to avoid dependence upon the success of
a single product, product category, theme or fad. The Company has expanded its
business since its inception in 1976 through internal new product development,
strategic acquisitions and licensing arrangements.
The Company believes that it is one of the world's leading manufacturers of
hockey and hockey related products, including hockey uniforms, protective
equipment, hockey, figure and inline skates, street hockey products and licensed
sports apparel.
The Company sells its products to more than 4,000 customers in North America,
including mass merchandisers, department stores, warehouse clubs, catalogue
retailers, wholesalers, cooperative buying groups, sporting goods shops and
specialty retailers. Outside North America, the Company sells its products in
approximately 30 countries worldwide through a network of international
distributors.
The Company's growth has included acquisitions of stock or certain assets of
companies, often with recognized trademarks, including those of CCM Inc.,
acquired in 1983 (hockey skates and equipment), St. Lawrence Manufacturing
Company Inc., acquired in 1985 (ice skate blades), and #1 Apparel, Inc. and #1
Apparel Canada Inc. ("#1 Apparel"), acquired in 1994 (licensed sports apparel).
REORGANIZATION CASE
SLM International, Inc. and six of its subsidiaries (collectively, the
"Debtors") filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code (the "Filing") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") on October 24, 1995 (the
"Petition Date"). The Company and those subsidiaries are presently operating
their businesses in the ordinary course as debtors-in-possession subject to the
jurisdiction of the Bankruptcy Court and have met all of their post-Petition
Date obligations to suppliers of goods and services. The Bankruptcy Court has
entered an order authorizing the joint administration of the Debtors' Chapter 11
cases (the "Chapter 11 Cases").
In the Chapter 11 Cases, substantially all domestic liabilities as of the
Petition Date are subject to resolution under a plan of reorganization to be
voted upon by the Company's creditors and stockholders and confirmed by the
Bankruptcy Court. The Company (and each of the Debtors) has filed schedules with
the Bankruptcy Court setting forth the assets and liabilities of the Company as
of the Petition Date as shown by the Company's accounting records. By order
dated March 20, 1996, the Bankruptcy Court fixed May 15, 1996 as the deadline by
which all of the Company's and its subsidiaries' creditors are required to file
their proofs of claim against the Company (and each of the Debtors). The
ultimate amount and settlement terms for such liabilities are subject to a plan
of reorganization or other order of the Bankruptcy Court and, accordingly, are
not presently determinable.
Under the Bankruptcy Code, the Company may elect to assume or reject leases,
employment contracts, service contracts and other executory pre-Petition Date
contracts, subject to Bankruptcy Court approval. The Company cannot presently
determine or reasonably estimate the ultimate liability which may result from
the filing of claims for any rejected contracts and no provisions have yet been
made for these items.
Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and the holders of the Company's 6.76% Senior Notes (the
"Senior Noteholders") which would have allowed these lenders to accelerate
repayment of these loans. However, as a result of the pendency of the Chapter 11
Cases, no principal or interest payments will be made on any pre-Petition Date
debt without Bankruptcy Court approval or until a plan of reorganization
defining the repayment terms has been developed and confirmed by the Bankruptcy
Court.
The Bankruptcy Court has authorized the Company to use the cash generated by its
operations to continue to fund its business obligations, and to pay among other
things, pre-Petition Date wages, salaries, sales commissions, employee benefits
and customs duties, honor manufacturer's warranties and pay certain non-U.S.
pre-Petition Date liabilities. These various Bankruptcy Court authorizations
provide the Company with cash
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and liquidity so that it can continue to conduct its operations in the ordinary
course. The Company expects to continue to fund its working capital and capital
expenditures requirements through either cash generated by its operations or
through credit facilities as necessary. However, there can be no assurance that,
if needed, the Company will be able to obtain such credit facilities or, if
obtained, that such facilities will be sufficient to enable the Company to meet
its liquidity requirements. The Company's financing requirements for long-term
growth, future capital expenditures and debt service cannot be determined until
a plan of reorganization is developed and confirmed by the Bankruptcy Court. The
Company is not presently able to predict when the Chapter 11 Cases will be
concluded or on what basis.
DISCONTINUED OPERATIONS
In December 1994, the Company determined that it would hold its investments in
its toy and fitness businesses operated primarily by its Buddy L Inc. and Buddy
L Canada Inc. subsidiaries (collectively, "Buddy L") for sale. Accordingly, the
results of operations of these businesses have been accounted for as
discontinued operations for all periods in the accompanying consolidated
financial statements. On March 2, 1995, Buddy L Inc., a wholly-owned subsidiary
of the Company, filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the District of Delaware. On May 9, 1995,
the Company accepted the bid to sell certain assets and liabilities of the Buddy
L toy business to Empire of Carolina, Inc. The bid was approved by the
Bankruptcy Court on May 19, 1995 and the transaction closed on July 7, 1995. The
Bankruptcy Court approved sale of Buddy L's fitness business was completed on
June 30, 1995. At December 31, 1994, the Company recorded a loss of $11.3
million, net of income taxes, for the disposition of its discontinued
operations, including the estimated 1995 operating loss through the disposition
date. As a result of the finalization of the sale of the Buddy L toy and fitness
businesses, the terms of which changed substantially from those previously
proposed; a change in the anticipated allocation of the sale proceeds amongst
the various creditors (see Settlement Agreement below) and the liquidation of
the remaining Buddy L assets (primarily accounts receivable and real property);
and an increase in estimated phase out costs, an additional loss from
disposition of discontinued operations of $25.6 million was recorded during the
year ended December 31, 1995.
On December 19, 1995, the Bankruptcy Court approved a settlement agreement (the
"Settlement Agreement") in the Buddy L Inc. Chapter 11 case between the Company,
Buddy L Inc., its creditors and the Company's banks and Senior Noteholders,
resolving the allocation of the proceeds and expenses from the disposition of
the Buddy L toy and fitness businesses. A plan of reorganization and a
disclosure statement for Buddy L Inc. were filed with the Bankruptcy Court
embodying the terms of the Settlement Agreement. A hearing on the adequacy of
the disclosure statement has not yet been scheduled.
CONTINUING OPERATIONS
Industry Background
In its annual survey of sports participation, the National Sporting Goods
Association ("NSGA") included among the Top 10 Growth Sports (by percentage
increase) in the U.S. for 1994, inline skating (57.2%) as No. 1, roller hockey
(50.3%) as No. 2 and ice hockey (14.5%) as No. 10. The NSGA has not yet
published comparable data for these markets for 1995.
The Company estimates the worldwide ice hockey market at approximately $750
million in 1994. The Company believes that the popularity of ice hockey will
grow as the National Hockey League ("NHL") continues to expand into new markets
in the U.S., with recent expansions in both California and Florida and the
relocation of existing teams to Texas, Colorado and Arizona.
The Sports Marketing Research Group, Inc., an independent market research
company, estimates the worldwide inline, street and roller hockey markets at
approximately $2.0 billion in 1995. This rapidly growing segment is expected to
continue to grow because (i) inline roller skates have a strong appeal to health
and fitness conscious consumers who use the product for physical conditioning
and recreation; (ii) hockey players and alpine and cross-country skiers are
increasingly using the product for off-season training; and (iii) sports such as
inline roller and street hockey as well as long distance and speed inline roller
skate racing are becoming increasingly popular.
The Company estimates the licensed sports apparel market in the U.S. and Canada
was approximately $3.8 billion in 1994. The market is divided primarily among
five sports leagues: the National Football League ("NFL") ($1.3 billion), Major
League Baseball ("MLB") ($1.2 billion), the National Basketball Association
("NBA") ($700 million), the National Collegiate Athletic Association ("NCAA")
($325 million) and the NHL ($275 million).
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Strategy
The Company's strategy with respect to hockey products is to maximize the
visibility of the CCM trademark in the NHL and other professional and amateur
hockey leagues. This strategy is based upon the Company's belief that the high
visibility of the CCM trademark leads to greater retail sales of its hockey
products. The CCM trademark appears on players' helmets, jerseys, pants, gloves
and skates. Unlike some of its competitors, the Company has not generally
pursued a strategy of multiple player endorsements, but rather has concentrated
on enhancing its relationships with the major hockey leagues. The Company has
licenses for certain hockey jerseys with the NHL, the American and Canadian
Hockey Leagues and most major NCAA hockey teams. To complement this strategy,
the Company provides both professional and amateur hockey players with a high
level of service and attention.
The Company has been able to use its existing manufacturing, importing and
distribution capabilities to capitalize on the success and popularity of several
trends and technologies in the sporting goods industry. The Company's agreement
with Reebok International Ltd. ("Reebok") enables it to take advantage of the
growing popularity of hockey by using Reebok's Instapump fitting system and
trademarks on ice hockey skates. In addition, the acquisition of #1 Apparel has
enabled the Company to utilize its sports apparel manufacturing capabilities and
distribution network to capitalize on the popularity of licensed sports apparel.
Hockey and Figure Skates
The Company markets a range of hockey and figure skates from professional
caliber premium hockey skates to popular priced figure and recreational hockey
skates. All of these products, including the Tacks line of premium hockey
skates, are sold under the CCM trademark. The Company estimates that during the
1994-1995 season, approximately 35% of NHL players wore its skates. The Company
also manufactures private label skates using specific retailers' brand names, as
well as the CCM trademark. The Company believes that it was the second largest
manufacturer of hockey and figure skates in North America in 1995, based on
units sold. The Company also markets premium hockey skates incorporating
Reebok's Instapump fitting system and technology which is sold using the CCM,
Tacks, Reebok and Instapump trademarks. This technology consists of an air
bladder strategically placed inside the skates which, when inflated, provides a
customized fit.
The Company believes that it is the world's largest manufacturer of hockey and
figure skate blades (based on units sold) with sales of more than one million
pairs per year. The Company's hockey skate blades, which are sold under the SLM
and CCM trademarks, are used by players of all skill levels from novice to
professional. Using its MK trademark the Company manufactures premium quality
figure skate blades, including skate blades for many of the world's most
prominent Olympic and professional figure skaters.
Hockey Equipment
The Company manufactures and markets a complete range of hockey helmets, pants,
shin pads, shoulder pads, elbow pads and gloves. All of the Company's protective
equipment is marketed under the CCM trademark. Sub-brands Supra, Ultra and
Powerline, which accompany the CCM trademark, differentiate the product by
quality and price point. The Company estimates that during the 1994-1995 hockey
season approximately 70% of NHL players used its hockey pants, approximately 25%
used its gloves and approximately 80% used its helmets.
Inline Roller Skates and Street and Roller Hockey
The Company manufactures and markets a range of inline roller skates and related
protective equipment and accessories under the CCM trademark for the beginning
recreational skater up to the professional inline roller hockey player. It has
also developed inline roller skates using the Revolver chassis and Arrester
braking system developed in association with Scott Olson, the founder of
Rollerblade Inc. The establishment of two professional inline roller hockey
leagues, which began play in 1994, creates further opportunities for the
Company's inline skates and roller hockey equipment. The Company believes that
the increasing popularity of hockey, as the NHL expands into new markets, will
result in growth in street and roller hockey as well.
Sports Apparel
Hockey Apparel. Using the CCM trademark, the Company markets a broad
range of hockey apparel, including authentic and replica NHL hockey jerseys
which are sold pursuant to certain license agreements with the NHL. The Company
also manufactures the authentic jerseys that are used by all of the players in
the American Hockey League, Canadian Hockey League and most major NCAA hockey
teams, as well as many amateur hockey teams in North America. These authentic
and replica jerseys are sold primarily through
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retailers. The Company believes that it is the world's largest manufacturer of
hockey jerseys based on total dollars and units sold.
#1 Apparel. In January 1994, the Company acquired #1 Apparel, the
licensed sports apparel division of K-Products, Inc., an Iowa-based apparel
manufacturer. #1 Apparel manufactures a high quality line of baseball style caps
and jackets using its own unique designs and graphics under licenses from the
NFL, MLB, NHL, major colleges and universities and the NCAA. The acquisition
included a manufacturing facility in Ontario, Canada, and all rights to the #1
Apparel name, trademarks, copyrights and designs.
#1 Apparel also manufactures premium merchandise, primarily caps, shirts and
jackets, for corporate customers. Under the terms of a non-compete agreement
sales of premium merchandise were limited to Canada during 1994 and 1995.
Beginning in 1996, premium product will be introduced in the U.S. market.
Sales and Marketing
The Company's sporting goods products are sold throughout the world. In North
America, the Company sells to more than 4,000 customers, including independent
sporting goods stores, cooperative buying groups, mass merchandisers, sporting
goods chains, department stores and wholesalers. Internationally, the Company
has exclusive distributors in 30 countries in Europe, South America, Central
America, Africa, Australia and the Far East. Sporting goods products are sold to
certain large customers by the Company's in-house sales staff, while other
accounts are serviced by an extensive network of approximately 75 independent
sales representatives. In 1995, no single account represented more than 10% of
the Company's consolidated net sales of sporting goods. The Company distributes
its sporting goods products from distribution centers in the United States and
Canada. (See Note 19 to the Consolidated Financial Statements).
Retail sales of hockey products are seasonal, with the majority of retail sales
occurring in the third and fourth calendar quarters. The Company believes that
first and second quarter sales of inline roller skate products and #1 Apparel
licensed products may reduce the Company's reliance on third and fourth quarter
sales of hockey products.
GENERAL
Backlog
The timing of orders is largely influenced by the degree of consumer demand for
product lines, inventory levels of retailers, marketing strategies, seasonality
and overall economic conditions. The Company's consolidated order backlog for
continuing operations at December 31, 1995 decreased 30% to approximately $19.9
million as compared to December 31, 1994. Product shortages, cancellations,
returns and allowances may reduce the amount of sales ultimately realized from
the fulfillment of backlog orders.
Trademarks, Patents and Licenses
The principal trademarks owned by the Company are listed in the table set forth
below. These trademarks are exclusive, perpetual and royalty-free for the
product categories indicated, except the CCM trademark which is owned by CCM
Holdings (1983) Inc. which is 50% owned by the Company through its subsidiaries.
The remaining 50% is owned by an unaffiliated Canadian bicycle manufacturer.
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Trademarks Category
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CCM Hockey apparel, hockey equipment, hockey, figure and
inline skates and street hockey equipment
Tacks, VAKUTACKS Hockey skates
Supra, Ultra, Powerline Hockey pants and protective equipment
Ultrafil, Airknit, Suprafil Hockey apparel
# 1 Apparel Apparel
</TABLE>
The Company's principal license agreements for its continuing operations are
listed in the table set forth below. In general, the license agreements have
terms of one to five years and the Company has usually been able to renew its
licenses upon expiration. License fees and royalties typically range from 5% to
11% of net sales of the licensed product.
The Company's hockey jersey license with the NHL expires on June 30, 1999. Under
this agreement, the Company has exclusivity for authentic game jerseys through
June 30, 1996 (except for the Colorado Avalanche)
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and is required to provide to each NHL team a certain quantity of jerseys free
of charge. The cost of these goods, approximately $300,000 in 1995, is expensed
by the Company and recorded in selling, general and administrative expenses. In
addition, the Company has exclusivity with the NHL for authentic All Star Game
jerseys and authentic and replica practice jerseys, and non-exclusive licenses
for replica jerseys for all teams through the entire term of the agreement.
Effective July 1, 1996, the Company's exclusivity for authentic game jerseys
will be reduced to 13 teams.
The Company has entered into a non-exclusive license agreement with the National
Hockey League Players Association under which the Company may sell authentic
game and replica hockey jerseys bearing the names and numbers of NHL players.
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Licensor Subject of License Categories
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National Hockey League NHL team logos and names Hockey jerseys, apparel,
equipment bags and headwear
Reebok International Ltd. Reebok and Instapump trademarks and pump air Hockey skates
bladder fitting system technology
NHL Players Association Players' names and numbers Hockey jerseys
</TABLE>
Manufacturing and Sourcing
North America. The Company manufactures and distributes most of its
products at eight facilities located in Vermont, New Hampshire, Ontario and
Quebec. Collectively these facilities have capabilities for knitting, cutting,
sewing, embroidery, silk screening, injection and vacuum molding, metal stamping
and plating, and skate and equipment manufacturing.
The growth rate the Company experienced in recent years significantly increased
the utilization of its manufacturing, distribution, office and showroom
facilities. From 1992 through 1995 the Company expanded and/or replaced many of
its office, showroom and distribution facilities and upgraded or replaced its
computer systems. Additionally, during 1994 and 1995, the Company began
implementing new production line methods aimed at increasing efficiency and
productivity and reducing inventory.
A disruption resulting in the shutdown or impairment of any of the Company's
manufacturing facilities could adversely affect the Company. The Company
maintains insurance coverage which might mitigate any such adverse effect.
Foreign. The Company sources products from China, Hong Kong, Korea,
Taiwan, Thailand and the Philippines. The Company's manufacturing facility in
Slough, England manufactures its premium MK figure skate blades.
No single supplier is responsible for products representing more than 10% of the
Company's consolidated net sales.
Research and Product Development
The majority of the Company's sporting goods products are conceived of and
developed at its own facilities, or are developed jointly with third party
inventors. The Company operates research and development facilities staffed by
27 people in Quebec. The employees at these facilities include designers,
engineers and model makers. These facilities include woodworking, spray
painting, molding and sculpting capabilities, and have creative services
departments which are responsible for apparel, packaging and catalog design and
development.
Competition
The sporting goods industry is highly fragmented. The Company competes with
numerous companies in team related sporting goods, equipment and sports apparel.
While the Company is renowned for its high quality and innovative products and
provides high levels of service to its customers, some of its competitors may
have greater financial resources. The Company's major competitors include (i)
with respect to licensed apparel, Russell Corporation, Champion Products Inc.,
VF Corp., Nike, Inc. and Starter Inc., (ii) with respect to hockey equipment,
Canstar Sports Inc. (acquired by Nike Inc. in February 1995) and Karhu Corp.,
(iii) with respect to hockey and figure skates, Canstar, and (iv) with respect
to the inline roller skates market, Rollerblade Inc., First Team Sports Inc.,
Canstar and Variflex Inc.
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Employees
As of December 31, 1995, the Company's continuing operations employed
approximately 1,550 persons. Approximately 1,280 are employed in Canada, 185 are
employed in the United States and the balance are employed abroad. None of the
Company's employees in the United States are unionized, while approximately 625
of its employees in Canada are unionized. The Company's current three year
collective bargaining agreement with the union at its St. Jean, Quebec plant
expires in late 1997 and the Company maintains good relations with this union.
The collective bargaining agreement with the union at the Company's skate blade
manufacturing plant in Beauport, Quebec expired in September 1994. In January
1995, the unionized employees at this facility rejected management's new
contract proposal, subsequent to which management instituted a lockout. A new
contract, expiring April 10, 2000 was entered into on April 20, 1995, at which
time management ended the lockout. Management believes that this action did not
have a materially adverse effect on the Company's financial condition and
results of operations for the year ended December 31, 1995.
ITEM 2. PROPERTIES
The Company believes that its existing manufacturing and distribution facilities
have sufficient capacity to support the Company's business without the need for
significant additional or upgraded equipment or capital expenditures. The
following table summarizes each of the Company's principal facilities for its
continuing operations.
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LOCATION USE APPROXIMATE LEASE/
SQUARE FEET OWN
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UNITED STATES
New York, New York Executive offices 3,000 Lease
Bradford, Vermont Hockey jersey finishing and distribution 55,000 Own
Peterborough, New Hampshire U.S. distribution center and administrative offices 144,000 Lease
CANADA
Beauport, Quebec Skate blade manufacturing 155,000 Lease
St. Jean, Quebec Hockey equipment and skate manufacturing 138,000 Lease
St. Jean, Quebec Helmet manufacturing 53,000 Lease
St. Hyacinthe, Quebec Hockey apparel knitting 78,000 Lease
St. Hyacinthe, Quebec Canadian distribution center and administrative offices 180,000 Lease
St. Hyacinthe, Quebec Hockey socks knitting 12,000 Lease
Cap de la Madeleine, Quebec Hockey apparel sewing 12,000 Lease
Montreal, Quebec Executive and marketing offices and showroom 12,200 Lease
Mt. Forest, Ontario Apparel manufacturing 115,200 Own
EUROPE
Slough, England Premium figure skate blade manufacturing and distribution 20,000 Lease
Paris, France European sales office 200 Lease
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ITEM 3. LEGAL PROCEEDINGS
Under Section 362 of the Bankruptcy Code, the Company's filing of a Chapter 11
petition, among other things, operates as an automatic stay of the commencement
or continuation of any legal action against the Company or any act to enforce a
lien on its property with respect to claims that arose prior to the commencement
of the Chapter 11 Cases. (See Item 1 for discussion of the Chapter 11 Cases)
Accordingly, pending litigation against the Company and its subsidiaries arising
from pre-Petition Date claims has been stayed by reason of the Filing in
accordance with the Bankruptcy Code, unless and until the stay is lifted with
respect to a particular case.
A. PRODUCT LIABILITY:
Certain subsidiaries of the Company are defendants in a personal injury action
which was filed in the United States District Court for the District of
Massachusetts in 1989 involving a spinal injury incurred by the plaintiff while
wearing a hockey helmet purported to have been manufactured or sold by such
subsidiaries. In view of the Filing, the Court dismissed the case without
prejudice to either party moving to restore it to the dockets upon final
determination of the bankruptcy proceedings. The plaintiff seeks damages related
to his quadriplegia consisting of approximately $6.3 million for economic loss
and long-term medical and health care costs and $2.7 million for, among other
things, pain and suffering. The plaintiff has further asserted a claim under
Massachusetts General Laws, Chapter 93A, for breach of warranty, including a
claim for treble damages for any and all loss. The Company has insurance
coverage of approximately $0.4 million plus the substantial portion of legal
costs for this action. Based on the facts of this case, the Company believes
that it has meritorious defenses to the claim. However, an adverse outcome of
this matter could have a materially
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adverse effect on the reorganization of the Company and on its financial
condition. The Company has not provided for any loss in its consolidated
financial statements which might result from this litigation.
The Company is also a defendant in other product liability suits for personal
injuries. The Company believes that any resulting losses and defense costs will
be within applicable insurance coverage and the Company's provision for such
losses and costs.
B. ENVIRONMENTAL MATTERS:
In 1991, the Vermont Department of Environmental Conservation ("VTDEC") notified
the Company that the Bradford, Vermont property operated by its wholly-owned
subsidiary, Maska U.S., Inc. ("Maska"), had been included on the U.S.
Environmental Protection Agency's Comprehensive Environmental Response,
Compensation and Liability Information System and the Vermont Hazardous Sites
List and was being evaluated for possible remedial action. Under relevant
environmental laws, Maska, as an owner of the property, is potentially liable
for the entire cost of investigating and remediating the contamination emanating
from its Bradford property and certain civil penalties. It is possible that
VTDEC's claims, if any, against Maska are stayed by virtue of the pendency of
Maska's Chapter 11 case. VTDEC has expressed the view that they are not. The
Company can make no assurance that these actions are stayed.
Maska has undertaken its own investigation to determine the extent of
contamination, the rate of movement and the concentration of the contaminants,
the appropriate action required for site remediation and the identification of
other parties who should bear a share of the costs of remediation. Maska may
seek recovery against the former owners of its Bradford property and facility
and certain of their affiliated companies for the costs of such investigation,
remediation and the settlement with the adjacent property owner discussed below.
In addition, Maska has brought suit against certain of its insurance carriers
for their failure to defend or indemnify Maska with respect to these claims. It
is uncertain at this time whether the prior owner or the Company's insurers will
bear their share of the costs and any damages. During April 1996, Maska and the
State of Vermont signed a consent decree setting forth the terms under which
Maska will remediate the contaminated property. The consent decree is subject to
several conditions, including the approval of the Bankruptcy Court and payment
by the Company of approximately $0.3 million in certain civil penalties and
certain State of Vermont oversight fees. The Company has accrued approximately
$0.3 million related to the consent decree.
While the total cost of investigation and remediation cannot be determined until
the investigation required by VTDEC is complete and the extent of Maska's
remedial obligations has been determined, the Company believes that it is
reasonably possible that these costs will be in a range of $1.0 to $2.0 million.
The Company has previously accrued approximately $1.4 million toward these
costs, which includes capital costs and operating, maintenance and monitoring
costs over a period of up to 30 years after construction of the remedy.
While the Company believes that other parties, including insurers, may be liable
for some or all of these costs, there can be no assurance that these parties
will bear these costs and therefore the Company has not assumed any recovery
from such third parties in estimating its potential liabilities. Based on
information available to the Company at this time, an outcome other than
anticipated for Maska's obligations for site remediation could have a materially
adverse effect on the financial condition of the Company.
In 1992, the owner of a property adjacent to Maska's manufacturing facility in
Bradford, Vermont, filed an action in Vermont Superior Court alleging that its
property has been contaminated as a result of the Company's manufacturing
activities and seeking compensatory and punitive damages under the Vermont
Groundwater Protection Law and various common law theories. During June 1995,
Maska reached a settlement of all claims with the adjacent landowner consisting
of $1.0 million cash (which was paid by July 15, 1995) and a $6.0 million note
bearing interest at 10% payable over five years based on a twenty year
amortization with the balance of principal payable in June 2000. The Company
recorded a provision of $7.0 million for this settlement during the year ended
December 31, 1995.
C. SECURITIES LITIGATION:
During May 1994, the Company was served with three complaints, in each case
filed in the U.S. District Court for the Southern District of New York, that
alleged violations of Sections 10(b) and 20 of the Securities Exchange Act of
1934 (the "1934 Act"). Each complaint also named as defendants certain current
and former officers and directors of the Company, sought class action status,
unspecified damages and certain fees and expenses. On July 14, 1994, the
respective plaintiffs filed a consolidated complaint that was purportedly
brought on behalf of all purchasers of the Company's common stock between July
12, 1993 and April 15, 1994.
7
<PAGE> 10
The defendants stipulated to certification of the purported class for procedural
purposes. On August 3, 1994, the Company and other defendants filed a motion to
dismiss the consolidated complaint. The Court has not ruled on that motion.
In November 1994, another complaint was filed in the U.S. District Court for the
Southern District of New York, which was purportedly brought on behalf of all
purchasers of the Company's common stock between May 2, 1994 and November 15,
1994. The complaint named as defendants the Company and certain current and
former officers and directors, and alleged violations of Section 10(b) and 20 of
the 1934 Act. The plaintiff in that complaint, the plaintiffs in the
consolidated complaint, and two additional plaintiffs together filed a second
consolidated complaint on January 5, 1995. The second consolidated complaint was
purportedly brought on behalf of all purchasers of the Company's common stock
between July 12, 1993 and November 21, 1994; names as defendants the Company and
certain current and former officers and directors; alleges violations of
Sections 10(b) and 20 of the 1934 Act; seeks class action status; unspecified
damages, and certain fees and expenses. The Company and individual defendants
have filed an answer to the second consolidated complaint, which denied all
substantive allegations.
On February 14, 1996, the Company, together with certain of its former and
present officers and directors, reached a settlement with the plaintiffs in this
litigation. The settlement provides for the cash payment by the Company's
insurer of $8.75 million on behalf of certain former and present officers and
directors of the Company who are defendants. In addition, the Company will issue
1,000,000 shares of its Common Stock. The settlement is subject to several
conditions, including the approval of the Bankruptcy Court and the U.S. District
Court for the Southern District of New York. As a result of this settlement, the
Company recorded a provision of approximately $1.6 million (the market value of
1,000,000 shares of common stock on the date the settlement was agreed to) in
the year ended December 31, 1995.
Other than certain legal proceedings arising from the ordinary course of
business, which the Company believes will not have a material adverse impact on
the results of operations, there is no other litigation pending or threatened
against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) PRICE RANGE OF COMMON STOCK
Since May 24, 1995, the Company's Common Stock trades on the NASD Electronic
Bulletin Board ("EBB") under the symbol "SLMI". Prior to that date, the
Company's Common Stock was traded on the NASDAQ Stock Market ("NASDAQ"). The
following chart sets forth, for the calendar periods indicated, the range of
closing prices for the Common Stock as reported on NASDAQ and EBB:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<C> <C> <C>
1994 First Quarter $ 25.50 $ 11.50
Second Quarter $ 14.00 $ 8.25
Third Quarter $ 11.25 $ 7.00
Fourth Quarter $ 7.13 $ 2.56
1995 First Quarter $ 6.50 $ 2.75
Second Quarter $ 3.88 $ 0.94
Third Quarter $ 3.75 $ 1.69
Fourth Quarter $ 3.63 $ 1.00
1996 First Quarter $ 2.13 $ 1.06
</TABLE>
(b) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
The approximate number of record holders of the Company's Common Stock as of
March 31, 1996 was 450. The Company believes that a substantially larger number
of beneficial owners hold such shares in nominee or depository form.
8
<PAGE> 11
The Company has not paid dividends on its Common Stock and has no current plans
to pay cash dividends in the foreseeable future. The Company is currently
restricted from paying cash dividends by its financing agreements and Chapter 11
proceedings.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes thereto included elsewhere in this Form 10-K. The selected consolidated
financial data as of and for the years ended December 31, 1995, 1994, 1993, 1992
and 1991 are derived from the consolidated financial statements of the Company.
In December 1994, the Company determined that it would hold its investment in
its toy and fitness businesses operated by its Buddy L Inc. and Buddy L Canada
Inc. subsidiaries for sale. Accordingly, these businesses have been reported as
discontinued operations for all income statement data presented below. However,
balance sheet data prior to December 31, 1994 has not been restated for these
discontinued operations.
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION(1))
YEARS ENDED DECEMBER 31,
(in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 160,973 $ 180,806 $ 126,034 $ 88,569 $ 67,191
Cost of goods sold 107,266 113,577 75,104 53,481 40,768
--------- --------- --------- --------- ---------
Gross profit 53,707 67,229 50,930 35,088 26,423
Gross profit margin (%) 33.4% 37.2% 40.4% 39.6% 39.3%
Selling, general and administrative
expenses 59,753 67,031 38,600 25,456 17,518
Unusual charges 15,471
--------- --------- --------- --------- ---------
Operating (loss) income (21,517) 198 12,330 9,632 8,905
Debt related fees 11,195
Other expense (income), net 1,484 (260) (499) (450) (495)
Interest expense 17,078 6,713 3,356 1,854 3,390
--------- --------- --------- --------- ---------
(Loss) income from continuing operations
before income taxes (51,274) (6,255) 9,473 8,228 6,010
Income taxes 605 (11) 3,779 2,760 1,808
--------- --------- --------- --------- ---------
(Loss) income from continuing operations $ (51,879) $ (6,244) $ 5,694 $ 5,468 $ 4,202
========= ========= ========= ========= =========
(Loss) income per share from continuing
operations(2) $ (2.75) $ (0.33) $ 0.30 $ 0.32 $ 0.61
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital (deficit) $ 110,088 $ (38,360) $ 78,623 $ 83,568 $ 42,855
Total assets 138,028 192,838 254,283 173,625 117,078
Short-term debt, including current portion,
long-term debt 702 173,471 79,700 32,376 27,716
Long-term debt 16,113 19,452 13,936
Liabilities subject to compromise under
reorganization proceedings 201,814
Stockholders' (deficit) equity (78,642) (6,284) 106,878 97,643 53,812
Total shares outstanding at year end(2) 18,860 18,860 18,805 18,545 15,788
</TABLE>
(1) On October 24, 1995, SLM International, Inc. and six of its
subsidiaries filed for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware.
(2) Adjusted for the effect of a three for two stock split in December
1993.
9
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. The Company and those
subsidiaries chose to seek court protection from creditors in order to conduct
their operations while preparing a reorganization plan. The Bankruptcy Court has
authorized the Company to use the cash generated by its operations to continue
to fund its business obligations. While the Company attempted, and would have
preferred, to reorganize outside of a bankruptcy court proceeding, the Company
viewed the Filing as the most viable alternative available given the adverse
impact on the businesses of inadequate liquidity. Nevertheless, disruptions that
occurred prior to and which may have been or may be caused by the Filing will
affect the Company's operating performance for a given period and could affect
the Company's results in 1996.
On March 6, 1995, the Senior Noteholders filed involuntary bankruptcy petitions
against certain of the Company's U.S. subsidiaries in the U.S. and against the
Company and certain of its Canadian subsidiaries in Canada. On March 24, 1995,
the United States Bankruptcy Court dismissed the involuntary petition filed
against two of the Company's U.S. subsidiaries (Maska U.S., Inc. and #1 Apparel,
Inc.). During June 1995, the Company entered into standstill agreements (the
"Standstill Agreements") with its bank lenders and Senior Noteholders that
provided a period of continued financing by its lenders, a sharing of collateral
by the bank lenders and Senior Noteholders and provided the Company a period
(through December 31, 1995) in which to restructure its debt without further
judicial proceedings. Additionally, the Company retained the investment banking
firm of Bear Stearns & Co., Inc. to assist the Company in exploring a wide
variety of possible financial transactions, including refinancing existing debt
and obtaining equity capital. In June 1995, in connection with the Standstill
Agreements, the Noteholders withdrew involuntary bankruptcy filings against the
Company and its subsidiaries in Canada.
As a result of significant operating losses in its toy and fitness businesses
during 1994, the Company decided in December 1994 that it would hold its
investment in Buddy L for sale. Consequently, these businesses have been
accounted for as discontinued operations. On March 2, 1995, the Company's
wholly-owned subsidiary Buddy L Inc. filed for reorganization under Chapter 11
of the United States Bankruptcy Code. On May 9, 1995, the Company accepted the
bid to sell certain assets and liabilities of the Buddy L toy business to Empire
of Carolina, Inc. The bid was approved by the Bankruptcy Court on May 19, 1995
and the transaction closed on July 7, 1995. The court approved sale of the
fitness business was completed on June 30, 1995. For further information
concerning discontinued operations, see Note 4 to the Consolidated Financial
Statements presented elsewhere herein.
The following discussion provides an assessment of the Company's results of
continuing operations, financial condition and liquidity and capital resources,
and should be read in conjunction with the Consolidated Financial Statements of
the Company and Notes thereto included elsewhere herein. (All references to
"Note(s)" refer to the Notes to the Consolidated Financial Statements.)
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
The Company's results of operations as a percentage of net sales for the periods
indicated were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Gross profit 33.4% 37.2% 40.4%
Selling, general & administrative expenses 37.1% 37.1% 30.6%
Unusual charges 9.6%
Operating (loss) income (13.3%) 0.1% 9.8%
Debt related fees 7.0%
Other expense (income), net 0.9% (0.1%) (0.4%)
Interest expense 10.6% 3.7% 2.7%
(Loss) income from continuing operations (31.8%) (3.5%) 7.5%
before income taxes
Income taxes 0.4% 0.0% 3.0%
(Loss) income from continuing operations (32.2%) (3.5%) 4.5%
</TABLE>
10
<PAGE> 13
1995 COMPARED TO 1994
Net sales of the Company's continuing operations decreased 11.0% to $161.0
million in the year ended December 31, 1995 as compared to $180.8 million in the
year ended December 31, 1994. The decline in sales included decreases of 10.1%
in protective equipment and 30.0% in licensed sports apparel, offset in part by
increases of 6.8% in hockey, figure and inline roller skates. Sales were
adversely affected by inadequate cash availability resulting in inventory
shortages versus customer orders. The sales growth in inline roller skates
resulted primarily from new and expanded product offerings in the inline roller
skate category in response to the continued growth in popularity of both
recreational skating and roller hockey. The decline in sales of licensed sports
apparel in 1995 from 1994 was due to the lingering effects of the NHL and MLB
labor problems which resulted in canceled orders, lost sales, product returns
and high retailer and manufacturer inventory levels.
Gross profit was $53.7 million in 1995 compared to $67.2 million in 1994, a
decrease of 20.1%. Measured as a percentage of net sales, gross profit margins
decreased to 33.4% in 1995 from 37.2% in 1994. Gross profit margin was adversely
affected by sales of excess, obsolete and slow moving inventories caused by
streamlining of product lines and more aggressive disposal of such items in
order to generate cash needed to support the Company's operations during the
period of its financial difficulties (see "Liquidity and Capital Resources"
below). These sales generated low profit margins as provisions for these excess,
obsolete and slow moving inventories were recorded to reduce them to net
realizable value. Provisions for excess, obsolete and slow moving inventories in
1995 were $5.7 million compared to $4.3 million in 1994.
Selling, general and administrative expenses in the year ended December 31, 1995
were $59.8 million compared to $67.0 million in the prior year, a decrease of
10.9%. Measured as a percentage of net sales, these expenses were 37.1% in 1995
and 1994. Expenses decreased primarily as a result of reduced variable selling
and distribution costs and certain legal and professional expenses, offset in
part by an increase in bad debt expense. Legal and professional fees related to
certain of the Company's environmental and product liability matters decreased
during 1995, as these cases were either settled or delayed due to the Company's
financial difficulties. Bad debt expense increased to $4.6 million in 1995 from
$3.4 million in 1994 due primarily to the financial difficulties of several
large U.S. and Canadian sporting goods and discount chain customers.
During 1995, the Company recorded significant unusual charges in continuing
operations totaling $15.5 million (see Note 5) due principally to litigation
settlements totaling $8.8 million and reassessment of the intangible assets
associated with the acquisition of #1 Apparel of $6.4 million.
Excluding the unusual charges, the operating loss for the year ended December
31, 1995 was $6.0 million compared to income of $0.2 million in 1994. Including
the unusual charges, the operating loss for 1995 was $21.5 million.
As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its Senior
Noteholders, the Standstill Agreements with its lenders and the Chapter 11
Cases, the Company's continuing operations incurred significant legal and
professional fees totaling $11.2 million for the year ended December 31, 1995.
These fees include the cost of the Company's legal counsellors, financial
advisors and consultants, as well as those of its bankers and Senior Noteholders
and certain payments made directly to these lenders. In addition, the Company
recorded $0.8 million for the intrinsic value of warrants provided to these
lenders. These costs are included as Debt Related Fees in the Consolidated
Statements of Operations. It is anticipated that additional significant
reorganization related fees will be incurred in future periods.
Interest expense increased in 1995 to $17.1 million from $6.7 million in 1994 as
a result of both increased working capital borrowings and higher interest rates
due to the Company's defaults under its financing agreements. These default
interest rates resulted in incremental interest expense of $5.7 million for the
year ended December 31, 1995. Of the 1995 interest expense, $10.1 million was
paid and $7.0 million was accrued and is still due.
The Company's loss from continuing operations for the year ended December 31,
1995 was $51.9 million ($2.75 per share) compared to a loss of $6.2 million in
the year ended December 31, 1994 ($0.33 per share). Excluding unusual charges,
default interest and debt related fees, the Company's 1995 net loss was $19.5
million. The unusual charges, default interest and debt related fees represented
62.2% of the Company's losses from continuing operations for the year ended
December 31, 1995.
For the year ended December 31, 1995, the Company recognized a loss on
discontinued operations of $25.6 million ($1.36 per share) due to the
finalization of the terms of sale of these operations. In 1994, discontinued
operations incurred a loss of $105.7 million ($5.61 per share).
11
<PAGE> 14
1994 COMPARED TO 1993
Net sales of the Company's continuing operations increased 43.5% to $180.8
million in the year ended December 31, 1994 as compared to $126.0 million in the
year ended December 31, 1993. The growth in sales included increases of 63.5% in
hockey, figure and inline roller skates, 34.4% in protective equipment and 30.7%
in licensed sports apparel. The sales growth in inline roller skates resulted
primarily from new and expanded product offerings in the inline roller skate
category in response to a surge in popularity of both recreational skating and
roller hockey. Sales of hockey skates and protective equipment increased
primarily as a result of the growing popularity of ice hockey in the United
States reflective of the expansion of the NHL into warm weather markets such as
Florida, Texas and California and increased media coverage, including a national
television contract. Approximately 85.9% of the increased sales of licensed
sports apparel in 1994 were the result of the acquisition of #1 Apparel in
January 1994. Sales of licensed sports apparel were negatively affected during
the fourth quarter of 1994 by the NHL and MLB labor problems which resulted in
canceled orders, lost sales, product returns and high retailer and manufacturer
inventory levels.
Gross profit was $67.2 million in 1994 compared to $50.9 million in 1993, an
increase of 32.0%. Measured as a percentage of net sales, gross profit margins
decreased to 37.2% in 1994 from 40.4% in 1993. The lower margins resulted in
part from post-acquisition manufacturing start-up inefficiencies at the #1
Apparel manufacturing plant in Mt. Forest, Ontario, where it was necessary to
relocate and reconfigure certain manufacturing equipment and processes and
re-train the work force. Additionally, gross profit was adversely affected by
higher provisions for excess, obsolete and slow moving inventories caused by the
NHL and MLB labor problems, streamlining of product lines and more aggressive
disposal of these inventories in order to generate cash needed to support the
Company's operations during the period of its financial difficulties (See
"Liquidity and Capital Resources" below). Provisions for excess, obsolete and
slow moving inventories in 1994 were $4.3 million compared to $0.8 million in
1993.
Selling, general and administrative expenses in the year ended December 31, 1994
were $67.0 million compared to $38.6 million in the prior year, an increase of
73.6%. Measured as a percentage of net sales, these expenses were 37.1% in 1994
versus 30.6% in 1993. The 43.5% increase in the Company's sales during 1994
resulted in higher selling expenses including royalties, commissions, freight,
cooperative advertising allowances and sales discounts and allowances, which
vary directly with sales. In addition, royalty expense of $7.5 million in 1994
included provisions of approximately $1.2 million for prospective minimum
royalty guarantee shortfalls due primarily to the integration of the #1 Apparel
business and the streamlining of the licensed sports apparel product line.
Redundant selling, distribution, general and administrative expenses resulting
from the acquisition of #1 Apparel negatively affected the Company as the
integration of #1 Apparel into the Company's existing structure was not
implemented until late in the year.
In order to sustain and support the Company's growth, it was necessary to
replace, expand, relocate and/or upgrade several of the Company's distribution
and office facilities, management information and telecommunications systems,
and increase spending on new product research and development, as well as sales,
marketing and administrative support functions. Legal and professional fees
related to certain of the Company's environmental and product liability matters
increased during 1994 as pre-trial and regulatory activities intensified. Bad
debt expense increased to $3.4 million in 1994 from $1.6 million in 1993 due
primarily to the bankruptcy of several large U.S. and Canadian sporting goods
and discount chain customers.
Operating income for the year ended December 31, 1994 was $0.2 million compared
to $12.3 million in 1993. The decrease was primarily the result of the lower
gross profit margins and higher selling, general and administrative expenses
discussed above.
Interest expense increased in 1994 to $6.7 million from $3.4 million in 1993 due
to higher working capital borrowings and capital expenditures needed to support
the Company's growth, the January 1994 acquisition of #1 Apparel for $15.1
million in cash and generally higher short-term interest rates.
The Company's loss from continuing operations for the year ended December 31,
1994 was $6.2 million ($0.33 per share) compared to income of $5.7 million in
the year ended December 31, 1993 ($0.30 per share).
Net sales of the Company's discontinued operations were approximately $181.5
million in 1994 compared to approximately $188.7 million in 1993. For the year
ended December 31, 1994, discontinued operations incurred a loss of $105.7
million ($5.61 per share), inclusive of a loss of $11.3 million ($0.60 per
share) expected from the disposition of the discontinued operations including
the estimated 1995 operating loss through the date of
12
<PAGE> 15
disposition (mid-1995). Discontinued operations had income of $2.4 million
($0.12 per share) for the year ended December 31, 1993.
INCOME TAXES
The Company's income tax provision is comprised of both United States and
foreign tax components. Due to changes in the relative contribution of income or
loss by country, differences in the effective tax rates between countries
(principally the U.S., Canada and Hong Kong) and permanent differences in
effective tax rates between income for financial statement purposes, the
consolidated effective tax rates may vary significantly from period to period.
The Company and its U.S. subsidiaries consolidate their income for U.S. federal
income tax purposes. However, gains and losses of certain subsidiaries may not
be available to other subsidiaries for tax purposes.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. A full valuation
allowance was provided in 1994 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. The Bankruptcy Court has
authorized the Company and these subsidiaries to operate their businesses in the
ordinary course while seeking to work out a plan of reorganization. The
Bankruptcy Court has also authorized the Company to use the cash generated by
its operations to continue to fund its business obligations, and to pay, among
other things, pre-Petition Date wages, salaries, sales commissions, employee
benefits and customs duties, honor manufacturer's warranties and pay certain
non-U.S. pre-Petition Date liabilities.
The Filing has enabled the Company to stabilize its liquidity position because
the cash requirements for the payment of accrued interest, accounts payable and
other liabilities, which arose prior to the Filing, are in most cases deferred
until a plan of reorganization is approved by the Bankruptcy Court. Under the
Bankruptcy Code, the Company may elect to assume or reject leases, employment
contracts, service contracts and other executory pre-Petition Date contracts,
subject to Bankruptcy Court approval. The Company cannot presently determine or
reasonably estimate the ultimate liability which may result from the filing of
claims for any rejected contracts and no provisions have yet been made for these
items.
Management expects to finance the Company's short-term working capital and
capital expenditures requirements through cash generated by its operations, as
authorized by the Bankruptcy Court, or through credit facilities as necessary.
However, there can be no assurance that the Company will be able to obtain such
credit facilities or, if obtained, that such facilities will be sufficient to
enable the Company to meet its liquidity requirements. The Company's financing
requirements for long-term growth, future capital expenditures and debt service
cannot be determined until a plan of reorganization is developed and confirmed
by the Bankruptcy Court.
Currently, the Company is considering its options in connection with its
reorganization efforts. Those options include a reorganization plan which
provides for the Company to emerge as a stand-alone entity, or which provides
for a change of control either through a sale of the Company's common stock (or
similar transaction with a third party) or a sale of the Company's assets. In
addition, other parties of interest in the Company's reorganization proceedings,
such as creditors and shareholders, may obtain leave from the Bankruptcy Court
to propose one or more reorganization plans for the Company and its
subsidiaries. The Company is not presently able to predict when the Chapter 11
Cases will be concluded or on what basis.
During the year ended December 31, 1995, the Company's continuing operations
used $3.7 million of cash from its operations and discontinued operations used
$4.9 million as compared to $14.5 million and $41.2 million, respectively, in
the year ended December 31, 1994. The Company's continuing operations incurred a
loss of $51.9 million compared to a loss of $6.2 million in 1994, however, the
cash impact was mitigated in 1995 due to non-cash charges for receivables,
inventory, intangibles and litigation.
Cash flows provided by investing activities during 1995 included $15.6 million,
consisting of $18.8 million from the proceeds from the disposal of discontinued
operations, offset by $3.4 million of purchases of fixed assets, compared to
$21.3 used in 1994. Cash used in 1994 included $15.2 million for the acquisition
of #1 Apparel and $6.1 million for the purchase of fixed assets.
13
<PAGE> 16
Net cash flows provided by financing activities during 1995 were approximately
$3.1 million, primarily from borrowings from short-term debt. During 1994,
financing activities provided approximately $83.0 million, which included cash
proceeds of $75.0 million from the issuance of 6.76% Senior Notes and short-term
borrowings of $17.9 million, net of debt repayments of $10.3 million. During
1993, net cash flows provided by financing activities were approximately $44.8
million, of which $47.3 million were short-term borrowings, net of debt
repayments of $3.6 million.
The Company follows the customary practice in the sporting goods industry of
offering extended payment terms to credit worthy customers on qualified orders.
The Company's working capital requirements generally peak in the third and
fourth quarters as it builds inventory and makes shipments under these extended
payment terms.
14
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
---------------------------------------------------------------------------------------
<S> <C>
Reports of Independent Accountants
Coopers & Lybrand L.L.P. 16
Raymond, Chabot, Martin, Pare 17
Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1995 and 1994 25
Consolidated Statements of Operations
for the years ended December 31, 1995, 1994 and 1993 26
Consolidated Statements of Stockholders' (Deficit) Equity
for the years ended December 31, 1995, 1994 and 1993 27
Consolidated Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993 28
Notes to Consolidated Financial Statements 29
</TABLE>
15
<PAGE> 18
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
SLM International, Inc.
We have audited the accompanying consolidated financial statements and financial
statement schedule of SLM International, Inc. and Subsidiaries listed in the
accompanying index in Item 8 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the 1995,
1994 and 1993 financial statements of certain companies, whose financial
statements include total assets of $71,570,000 and $71,638,000 as of December
31, 1995, and 1994, respectively, and total net sales of $68,101,000,
$70,645,000 and $59,642,000 for the years ended December 31, 1995, 1994 and
1993, respectively. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to the
amounts included for these companies, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of SLM International, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles. In addition, in our opinion, based on our audits and the reports of
other auditors, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred significant losses from
operations and negative cash flows for the year ended December 31, 1995. In
addition, Buddy L Inc., a subsidiary, filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court on March 2, 1995, and six other subsidiaries filed for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court on October 24, 1995. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regards to these matters are described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
/s/ Coopers & Lybrand LLP
Albany, New York
April 26, 1996
16
<PAGE> 19
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
#1 Apparel Canada Inc.
We have audited the balance sheet of #1 Apparel Canada Inc. as at December 31,
1995 and the statements of earnings and deficit and changes in cash resources
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA -- UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
17
<PAGE> 20
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
St. Lawrence Manufacturing Canada Inc.
We have audited the balance sheet of St. Lawrence Manufacturing Canada Inc. as
at December 31, 1995 and the statements of earnings and deficit and changes in
cash resources for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA -- UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
18
<PAGE> 21
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
Sport Maska Inc.
We have audited the consolidated balance sheet of Sport Maska Inc. as at
December 31, 1995 and the consolidated statements of earnings and retained
earnings and changes in cash resources for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1995
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting principles
in Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA -- UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 25, 1996
19
<PAGE> 22
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
#1 Apparel Canada Inc.
We have audited the balance sheet of #1 Apparel Canada Inc. as at December 31,
1994 and the statements of earnings and deficit and changes in cash resources
for the initial year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA - UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
20
<PAGE> 23
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
Buddy L Canada Inc.
We have audited the balance sheet of Buddy L Canada Inc. as at December 31, 1994
and the statements of earnings and deficit and changes in cash resources for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA - UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
21
<PAGE> 24
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
To the Shareholder of
Sport Maska Inc.
We have audited the consolidated balance sheet of Sport Maska Inc. as at
December 31, 1994 and the consolidated statements of earnings and retained
earnings and changes in cash resources for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1994
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting principles
in Canada.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
ON CANADA - UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
April 14, 1995
22
<PAGE> 25
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
----------------
To the Shareholder of
Buddy L Canada Inc.
We have audited the balance sheet of Buddy L Canada Inc. as at December 31,
1993 and the statements of earnings and retained earnings and changes in cash
resources for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1993 and the
results of its operations and the changes in its financial position for the
year then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
General Partnership
Chartered Accountants
Montreal, Canada
February 2, 1994
23
<PAGE> 26
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
AUDITORS' REPORT
----------------
To the Shareholders of
Sport Maska Inc.
We have audited the balance sheet of Sport Maska Inc. as at December 31, 1993
and the statements of earnings and retained earnings and changes in cash
resources for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1993 and the
results of its operations and the changes in its financial position for the
year then ended in accordance with generally accepted accounting principles in
Canada.
/s/ Raymond, Chabot, Martin, Pare
General Partnership
Chartered Accountants
Montreal, Canada
January 28, 1994
24
<PAGE> 27
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 18,605 $ 8,344
Accounts receivable, net 41,346 53,853
Inventories 50,898 58,284
Prepaid expenses 1,918 1,573
Income taxes receivable 256 1,598
Net assets of discontinued operations 9,856 35,501
Other receivables 1,530 1,515
--------- ---------
Total current assets 124,409 160,668
Property, plant and equipment, net 13,496 12,996
Intangible assets, net 90 6,944
Net assets of discontinued operations 12,113
Other assets 33 117
--------- ---------
Total assets $ 138,028 $ 192,838
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Short-term debt $ $ 92,162
Accounts payable 4,028 12,838
Accrued liabilities 9,055 12,431
Long-term debt, current portion 702 81,309
Income taxes payable 536 288
--------- ---------
Total current liabilities 14,321 199,028
Deferred income taxes 535 39
Other liabilities 55
Liabilities subject to compromise under reorganization proceedings 201,814
--------- ---------
Total liabilities 216,670 199,122
--------- ---------
Commitments and contingencies
STOCKHOLDERS' (DEFICIT)
Preferred stock, no par, 100,000 shares authorized, none issued or
outstanding
Common stock, par value $0.01 per share, 50,000,000 shares
authorized, 18,859,679 shares issued and outstanding at
December 31, 1995 and 1994 189 189
Additional paid-in capital 88,564 87,764
Retained (deficit) (163,569) (86,121)
Foreign currency translation adjustments (3,826) (8,116)
--------- ---------
Total stockholders' (deficit) (78,642) (6,284)
--------- ---------
Total liabilities and stockholders'(deficit) $ 138,028 $ 192,838
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
25
<PAGE> 28
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
(In thousands, except share data)
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 160,973 $ 180,806 $ 126,034
Cost of goods sold 107,266 113,577 75,104
------------ ------------ ------------
Gross profit 53,707 67,229 50,930
Selling, general and administrative expenses 59,753 67,031 38,600
Unusual charges (see Note 5) 15,471
------------ ------------ ------------
Operating (loss) income (21,517) 198 12,330
Debt related fees (see Note 6) 11,195
Other expense (income), net 1,484 (260) (499)
Interest expense (see Note 6) 17,078 6,713 3,356
------------ ------------ ------------
(Loss) income from continuing operations before
income taxes (51,274) (6,255) 9,473
Income taxes 605 (11) 3,779
------------ ------------ ------------
(Loss) income from continuing operations (51,879) (6,244) 5,694
(Loss) income from discontinued operations, net of
income taxes (94,390) 2,402
(Loss) from disposition of discontinued operations,
net of income taxes (25,569) (11,335)
------------ ------------ ------------
Net (loss) income $ (77,448) $ (111,969) $ 8,096
============ ============ ============
(Loss) income per share from continuing operations $ (2.75) $ (0.33) $ 0.30
(Loss) income per share from discontinued operations (5.01) 0.12
(Loss) per share from disposition of discontinued operations (1.36) (0.60)
------------ ------------ ------------
Net (loss) income per share $ (4.11) $ (5.94) $ 0.42
============ ============ ============
Weighted average common and common equivalent shares
outstanding 18,859,679 18,844,097 19,232,700
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
26
<PAGE> 29
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
(DEFICIT) EQUITY For the years ended
December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
Additional Retained Currency
Common Stock Paid-in (Deficit) Translation
# of Shares Amount Capital Earnings Adjustments Total
----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 12,363 $ 123 $ 83,894 $ 17,752 $ (4,126) $ 97,643
Net income 8,096 8,096
Stock issued in connection with
acquisition 57 1 1,499 1,500
Exercise of stock options 117 2 1,256 1,258
Tax benefit from exercise of
stock options 672 672
Three for two stock split 6,268 62 (62)
Foreign currency translation
adjustments (2,291) (2,291)
------ --------- --------- --------- --------- ---------
Balance at December 31, 1993 18,805 188 87,259 25,848 (6,417) 106,878
Net (loss) (111,969) (111,969)
Exercise of stock options 55 1 403 404
Tax benefit from exercise of
stock options 102 102
Foreign currency translation
adjustments (1,699) (1,699)
------ --------- --------- --------- --------- ---------
Balance at December 31, 1994 18,860 189 87,764 (86,121) (8,116) (6,284)
Net (loss) (77,448) (77,448)
Issuance of stock warrants 800 800
Foreign currency translation
adjustments 4,290 4,290
------ --------- --------- --------- --------- ---------
Balance at December 31, 1995 18,860 $ 189 $ 88,564 $(163,569) $ (3,826) $ (78,642)
====== ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
27
<PAGE> 30
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH
FLOWS For the years ended December 31,
1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(77,448) $(111,969) $ 8,096
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
Loss from discontinued operations, including loss on
disposal 25,569 105,725
Loss on impairment of intangible assets 6,416
Litigation settlements 7,813
Stock warrants 800
Depreciation and amortization 2,870 3,134 11,485
Provisions for inventory, doubtful accounts and other
deductions 22,726 21,576 17,344
Deferred income taxes 496 1,143 (416)
Loss (gain) on sale and disposal of fixed assets 266 113 (12)
Loss on foreign exchange 1,029 286 662
Change in operating assets and liabilities:
Accounts receivable (4,073) (30,265) (48,861)
Inventories 2,447 (20,810) (32,976)
Prepaid expenses (257) 665 (2,360)
Income taxes receivable 1,365 3,028 (6,461)
Other receivables 24 2,228 (2,559)
Accounts payable and accrued liabilities 1,473 10,340 22,390
Interest payable 4,402 2,139 471
Income taxes payable 549 (1,819) 1,556
Other (136) (69) (74)
Net effect of discontinued operations (4,902) (41,177)
-------- --------- --------
Net cash used in operating activities (8,571) (55,732) (31,715)
-------- --------- --------
INVESTING ACTIVITIES:
Purchase of companies, net of cash acquired (15,150) (4,313)
Purchases of fixed assets (3,354) (6,053) (15,337)
Additions to deferred costs (228) (5,013)
Proceeds from sales of fixed assets 119 86 7,172
Proceeds from disposal of discontinued operations 18,841
-------- --------- --------
Net cash provided by (used in) investing activities 15,606 (21,345) (17,491)
-------- --------- --------
FINANCING ACTIVITIES:
(Payments) of deposits (199)
Proceeds from borrowings 4,168 92,880 47,273
Principal payments of debt (1,061) (10,321) (3,578)
Exercise of stock options 404 1,258
-------- --------- --------
Net cash provided by financing activities 3,107 82,963 44,754
-------- --------- --------
Effects of foreign exchange rate changes on cash 119 (122) (18)
-------- --------- --------
Increase (decrease) in cash 10,261 5,764 (4,470)
Cash at beginning of period 8,344 2,580 7,050
-------- --------- --------
Cash at end of period $ 18,605 $ 8,344 $ 2,580
======== ========= ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
28
<PAGE> 31
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION:
SLM International, Inc. ("SLM") was incorporated in September 1991. The
consolidated financial statements include the accounts of SLM and its
wholly-owned subsidiaries (collectively, the "Company"). All significant
intercompany transactions and accounts are eliminated. The Company's investment
in its toy and fitness businesses are classified as discontinued operations (see
Note 4).
B. BASIS OF PRESENTATION:
SLM and six of its subsidiaries (collectively, the "Debtors") filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Filing") in the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") on October 24, 1995 (the "Petition Date"). The Company
and those subsidiaries are presently operating their businesses in the ordinary
course as debtors-in-possession subject to the jurisdiction of the Bankruptcy
Court. The Bankruptcy Court has entered an order authorizing the joint
administration of the Debtors' Chapter 11 cases (the "Chapter 11 Cases") (see
Note 2).
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern which, except as otherwise disclosed, assumes that assets will be
realized and liabilities will be discharged in the normal course of business,
and do not include any adjustments which might result from the outcome of the
Chapter 11 Cases.
Certain prior-year amounts have been reclassified to conform to the 1995
presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
C. CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of temporary cash investments and accounts
receivable. The Company restricts its cash investments to temporary investments
in institutions with high credit standing and to short-term securities backed by
the full faith and credit of the United States Government. The Company sells its
products principally to retailers and distributors and, in accordance with
industry practice, grants extended payment terms to qualified customers.
Concentration of accounts receivable credit risk is mitigated due to the
performance of credit reviews which are considered in determining credit
policies and allowances for doubtful accounts. The Company provides allowances
for expected sales returns, net of related inventory cost recoveries, discounts,
rebates and cooperative advertising. The Company does not collateralize its
receivables.
D. REVENUE RECOGNITION:
Revenue is recognized when products are shipped to customers.
E. INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method. The Company provides allowances for excess,
obsolete and slow moving inventories.
F. RESEARCH & DEVELOPMENT EXPENSES:
Costs for new product research and development as well as changes to existing
products are expensed as incurred and totaled $1,692, $1,738 and $943 for the
years ended December 31, 1995, 1994 and 1993, respectively.
G. PREPAID EXPENSES:
The Company expenses advertising and promotion costs in the first fiscal year in
which the advertising takes place.
Royalty payments are deferred to the extent that the related sales have not yet
been recorded. Such costs are included in prepaid expenses.
H. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation and amortization
are provided for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using principally the
straight-line method of depreciation.
29
<PAGE> 32
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
The estimated service lives of the respective assets are as follows:
Years
Buildings and improvements 5 - 40
Machinery and equipment 3 - 10
Tools, dies and molds 3 - 5
Office furniture and equipment 3 - 10
Accelerated methods of depreciation are used where permitted for tax reporting
purposes. Significant additions or major improvements are capitalized, while
normal maintenance and repair costs are expensed. When assets are sold, retired
or otherwise disposed of, the applicable costs and accumulated depreciation are
removed from the accounts, and the resulting gain or loss is recognized.
I. INCOME TAXES:
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
consists of both the tax payable for the period and the change during the period
in deferred tax assets and liabilities.
The Company does not provide for deferred income taxes on the undistributed
earnings of its non-U.S. subsidiaries, since such earnings are not expected to
be remitted to the Company in the foreseeable future.
J. FOREIGN CURRENCY TRANSLATION:
The balance sheets of the Company's non-U.S. subsidiaries are translated into
U.S. dollars at the exchange rates in effect at the end of each year. Revenues,
expenses and cash flows are translated at weighted average rates of exchange.
Gains or losses resulting from foreign currency transactions are included in
earnings, while those resulting from translation of financial statements are
shown as a separate component of stockholders' equity.
K. INTANGIBLE ASSETS:
Intangible assets are recorded at cost and are amortized on a straight-line
basis. At December 31, 1995 these amounts include the excess purchase prices
over fair values assigned to net assets acquired (which are amortized on a
straight-line basis over periods from three to twenty years), and costs related
to obtaining patents and trademarks (which are amortized on a straight-line
basis over three years). The Company periodically reviews intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. When such circumstances occur, the
Company estimates future cash flows expected to result from the use and eventual
disposition of the intangibles. If the expected future cash flows are less than
the carrying amount, the Company recognizes an impairment loss (see Note 5).
Certain costs related to packaging for products that will be introduced
subsequent to year end are deferred and amortized over a three-or five-year
period. Provisions are made to write these costs off when the products are no
longer sold.
Accumulated amortization of intangible assets was $142 and $963 at December 31,
1995 and 1994, respectively.
L. EARNINGS PER SHARE:
Earnings per share of common stock are computed based on the average number of
shares of common stock assumed to be outstanding during each year. Common stock
equivalents are included when material and dilutive (See Notes 7 and 17).
2. REORGANIZATION CASE
In the Chapter 11 Cases, substantially all liabilities as of the Petition Date
are subject to resolution under a plan of reorganization to be voted upon by the
Company's creditors and stockholders and confirmed by the Bankruptcy Court.
Schedules have been filed by the Company with the Bankruptcy Court setting forth
its assets and liabilities as of the Petition Date as shown by its accounting
records. Differences between amounts shown by the Company and claims filed by
creditors will be investigated and resolved. The ultimate amount and settlement
terms for such liabilities are subject to a plan of reorganization, and
accordingly, are not presently determinable.
30
<PAGE> 33
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Under the Bankruptcy Code, the Company may elect to assume or reject leases,
employment contracts, service contracts and other executory pre-Petition Date
contracts, subject to Bankruptcy Court approval. The Company cannot presently
determine or reasonably estimate the ultimate liability which may result from
the filing of claims for any rejected contracts, and no provisions have yet been
made for these items.
Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and with the holders of the Company's 6.76% Senior Notes
(the "Senior Noteholders") which would allow these lenders to accelerate
repayment of these loans. However, as a result of the Filing, no principal or
interest payments will be made on any pre-Petition Date debt without Bankruptcy
Court approval or until a reorganization plan defining the repayment terms has
been confirmed.
The Bankruptcy Court has authorized the Company to use the cash generated by its
operations to continue to fund its business obligations, and to pay pre-Petition
Date wages, salaries, sales commissions, employee benefits and customs duties,
honor manufacturer's warranties and pay certain non-U.S. pre-Petition Date
liabilities. These various Bankruptcy Court authorizations provide the Company
with cash and liquidity so that it can conduct its operations. The Company
expects to continue to fund its working capital and capital expenditures
requirements through either cash generated by its operations or through credit
facilities as necessary. However, there can be no assurance that the Company
will be able to obtain such credit facilities or, if obtained, that such
facilities will be sufficient to enable the Company to meet its liquidity
requirements. The Company's financing requirements for long-term growth, future
capital expenditures and debt service cannot be determined until a plan of
reorganization is developed and confirmed by the Bankruptcy Court. The Company
is not presently able to predict when the Chapter 11 Cases will be concluded or
on what basis.
3. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Substantially all the Company's liabilities as of the Petition Date are subject
to settlement under a plan of reorganization. The Company is generally not
permitted to make payments with respect to its pre-Petition Date liabilities
until a plan of reorganization has been confirmed by the Bankruptcy Court.
At December 31, 1995, liabilities subject to compromise under reorganization
proceedings consisted of:
<TABLE>
<S> <C>
Priority Claims $ 605
Secured Debt
Principal 100,876
Interest 3,513
General Unsecured Claims 12,155
Unsecured Debt, Principal and Interest 84,665
----------
$ 201,814
==========
</TABLE>
Priority claims, the repayment of which the Company is required to prioritize
under bankruptcy law, are comprised principally of income and property tax
claims. Unsecured debt includes amounts which may ultimately be deemed secured.
It is not practicable to estimate the fair value of the Company's liabilities
subject to compromise under reorganization proceedings.
4. DISCONTINUED OPERATIONS
During the quarter ended October 1, 1994, the Company initiated significant
management changes in its toy and fitness businesses operated primarily by its
Buddy L Inc. and Buddy L Canada Inc. subsidiaries (collectively, "Buddy L") and,
as a result, began evaluating Buddy L's strategic direction and cost structure.
The initial phase of this evaluation included changes in management
responsibility, re-focused attention on established products and product lines,
minimizing the use of television and infomercial advertising and the assessment
of potential productivity improvements.
In connection with this strategic and cost evaluation, the Company recorded
charges totaling $44,055 in the third quarter and nine months ended October 1,
1994. The charges included provisions for product returns and markdown
allowances ($5,342), certain inventory valuation adjustments ($3,353), the
reassessment of the carrying values of tooling ($4,201) and excess and obsolete
inventories ($12,600) due to the strategic decision not to continue support of
certain products, deferred product development costs ($4,600), television
commercial and infomercial production costs ($1,455) and prepaid barter credits
($2,974) related to the decision to no longer support certain products and
minimize the use of advertising. Charges were also provided for defective
product
31
<PAGE> 34
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
allowances ($2,607), minimum royalty guarantees ($2,926), allowances for
uncollectable multi-installment receivables due from consumers on infomercial
generated sales ($1,300), employee severance expenses ($1,672), office and
showroom lease termination costs ($605) and other miscellaneous items ($420).
During the fourth quarter of 1994, the Company recorded additional charges
totaling $24,548. The charges included provisions for product returns and
markdown allowances ($1,777), certain inventory valuation adjustments ($7,101),
the reassessment of the carrying values of tooling ($2,135) and excess and
obsolete inventories ($5,140), deferred product development costs ($821),
prepaid barter credits ($1,007), defective product allowances ($1,392), employee
severance expenses ($1,377), fixed asset write-offs ($1,575) and other
miscellaneous items ($2,223).
In December 1994, the Company determined that it would hold its investments in
its Buddy L toy and fitness businesses for sale. Accordingly, the results of
operations of these businesses have been accounted for as discontinued
operations for all periods in the accompanying consolidated financial
statements. On March 2, 1995, Buddy L Inc. filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware. On May 9, 1995, the Company accepted the bid to sell
certain assets and liabilities of the Buddy L toy business to Empire of
Carolina, Inc. The bid was approved by the Bankruptcy Court on May 19, 1995 and
the transaction closed on July 7, 1995. The court approved sale of the fitness
business was completed on June 30, 1995. At December 31, 1994, the Company
recorded a loss of $11,335, net of income taxes, for the disposition of its
discontinued operations, including the estimated 1995 operating loss through the
disposition date. As a result of the finalization of the sale of the Buddy L toy
and fitness businesses, the terms of which changed substantially from those
previously proposed; a change in the anticipated distribution of the sale
proceeds amongst the various creditors and the liquidation of the remaining
Buddy L assets (primarily accounts receivable and real property); and an
increase in estimated phase out costs, an additional loss from disposition of
discontinued operations of $25,569 was recorded during the year ended December
31, 1995.
On December 19, 1995, the Bankruptcy Court approved a settlement agreement (the
"Settlement Agreement") in the Buddy L Inc. Chapter 11 case between the Company,
Buddy L Inc., its creditors and the Company's banks and Senior Noteholders,
resolving the allocation of the proceeds and expenses from the disposition of
the Buddy L toy and fitness businesses. A plan of reorganization and a
disclosure statement for Buddy L Inc. were filed with the Bankruptcy Court
embodying the terms of the Settlement Agreement. A hearing on the adequacy of
the disclosure statement has not yet been scheduled.
Net sales of discontinued operations were $181,514 and $188,712 for the years
ended December 31, 1994 and 1993, respectively. One customer aggregated more
than 10% of net sales for each of the years. The (loss) income from discontinued
operations for the years ended December 31, 1994 and 1993 were net of the income
tax expense of $309 and $1,094, respectively. The Company allocates interest
expense to discontinued operations based upon interest on debt of the
discontinued operation estimated to be assumed by the buyer plus that portion of
interest not directly attributable to other operations allocated based upon a
ratio of net assets discontinued to total consolidated net assets plus debt
other than debt of the discontinued operation to be assumed and debt that can be
directly attributable to other operations. Interest allocated in determining the
(loss) income from discontinued operations in 1994 and 1993 was $5,547 and
$2,011, respectively, and the interest in the 1994 loss from the disposition of
discontinued operations was $4,300. Net assets of discontinued operations
classified as current in the balance sheet at December 31, 1994 consisted of
$35,501 (principally accounts receivable, inventories, property, plant and
equipment and intangibles, net of accounts payable, accrued liabilities and
long-term debt) and noncurrent assets of $12,113 (principally proceeds from
disposition of discontinued operations not expected to be received within one
year). The consolidated statement of cash flows for the year ended December 31,
1993 has not been restated for discontinued operations. Net assets of
discontinued operations of $9,856 at December 31, 1995, consisted primarily of
accounts receivable and real property.
5. UNUSUAL CHARGES
During 1995, the Company recorded significant unusual charges in continuing
operations totaling $15,471 due principally to litigation settlements ($8,813)
and reassessment, during the fourth quarter of 1995, of the intangible assets
associated with the acquisition of #1 Apparel (see Note 8) ($6,416). Litigation
settlements (see Note 18) include settlements of environmental litigation
($7,000, recorded in the second quarter and $250, recorded in the fourth quarter
1995) and securities litigation ($1,563 recorded in the fourth quarter 1995).
The
32
<PAGE> 35
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
unusual charges represent 29.8% of the Company's loss from continuing operations
for the year ended December 31, 1995.
6. DEBT RELATED FEES AND DEFAULT INTEREST
As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its Senior
Noteholders and the Standstill Agreements with its lenders (see Note 12), the
Company's continuing operations incurred significant legal and professional fees
totaling $11,195 during the year ended December 31, 1995. These fees include the
cost of the Company's legal counsellors, financial advisors and consultants, as
well as those of its bankers and Senior Noteholders and certain payments made
directly to these lenders. In addition, the Company recorded $800 for the
intrinsic value of warrants provided to these lenders (see Note 12). These costs
are included as Debt Related Fees in the Consolidated Statement of Operations
for the year ended December 31, 1995. It is anticipated that additional
significant reorganization related fees will be incurred in future periods.
Additionally, as a result of the Company's defaults under its financing
agreements, its financial condition and the terms of the Standstill Agreements,
since February 1995 the Company has been charged an additional 3.0% interest on
its bank debt and the interest rate on the 6.76% Senior Notes has been increased
to 15%. These higher interest rates resulted in incremental interest expense of
$5,679 for the year ended December 31, 1995 which is included in Interest
Expense in the Consolidated Statements of Operations.
The debt related fees and default interest costs represent 32.5% of the
Company's loss from continuing operations for the year ended December 31, 1995.
7. EQUITY TRANSACTIONS
A. On October 28, 1993, the Company's Board of Directors declared a 3-for-2
stock split of the Company's common stock, distributed on December 3, 1993 to
stockholders of record on November 8, 1993. All share and per share data for
prior periods presented have been restated to reflect this stock split.
B. In January 1995, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of common stock of the
Company to stockholders of record at the close of business on March 1, 1995.
Each Right entitles the registered holder to purchase from the Company a unit
consisting of one one-thousandth of a share (a "Unit") of the Series A Junior
Participating Preferred Shares, par value $0.01 per share, of the Company (the
"Preferred Shares"), at a purchase price of $32.00 per Unit, subject to
adjustment. The Rights are not exercisable until the Distribution Date, as
defined, and will expire at the close of business in the year 2005.
8. ACQUISITION
In January 1994, the Company acquired the licensed sports apparel division of
K-Products, Inc., a premium apparel manufacturer, through newly created
subsidiaries #1 Apparel, Inc. and #1 Apparel Canada Inc. ("#1 Apparel"). #1
Apparel manufactures a high quality line of baseball style caps and jackets
using its own unique designs and graphics under licenses from various
professional and college sports leagues and teams. The acquisition included a
manufacturing facility in Ontario, Canada, and all rights to the #1 Apparel
name, trademarks, copyrights and designs, as well as accounts receivable and
inventory. The price paid by the Company for this acquisition was $15,150 in
cash. This acquisition was accounted for using the purchase method of
accounting. The operating results of #1 Apparel are recorded in the Company's
consolidated financial statements from the date of acquisition.
9. ACCOUNTS RECEIVABLE
Net accounts receivable include:
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Allowance for doubtful accounts $ 5,337 $3,398
Allowance for returns, discounts, rebates and
cooperative advertising 7,301 5,438
------- ------
$12,638 $8,836
======= ======
</TABLE>
Bad debt expense for the years ended December 31, 1995, 1994 and 1993 was
$4,679, $3,403 and $1,607, respectively.
33
<PAGE> 36
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
10. INVENTORIES
Net inventories consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Finished products $38,948 $44,666
Work in process 4,143 3,861
Raw materials and supplies 7,807 9,757
------- -------
50,898 $58,284
====== =======
</TABLE>
Allowances for excess, obsolete and slow moving inventories were $6,536 and
$5,226 at December 31, 1995 and 1994, respectively.
11. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Land and improvements $ 79 $ 79
Buildings and improvements 5,543 4,565
Machinery and equipment 14,280 13,611
Tools, dies and molds 2,568 2,909
Office furniture and equipment 6,037 4,852
------- -------
28,507 26,016
Less accumulated depreciation and amortization 15,011 13,020
------- -------
$13,496 $12,996
======= =======
</TABLE>
Property, plant and equipment under capital leases, primarily machinery and
equipment, included above totaled $2,493 and $2,883 at December 31, 1995 and
1994, respectively. Accumulated amortization for the same periods was $1,277 and
$1,118 respectively.
Depreciation and amortization expense for the years ended December 31, 1995,
1994 and 1993 was $2,407, $1,811 and $1,619, respectively.
12. INDEBTEDNESS
As a result of the Chapter 11 Filing, certain of the Company's indebtedness is
subject to resolution under a plan of reorganization to be voted upon by the
Company's creditors and stockholders and confirmed by the Bankruptcy Court. The
related debt has been classified as non-current and included in liabilities
subject to compromise under reorganization proceedings, at December 31, 1995.
Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and Senior Noteholders. As a result, the related debt was
classified as current at December 31, 1994. On June 5, 1995, the Company and its
bank lenders and Senior Noteholders entered into Standstill Agreements that
provided a period of continued financing of the Company by its lenders, a
sharing of collateral by its bank lenders and Senior Noteholders and provided
the Company with a period in which to restructure its debt without further
judicial proceedings. Under the terms of the Standstill Agreements, the interest
rate on the 6.76% Senior Notes was increased to 15% effective February 15, 1995
and, subject to certain adjustments, would have increased to a maximum of 19%
during the agreement period and the interest was payable at 9% with the
remaining interest payable at the end of the Standstill Agreement period. The
Standstill Agreements provided the Company's lenders with warrants for an
aggregate of 2.0 million shares of the Company's common stock, with an exercise
price of $2.45 per share and 0.5 million shares with an exercise price of $2.27
per share. Under certain conditions the Company may repurchase these warrants
below the exercise price.
A. BANK AGREEMENT
In December 1992, the Company entered into a Loan and Security Agreement ("Bank
Agreement") with a syndicate of banks led by Fleet Credit Corporation.
Borrowings under the Bank Agreement are collateralized by certain of the
Company's accounts receivable and inventory, and the common stock of certain
subsidiaries and are cross collateralized and guaranteed by such subsidiaries.
Borrowings are based upon eligible accounts receivable and inventories. Total
amounts outstanding under the Bank Agreement were $96,330 at December 31, 1995
and $106,920 (including $14,758 in net assets of discontinued operations) at
December 31, 1994. As a result of the Filing, the $96,330 outstanding at
December 31, 1995 is classified as liabilities subject to compromise under
reorganization proceedings.
34
<PAGE> 37
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
The Bank Agreement contains certain administrative and financial covenants which
require maintenance of specified ratios and cross-defaults with the Company's
other financing agreements. Since October 1, 1994, the Company has not been in
compliance with these covenants.
Borrowings under the Bank Agreement bear interest at the bank's U.S. prime rate
(8.5% at December 31, 1995 and December 31, 1994) plus 1.0% payable monthly. In
addition, the Company is charged a monthly commitment fee of 0.25% to 0.375% of
the unused portion of the facility. The weighted average interest rate on short
term debt outstanding at December 31, 1995 and 1994 was 13.0% and 8.82%,
respectively. However, since February 23, 1995, the Company has been charged a
default rate of interest at the U.S. prime rate plus 4.0% payable monthly.
The revolving credit facility is also used to issue letters of credit. At
December 31, 1995, the Company had outstanding letters of credit of
approximately $618.
B. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
6.76% Senior Notes (see Note C) $ 75,000 $ 75,000
Note payable (see Note D) 6,000 0
Industrial Development Revenue Bonds (see Note E) 3,720 3,820
Capital leases (see Note F) 702 1,123
Other long-term debt 826 1,366
-------- --------
86,248 81,309
Less amounts contractually due within one year (1,285) (1,139)
-------- --------
Total long-term debt, excluding current portion $ 84,963 $ 80,170
======== ========
</TABLE>
C. In March 1994, the Company completed a private placement of $75,000 of its
6.76% Senior Notes due February 15, 2004 ("Senior Notes") with a group of eight
insurance companies. The Senior Notes contain certain administrative and
financial covenants including maintenance of minimum net worth and debt
limitation and cross-default with the Company's other financing agreements.
Additionally, the Senior Notes are cross-guaranteed by certain of the Company's
subsidiaries, the shares of which are co-pledged to the Senior Noteholders and
the lenders under the Bank Agreement. At December 31, 1995 and 1994 the Company
was not in compliance with these covenants. On February 23, 1995, the Company
granted as additional collateral to the lenders under the Bank Agreement, its
otherwise unsecured property, plant and equipment and its patents and
trademarks, including its 50% ownership in CCM Holdings (1983) Inc., without the
required consent of the Senior Noteholders. On March 6, 1995, the Senior
Noteholders accelerated the full $75,000 principal amount of the Senior Notes
and filed involuntary bankruptcy petitions against the Company and certain of
its subsidiaries in the United States and Canada.
D. During June 1995, the Company entered into an agreement to settle certain
litigation for $7,000, including a note in the principal amount of $6,000
bearing interest at 10% payable over five years based on a twenty year
amortization with the balance of principal payable in June 2000.
E. During 1992, Buddy L Inc. borrowed $4,000 under a bond indenture agreement
with Fulton County, New York to purchase a building, land and machinery and
equipment. The bonds consist of a $2,000 tax-exempt issue and a $2,000 taxable
issue with variable interest. The principal balance at December 31, 1995 and
1994 was $3,720 and $3,820, respectively. Interest is payable quarterly and
principal is payable in annual installments through 2012. The bonds are
collateralized by the building, land and machinery and equipment. The bonds are
further collateralized by letters of credit amounting to $3,775 at December 31,
1995, under which the Company, in addition to Buddy L Inc., is a direct obligor.
Accordingly, the amounts outstanding under these bonds are classified as an
obligation of the Company's continuing operations. The bonds and letters of
credit contain various covenants including cross-defaults with the Company's
other financing agreements. At December 31, 1995, the Company was not in
compliance with such covenants.
F. Capital leases on molds, machinery and equipment, with variable interest
rates to 14% and maturing on various dates through 1998. By authorization of the
Bankruptcy Court, the Company may continue to pay these, therefore these are
classified as current at December 31, 1995.
35
<PAGE> 38
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
G. At December 31, 1995, future maturities of long-term debt based upon original
terms were:
<TABLE>
<CAPTION>
Capital Leases Other Long-term Debt Total
-------------- -------------------- -------
<C> <C> <C> <C>
1996 $376 $ 975 $ 1,351
1997 218 342 560
1998 179 10,971 11,150
1999 10,995 10,995
2000 16,335 16,335
Thereafter 45,928 45,928
---- -------- -------
Total minimum payments 773 85,546 86,319
Amounts representing interest 71 71
---- -------- -------
Present value of payments $702 $ 85,546 $86,248
==== ======== =======
</TABLE>
H. Cash payments for interest were $17,337, $9,465 and $5,256 for the years
ended December 31, 1995, 1994 and 1993, respectively. During the reorganization
proceedings the Company is generally not permitted to pay interest. During such
time, the Company will record interest expense only to the extent paid or earned
during the proceedings and to the extent it is probable that the Bankruptcy
Court will allow interest on pre-Petition Date debt as a priority, secured or
unsecured claim. The excess of contractual interest expense over recorded
interest expense for the year ended December 31, 1995 was approximately $2,100.
13. RELATED PARTY TRANSACTIONS
The Company (including discontinued operations) leases property from companies
controlled by certain officers and directors of the Company ("Related
Entities"). Related party rent expense for the years ended December 31, 1995,
1994 and 1993 was $1,791, $1,095 and $1,693, respectively.
The Company was charged $350 in management fees by companies controlled by
certain officers and directors of the Company for the years ended December 31,
1995, 1994 and 1993.
Additionally, during 1994, the Company was charged $1,053 for construction
project management at certain of the Company's facilities (of which $950 related
to discontinued operations) by a company controlled by certain officers and
directors of the Company.
14. LEASES
Certain of the Company's subsidiaries lease office and warehouse facilities and
equipment under operating lease agreements. Some lease agreements provide for
annual rent increases based upon certain factors including the consumer price
index.
As Debtors-in-Possession, the Company has the right, subject to Bankruptcy Court
approval, to assume or reject executory contracts and unexpired leases. In this
context, "assumption" means that the Company agrees to perform its obligations
and cure all existing defaults under the contract or lease agreement, and
"rejection" means that the Company is relieved from its obligations to perform
further under the contract or lease, but is subject to a claim of damages for
the breach thereof.
As of March 31, 1996, the Company has not determined which executory contracts
and unexpired leases to assume or reject.
The following is a schedule of future minimum lease payments under noncancelable
operating leases with initial terms in excess of one year at December 31, 1995:
<TABLE>
<CAPTION>
Operating Leases
----------------
<S> <C>
1996 $ 3,923
1997 2,905
1998 2,639
1999 2,383
2000 2,407
Thereafter 14,741
-------
$28,998
=======
</TABLE>
Rental payments, including those to related parties, for the years ended
December 31, 1995, 1994 and 1993 were approximately $7,686, $6,477 and $1,923,
respectively.
36
<PAGE> 39
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Certain lease agreements contain various administrative and financial covenants
and cross-default provisions with certain of the Company's financial agreements
and allow for acceleration of minimum lease payments. At December 31, 1995, the
Company was not in compliance with certain of these covenants. If accelerated in
1996, the minimum lease payments would increase approximately $990.
15. ROYALTIES
Certain of the Company's subsidiaries have entered into agreements which call
for royalty payments generally based on net sales of certain products and
product lines. Certain agreements require guaranteed minimum payments over the
royalty term.
As Debtors-in-Possession, the Company has the right, subject to Bankruptcy Court
approval, to assume or reject executory contracts and unexpired leases (see Note
14). As of March 31, 1996, the Company has not determined which executory
contracts and unexpired leases to assume or reject.
Future minimum payments under these agreements, for the years ended December 31,
are as follows:
<TABLE>
<CAPTION>
Royalties
---------
<C> <C>
1996 $ 2,429
1997 3,289
1998 3,583
1999 3,583
2000 50
Thereafter 150
-------
$13,084
=======
</TABLE>
Royalty expense for the years ended December 31, 1995, 1994 and 1993, including
guaranteed minimum payments, was approximately $4,190, $7,532 and $4,981,
respectively.
16. INCOME TAXES
The components of income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ------- ------
<S> <C> <C> <C>
Current: U.S. $205 $(1,872) $2,392
Non-U.S. (96) 446 2,897
---- ------- ------
109 (1,426) 5,289
---- ------- ------
Deferred: U.S. 0 1,765 (828)
Non-U.S. 496 (622) 412
---- ------- ------
496 1,143 (416)
---- ------- ------
$605 $ (283) $4,873
==== ======= ======
</TABLE>
The income tax (benefit) expense is reflected in the accompanying Consolidated
Statements of Operations as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
---- ----- ------
Continuing operations $605 $ (11) $3,779
Discontinued operations 0 (272) 1,094
---- ----- ------
$605 $(283) $4,873
==== ===== ======
</TABLE>
U.S. (loss) income before taxes from continuing operations was $(47,401),
$(7,100) and $4,293 for the years ended December 31, 1995, 1994 and 1993,
respectively.
The Company utilized approximately $154 of foreign tax credits against income
from continuing operations in 1993.
37
<PAGE> 40
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
The Company's effective income tax rate from continuing operations differed from
the federal statutory rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income taxes based on U.S. federal tax rate 34% 34% 34%
Non-U.S. and state tax rates (1%) 1% 6%
Valuation Allowance (33%) (33%)
Other, net (1%) (2%)
--- --- ---
Effective income tax rate (1%) 0% 40%
=== === ===
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
U.S. Non-U.S. U.S. Non-U.S.
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Disposal of discontinued operations $ 3,570 $ 0 $ 0 $ 0
Accounts receivable, principally due to allowance for
doubtful accounts 2,350 0 9,412 0
Inventories, principally due to additional costs
inventoried for tax purposes 2,092 0 7,648 0
Other, net (58) 0 2,745 0
-------- -------- -------- -------
7,954 0 19,805 0
Valuation allowance (7,954) 0 (19,805) 0
-------- -------- -------- -------
Total current deferred tax assets (liabilities) $ 0 $ 0 $ 0 $ 0
======== ======== ======== =======
Disposal of discontinued operations $ 0 $ 0 $ 1,126 $ 2,014
Net operating loss carryforwards 42,747 1,833 9,854 120
Plant, equipment and depreciation (156) (882) 251 (538)
Other, net 5,495 1,327 3,260 1,018
-------- -------- -------- -------
48,086 2,278 14,491 2,614
Valuation allowance (48,086) (2,813) (14,491) (2,653)
-------- -------- -------- -------
Total non-current deferred tax assets (liabilities) $ 0 $ (535) $ 0 $ (39)
======== ======== ======== =======
</TABLE>
During the year ended December 31, 1995, the valuation allowance increased by
$21,904.
Net cash (refunds) payments for income taxes for the years ended December 31,
1995, 1994 and 1993 were $(2,726), $(1,838) and $10,637, respectively.
Undistributed earnings from continuing operations of subsidiaries outside the
U.S., for which no provision for U.S. taxes has been made, amounted to
approximately $4,400 at December 31, 1995. In the event earnings of these
subsidiaries are remitted, foreign tax credits may be available to offset U.S.
taxes.
At December 31, 1995, the Company has net operating loss carryforwards related
to U.S. operations for income tax purposes of approximately $121,160, of which
approximately $250 can only be used to offset the income of certain operations,
and net operating loss carryforwards related to foreign operations for income
tax purposes of approximately $6,500. These carryforwards, arising primarily
from discontinued operations, begin to expire in 2011 and have been fully
reserved by a valuation allowance. These carryforwards may be available to
offset future income from continuing operations.
17. STOCK OPTION PLAN
In October 1991, the Board of Directors adopted the 1991 Stock Option Plan (the
"Option Plan") which provides for the issuance of stock options to purchase up
to an aggregate of 1,050,000 shares of the Company's common stock. At the April
29, 1993 Annual Meeting of Shareholders an amendment to the Option Plan was
approved, increasing the number of shares available for grant to 3,300,000. The
Option Plan provides for the granting of options intended to qualify as
"incentive stock options" ("ISOs") and non-qualified stock options ("NQSOs") to
key employees of the Company including officers and directors of the Company who
are also employees.
38
<PAGE> 41
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
The exercise price of ISOs granted under the Option Plan may not be less than
the fair market value of the shares at the time the option is granted. The
exercise price of NQSOs granted under the Option Plan may not be less than 50%
of the fair value of the shares at the time the option is granted.
Options granted under the Option Plan are as follows:
<TABLE>
<CAPTION>
Shares Exercise Price
--------- ----------------
<S> <C> <C>
December 31, 1993 1,300,850 $ 7.00 - 26.17
Options Granted 1,357,750 2.83 - 25.00
Options Canceled (985,250) 7.00 - 26.17
Options Exercised (54,880) 7.00 - 14.67
--------- ----------------
December 31, 1994 1,618,470 2.83 - 25.00
Options Granted -0-
Options Canceled (619,270) 2.83 - 25.58
Options Exercised -0-
--------- ----------------
December 31, 1995 999,200 $ 2.83 - 14.67
========= ================
</TABLE>
The Company adopted the disclosure-only option under SFAS No. 123, Accounting
for Stock-Based Compensation, as of December 31, 1995. If the accounting
provisions of this new statement had been adopted as of the beginning of 1995,
the effect on 1995 net earnings would have been immaterial. Further, based on
current and anticipated use of stock options, it is not envisioned that the
impact of the new statement's accounting provisions would be material in any
future period.
The following table summarizes information about stock options outstanding at
December 31, 1995.
<TABLE>
<CAPTION>
Outstanding Exercisable
----------------------------------------- --------------------------
Average Average Average
Exercise price range Shares life (a) exercise price Shares exercise price
-------------------- ------- -------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$ 2.83 - 3.99 740,000 8.91 $ 3.52 263,000 $ 3.40
4.00 - 10.99 171,300 6.57 8.12 71,100 7.55
11.00 - 14.67 87,900 7.01 13.92 112,500 13.87
------- -------
Total 999,200 5.23 446,600 6.70
======= =======
</TABLE>
(a) Average contractual life remaining in years.
At December 31, 1994, there were approximately 333,120 options exercisable at an
average exercise price of $6.42.
All of the options outstanding at December 31, 1995 are NQSOs of which 961,700
vest over periods of up to five years and 37,500 vest after five years. At
December 31, 1995, 385,700 shares of the outstanding options were exercisable at
exercise prices of $2.83 to $14.67. Options have been granted at fair market
value and accordingly, no compensation expense has been recorded.
18. CONTINGENCIES AND LITIGATION
Under Section 362 of the Bankruptcy Code, the Company's filing of a Chapter 11
petition, among other things, operates as an automatic stay of the commencement
or continuation of any legal action against the Company or any act to enforce a
lien on its property with respect to claims that arose prior to the commencement
of the Chapter 11 Cases. Accordingly, pending litigation against the Company and
its subsidiaries arising from pre-Petition Date claims has been stayed by reason
of the Filing in accordance with the Bankruptcy Code, unless and until the stay
is lifted with respect to a particular case.
A. PRODUCT LIABILITY:
Certain subsidiaries of the Company are defendants in a personal injury action
which was filed in the United States District Court for the District of
Massachusetts in 1989 involving a spinal injury incurred by the plaintiff while
wearing a hockey helmet purported to have been manufactured or sold by such
subsidiaries. In view of the Filing, the Court dismissed the case without
prejudice to either party moving to restore it to the dockets upon final
determination of the bankruptcy proceedings. The plaintiff seeks damages related
to his quadriplegia consisting of approximately $6,300 for economic loss and
long-term medical and health care costs and $2,700 for, among other things, pain
and suffering. The plaintiff has further asserted a claim under Massachusetts
General Laws, Chapter 93A, for breach of warranty, including a claim for treble
damages for any
39
<PAGE> 42
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
and all loss. The Company has insurance coverage of approximately $400 plus the
substantial portion of legal costs for this action. Based on the facts of this
case, the Company believes that it has meritorious defenses to the claim.
However, an adverse outcome of this matter could have a materially adverse
effect on the reorganization of the Company and on its financial condition. The
Company has not provided for any loss in its consolidated financial statements
which might result from this litigation.
The Company is also a defendant in other product liability suits for personal
injuries. The Company believes that any resulting losses and defense costs will
be within applicable insurance coverage and the Company's provision for such
losses and costs.
B. ENVIRONMENTAL MATTERS:
In 1991, the Vermont Department of Environmental Conservation ("VTDEC") notified
the Company that the Bradford, Vermont property operated by its wholly-owned
subsidiary, Maska U.S., Inc. ("Maska"), had been included on the U.S.
Environmental Protection Agency's Comprehensive Environmental Response,
Compensation and Liability Information System and the Vermont Hazardous Sites
List and was being evaluated for possible remedial action. Under relevant
environmental laws, Maska, as an owner of the property, is potentially liable
for the entire cost of investigating and remediating the contamination emanating
from its Bradford property and certain civil penalties. It is possible that
VTDEC's claims, if any, against Maska are stayed by virtue of the pendency of
Maska's Chapter 11 case. VTDEC has expressed the view that they are not. The
Company can make no assurance that these actions are stayed.
Maska has undertaken its own investigation to determine the extent of
contamination, the rate of movement and the concentration of the contaminants,
the appropriate action required for site remediation and the identification of
other parties who should bear a share of the costs of remediation. Maska may
seek recovery against the former owners of its Bradford property and facility
and certain of their affiliated companies for the costs of such investigation,
remediation and the settlement with the adjacent property owner discussed below.
In addition, Maska has brought suit against certain of its insurance carriers
for their failure to defend or indemnify Maska with respect to these claims. It
is uncertain at this time whether the prior owner or the Company's insurers will
bear their share of the costs and any damages. During April 1996, Maska and the
State of Vermont signed a consent decree setting forth the terms under which
Maska will remediate the contaminated property. The consent decree is subject to
several conditions, including the approval of the Bankruptcy Court and payment
by the Company of approximately $250 in certain civil penalties and certain
State of Vermont oversight fees. The Company has accrued approximately $250
related to the consent decree.
While the total cost of investigation and remediation cannot be determined until
the investigation required by VTDEC is complete and the extent of Maska's
remedial obligations has been determined, the Company believes that it is
reasonably possible that these costs will be in a range of $1,000 to $2,000. The
Company has previously accrued approximately $1,400 toward these costs, which
includes capital costs and operating, maintenance and monitoring costs over a
period of up to 30 years after construction of the remedy.
While the Company believes that other parties, including insurers, may be liable
for some or all of these costs, there can be no assurance that these parties
will bear these costs and therefore the Company has not assumed any recovery
from such third parties in estimating its potential liabilities. Based on
information available to the Company at this time, an outcome other than
anticipated for Maska's obligations for site remediation could have a materially
adverse effect on the financial condition of the Company.
In 1992, the owner of a property adjacent to Maska's manufacturing facility in
Bradford, Vermont, filed an action in Vermont Superior Court alleging that its
property has been contaminated as a result of the Company's manufacturing
activities and seeking compensatory and punitive damages under the Vermont
Groundwater Protection Law and various common law theories. During June 1995,
Maska reached a settlement of all claims with the adjacent landowner consisting
of $1,000 cash (which was paid by July 15, 1995) and a $6,000 note bearing
interest at 10% payable over five years based on a twenty year amortization with
the balance of principal payable in June 2000. The Company recorded a provision
of $7,000 for this settlement during the year ended December 31, 1995.
C. SECURITIES LITIGATION:
During May 1994, the Company was served with three complaints, in each case
filed in the U.S. District Court for the Southern District of New York, that
alleged violations of Sections 10(b) and 20 of the Securities Exchange Act of
1934 (the "1934 Act"). Each complaint also named as defendants certain current
and former
40
<PAGE> 43
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
officers and directors of the Company, sought class action status, unspecified
damages and certain fees and expenses. On July 14, 1994, the respective
plaintiffs filed a consolidated complaint that was purportedly brought on behalf
of all purchasers of the Company's common stock between July 12, 1993 and April
15, 1994. The defendants stipulated to certification of the purported class for
procedural purposes. On August 3, 1994, the Company and other defendants filed a
motion to dismiss the consolidated complaint. The Court has not ruled on that
motion.
In November 1994, another complaint was filed in the U.S. District Court for the
Southern District of New York, which was purportedly brought on behalf of all
purchasers of the Company's common stock between May 2, 1994 and November 15,
1994. The complaint named as defendants the Company and certain current and
former officers and directors, and alleged violations of Section 10(b) and 20 of
the 1934 Act. The plaintiff in that complaint, the plaintiffs in the
consolidated complaint, and two additional plaintiffs together filed a second
consolidated complaint on January 5, 1995. The second consolidated complaint was
purportedly brought on behalf of all purchasers of the Company's common stock
between July 12, 1993 and November 21, 1994; names as defendants the Company and
certain current and former officers and directors; alleges violations of
Sections 10(b) and 20 of the 1934 Act; seeks class action status; unspecified
damages, and certain fees and expenses. The Company and individual defendants
have filed an answer to the second consolidated complaint, which denied all
substantive allegations.
On February 14, 1996, the Company, together with certain of its former and
present officers and directors, reached a settlement with the plaintiffs in this
litigation. The settlement provides for the cash payment by the Company's
insurer of $8,750, on behalf of certain former and present officers and
directors of the Company who are defendants. In addition, the Company will issue
1,000,000 shares of its Common Stock. The settlement is subject to several
conditions, including the approval of the Bankruptcy Court and the U.S. District
Court for the Southern District of New York. As a result of this settlement, the
Company recorded a provision of approximately $1,563 (the market value of
1,000,000 shares of common stock on the date the settlement was agreed to) in
the year ended December 31, 1995.
Other than certain legal proceedings arising from the ordinary course of
business, which the Company believes will not have a material adverse impact on
the results of operations, there is no other litigation pending or threatened
against the Company.
41
<PAGE> 44
SLM INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
19. GEOGRAPHICAL INFORMATION
The Company designs, develops, manufactures and markets a broad range of
sporting goods. The Company manufactures hockey and hockey related products,
including hockey uniforms, protective equipment, hockey figure and inline skates
and inline skates and street hockey products, marketing under the CCM brand
name, and private label brands and licensed sports apparel under the CCM and #1
Apparel names. The Company sells its products worldwide, primarily in North
America, to a diverse customer base consisting of mass merchandisers, retailers,
wholesalers, sporting goods shops and international distributors. The Company
manufactures and distributes most of its products at facilities in North America
and sources products internationally.
The following table shows data by geographic area for the periods noted below:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales to unaffiliated customers from operations
within:
United States $ 89,631 $ 106,911 $ 63,792
Canada 68,101 70,645 59,642
Other (A) 3,241 3,250 2,600
----------- ----------- -----------
160,973 180,806 126,034
Intercompany sales to other geographic areas from
operations within:
United States 3,123 26
Canada 30,141 34,435 17,001
Intercompany transfers between geographic areas (33,264) (34,461) (17,001)
----------- ----------- -----------
Net sales $ 160,973 $ 180,806 $ 126,034
=========== =========== ===========
Operating (loss) income within:
United States $ (23,415) $ (1,232) $ 7,145
Canada 219 1,147 4,815
Other (A) 490 463 370
Intercompany adjustments 1,189 (180)
----------- ----------- -----------
Operating (loss) income $ (21,517) $ 198 $ 12,330
=========== =========== ===========
Identifiable assets at year end:
United States $ 235,213 $ 351,295 $ 332,654
Canada 71,570 81,317 81,030
Other (A) (B) 12,273 61,563 21,688
Intercompany balances (181,028) (301,337) (181,089)
----------- ----------- -----------
Identifiable assets $ 138,028 $ 192,838 $ 254,283
=========== =========== ===========
</TABLE>
(A) Other includes Hong Kong and the United Kingdom.
(B) Other identifiable assets include net assets of discontinued operations.
Foreign currency transaction (losses) amounted to $(1,029), $(286) and $(201)
for the years ended December 31, 1995, 1994 and 1993, respectively.
42
<PAGE> 45
Schedule II
SLM INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND OTHER TRANSLATION DECEMBER 31,
DESCRIPTION 1994 EXPENSES ACCOUNTS ADJUSTMENTS DEDUCTIONS 1995
----------- ------------ ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 3,398 4,679 0 7 2,747 $ 5,337
(A)
Allowance for returns, $ 5,438 12,301 0 41 10,479 $ 7,301
discounts, rebates and (B)
cooperative advertising
Allowance for excess, obsolete $ 5,226 5,746 47 57 4,540 $ 6,536
and slow moving inventories
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND OTHER TRANSLATION DECEMBER 31,
DESCRIPTION 1993 EXPENSES ACCOUNTS ADJUSTMENTS DEDUCTIONS 1994
----------- ------------ ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 2,275 3,403 15 (26) 2,269 $ 3,398
(A)(C)
Allowance for returns, $ 5,495 13,893 100 (79) 13,971 $ 5,438
discounts, rebates and (B)(C)
cooperative advertising
Allowance for excess, obsolete $ 1,507 4,280 240 (92) 709 $ 5,226
and slow moving inventories (C)
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND OTHER TRANSLATION DECEMBER 31,
DESCRIPTION 1992 EXPENSES ACCOUNTS ADJUSTMENTS DEDUCTIONS 1993
----------- ------------ ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 783 3,226 52 (15) 1,771 $ 2,275
(A)
Allowance for returns, $ 3,685 14,118 118 (48) 12,378 $ 5,495
discounts, rebates and (B)
cooperative advertising
Allowance for excess, obsolete $ 225 1,320 (38) $ 1,507
and slow moving inventories
</TABLE>
--------------------
(A) Accounts written off as uncollectable
(B) Deductions taken by customers.
(C) Deductions for discontinued operations.
43
<PAGE> 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information as of March 31, 1996 concerning each
Director and Executive Officer of the Company, including his age, position(s)
with the Company, present principal occupation and business experience during
the past five years.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
David Zunenshine (1)(2) 66 Chairman of the Board of Directors
Howard J. Zunenshine 38 Chief Executive Officer and Director
Michael Zunenshine (3) 64 Director
James C. Jarocki (1)(2)(3) 37 Director
Donald M. Flaks (1)(2)(3) 61 Director
John A. Sarto 44 Vice President and Chief Financial Officer
Kenneth A. Bloom 43 Vice President
Richard S. Levy 46 Vice President, Legal Affairs
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
David Zunenshine, the Company's founder, became Chairman of the Board and a
Director of the Company in September 1991. He has served as Chairman of the
Board and a Director of St. Lawrence Manufacturing Canada Inc. ("SLM Canada")
since 1984, is the founder, Chairman of the Board and a Director of Sport Maska,
Inc. ("Sport Maska") and currently serves as a director of certain of the
Company's other subsidiaries (certain information with respect to SLM Canada and
Sport Maska is set forth below). He is also co-founder and Chairman of the Board
of Belcourt Property Management Inc. ("Belcourt"). David Zunenshine is the
brother of Michael Zunenshine and the father of Howard J. Zunenshine.
Howard J. Zunenshine served as Co-Chief Executive Officer of the Company from
September 1991 until August 1994 and became Chief Executive Officer of the
Company in August 1994. Mr. Zunenshine has served as a Director of the Company
since September 1991 and currently serves as a director of certain of the
Company's subsidiaries. He joined Sport Maska in 1980. In 1981 he founded Maska
U.S. Inc. ("Maska U.S.") and became its Vice President and General Manager. In
1989 he became Executive Vice President of Sport Maska and Maska U.S. In 1990,
he became Chief Executive Officer of Maska U.S. and in July 1991 he became Chief
Executive Officer of Sport Maska. Howard J. Zunenshine is the son of David
Zunenshine.
Michael Zunenshine became a Director of the Company in September 1991 and
currently serves as a director of certain of the subsidiaries of the Company. He
is co-founder, President and Chief Executive Officer of Belcourt and a director
of Lessard Beaucage Lemieux, a glass supply and installation company. Michael
Zunenshine is the brother of David Zunenshine.
James C. Jarocki became a Director of the Company in September 1994. He has been
President of Stolat Management, Inc., an investment firm that invests in
mortgage-backed securities and other financial instruments, since 1992. From
1987 to 1992 Mr. Jarocki was the President of Americity Federal Savings Bank, a
chartered savings institution.
Donald M. Flaks became a Director of the Company in August 1995. He has been
President of Sybedon Equities Corp., an investment firm that invests primarily
in real estate, since 1978.
44
<PAGE> 47
John A. Sarto became Vice President and Chief Financial Officer of the Company
in October 1994. From 1990 to 1993, he was Vice President and Chief Financial
Officer of Brooke Group Ltd., a diversified manufacturing company. From 1988 to
1990 he was Vice President-Finance of Brooke Management, Inc. From 1986 to 1988,
he was Vice President, Corporate Controller of MasterCard International, Inc.
From 1980 until 1986, Mr. Sarto held a number of financial positions with The
Dun & Bradstreet Corporation.
Kenneth A. Bloom became Vice President of the Company in October 1994.
Previously, he served as Chief Financial Officer of the Company from October
1991 until October 1994. From 1988 to 1990, he was employed by Matchbox
International Ltd., a Hong Kong-based toy manufacturer ("Matchbox"), as Vice
President and Chief Financial Officer. From 1990 to 1991 he was Executive Vice
President and General Manager of Matchbox Toys U.S.A., a Matchbox subsidiary.
From 1979 to 1988, he held a number of financial management positions with
Mattel Inc., a leading international toy company.
Richard S. Levy became Vice President, Legal Affairs, General Counsel and
Secretary of the Company in September 1991. He joined SLM Canada in 1990 as Vice
President, Legal Affairs and General Counsel. He has also served as Secretary of
certain of the Company's subsidiaries since 1984. From 1976 until he went into
private practice, he worked as a attorney with an agency of the Department of
Industry of the Canadian government. From 1982 to 1990 Mr. Levy practiced law
with the firm of Adessky, Kingstone in Montreal, where he was a partner and head
of their intellectual property law department. Mr. Levy is married to the
daughter of David Zunenshine.
BOARD OF DIRECTORS
The Board of Directors has responsibility for establishing broad corporate
policies and for overseeing the performance of the Company, although it is not
involved in day-to-day operations. Certain of these corporate policies are
subject to the approval of the Bankruptcy Court. Members of the Board are kept
informed of the Company's business by various reports and documents sent to them
in anticipation of Board meetings as well as by operating and financial reports
presented at Board and various Committee meetings. During the year ended
December 31, 1995, the Board held three regularly scheduled meetings and held
two meetings by teleconference. In addition, the Board acted by written consent
in lieu of meeting two times. Each of the Directors participated in at least 75%
of the meetings and consents in lieu of meetings of the Board and Committees on
which they served.
AUDIT COMMITTEE
The Audit Committee reviews the internal controls of the Company and the
objectivity of its financial reporting and meets with appropriate Company
financial personnel and its independent accountants in connection with these
reviews. The Audit Committee recommends to the Board the appointment of
independent accountants to serve as auditors for the following year in examining
the corporate accounts of the Company. During the year ended December 31, 1995,
the Audit Committee held one meeting. The Audit Committee presently consists of
David Zunenshine, Donald M. Flaks and James C. Jarocki. Its current Chairman is
James C. Jarocki.
COMPENSATION COMMITTEE
The Compensation Committee advises and makes recommendations to the Board with
respect to salaries, bonuses, options and other compensation to be paid to
officers and other key employees of the Company and with respect to fees or
other compensation to be paid to Directors who are not employees. During the
year ended December 31, 1995, the Compensation Committee included Ralph M.
Medjuck and Fred Lulof, who were directors of the Company. The Compensation
Committee held two meetings during the year ended December 31, 1995. The
Compensation Committee currently consists of David Zunenshine, Donald M. Flaks
and James C. Jarocki. Its current Chairman is James C. Jarocki.
STOCK OPTION COMMITTEE
The Stock Option Committee administers the Company's 1991 Stock Option Plan and
makes decisions with respect to the number of common stock options to be granted
to officers and other key employees and the exercise price for such options, as
well as other related matters. The Stock Option Committee currently consists of
Michael Zunenshine, Donald M. Flaks and James C. Jarocki. Its current Chairman
is James C. Jarocki. During the year ended December 31, 1995, the Stock Option
Committee neither met nor granted any stock options.
The Board does not have a nominating committee, but acts, as a whole, in
performing the functions of such a committee.
45
<PAGE> 48
Directors who are not officers of the Company receive a $6,000 annual retainer
and a fee of $1,000 for each meeting of the Board of Directors or Committee
thereof attended, plus reimbursement of reasonable out-of-pocket expenses in
respect of such meetings. Directors who are also officers of the Company do not
receive any compensation for services rendered in their capacity as Directors.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth certain information for the
years ended December 31, 1993, 1994 and 1995 concerning the cash and non-cash
compensation earned by or awarded to the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company as
at December 31, 1995 and as at the date hereof.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Fiscal Other Annual Stock All Other
Name And Principal Position Year Salary Bonus Compensation (1) Options (2) Compensation(3)
--------------------------- ------ ---------- -------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Howard J. Zunenshine 1995 $ 369,000 $ -0- $ 131,610(4) -0- -0-
Chief Executive Officer (4) 1994 369,000 200,000 124,515(4) 225,000 -0-
1993 369,000 -0- 124,982(4) -0- -0-
David Zunenshine 1995 240,000 -0- 535,854 -0- -0-
Chairman of the Board (5) 1994 220,000 -0- 384,151 150,000 -0-
1993 205,000 -0- 370,300 -0- -0-
John A. Sarto 1995 229,167 -0- 27,522 -0- -0-
Vice President and Chief 1994 43,836 -0- 4,378 200,000 -0-
Financial Officer (6) 1993 -0- -0- -0- -0- -0-
Richard S. Levy 1995 160,000 -0- 15,638 -0- -0-
Vice President, Legal Affairs, 1994 160,000 -0- 14,762 22,500 -0-
General Counsel and Secretary 1993 140,000 78,640 -0- -0- -0-
Kenneth A. Bloom 1995 140,000 -0- 14,713 -0- -0-
Vice-President (7) 1994 140,000 -0- 11,881 15,000 -0-
1993 140,000 70,000 -0- -0- -0-
</TABLE>
(1) Includes other annual compensation not properly categorized as salary or
bonus. In addition, certain perquisites which do not exceed the lesser of
$50,000 or 10% of the named individual's salary and bonus are excluded.
(2) Includes options to purchase shares of Common Stock with respect to the
stated number of shares.
(3) Includes other compensation that could not properly be reported in any other
column of the Summary Compensation Table.
(4) Other Annual Compensation for Howard J. Zunenshine also includes amounts
paid to his spouse.
(5) Under an employment agreement with the Company (the "Employment Agreement"),
David Zunenshine was paid a salary of $205,000 for the year ended December
31, 1993 and $220,000 for the year ended December 31, 1994. Under the
Management Agreement, Belcourt was paid base management fees of $350,000 for
the year ended December 31, 1993, which amounts are included under Other
Annual Compensation for David Zunenshine. Under the Management Agreement,
Belcourt was paid base management fees of $175,000 during the year ended
December 31, 1994. On June 30, 1994, the Management Agreement was terminated
and on July 1, 1994, the Company entered into a management agreement with
Elkana Limited Liability Co. ("Elkana"), a construction management company
beneficially owned by the spouses of David and Michael Zunenshine, under
terms and conditions identical to those of the Management Agreement with
Belcourt. During the year ended December 31, 1994, Elkana was paid base
management fees of $175,000 under such agreement which amounts are included
under Other Annual Compensation to David Zunenshine.
Under the Employment Agreement, David Zunenshine earned a salary of $240,000
for the year ended December 31, 1995, of which, as a result of an agreement
with the Company's former bank lenders, $181,667 was actually paid.
Similarly, while under its management agreement Elkana earned $350,000 in
the year ended December 31, 1995, only $29,167 was paid. The amounts earned,
rather than paid under the Employment Agreement and Management Agreement are
included under Salary and Other Annual Compensation to David Zunenshine,
respectively. Currently, in accordance with a stipulated order of the
Bankruptcy Court, the combined compensation paid under the Employment
Agreement and Elkana Management Agreement cannot exceed the annualized
amount of $100,000. All unpaid amounts due David Zunenshine and Elkana will
be subject to the Company's Chapter 11 plan of reorganization. The ultimate
amount and terms of repayment of these liabilities are not presently
determinable.
(6) John A. Sarto joined the Company as Chief Financial Officer on October 12,
1994.
(7) Kenneth A. Bloom served as Chief Financial Officer of the Company until
October 1994. He currently holds the position of Vice President.
46
<PAGE> 49
STOCK OPTIONS
The following two tables set forth certain information concerning the grant of
options to purchase shares of the Company's Common Stock to each of the
executive officers of the Company named in the Summary Compensation Table above,
as well as certain information concerning the exercise and value of such stock
options for each of such individuals. Options generally become exercisable over
periods of up to five years and, subject to certain exceptions, expire no later
than ten years from the date of grant.
There were no stock options granted to the executive officers named above, or to
any other employee, during the year ended December 31, 1995.
STOCK OPTION EXERCISES IN 1995 AND
VALUE OF OPTIONS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Value Of Unexercised
Number Of Unexercised Options In-The-Money (1)
Shares Held At Year End Options At Year End (2)
Acquired Value ----------------------------- ----------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard J. Zunenshine -0- -0- 150,000 150,000 N/A N/A
David Zunenshine -0- -0- 30,000 120,000 N/A N/A
John A. Sarto -0- -0- 95,000 105,000 N/A N/A
Richard S. Levy -0- -0- 22,500 39,000 N/A N/A
Kenneth A. Bloom -0- -0- 9,750 14,250 N/A N/A
</TABLE>
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock at December 31, 1995 exceeds the exercise price of the options
on such date.
(2) The value of unexercised options represents the difference between the
exercise price of such options and the closing market price of the Company's
Common Stock on December 31, 1995.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of Original
Market Price of Exercise Price New Option Term
Underlying Stock at Time of at Time of Exercise Remaining at the
Name Date Securities Repricing Repricing Price Time of Repricing
---- ---- ---------- ---------------- -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David Zunenshine 12/2/94 150,000 $ 3.63 $ 13.79 $ 3.63 8 years
Richard S. Levy 12/2/94 22,500 3.63 13.79 3.63 8 years
Kenneth A. Bloom 12/2/94 15,000 3.63 13.79 3.63 8 years
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee advises and makes recommendations to the Board with
respect to salaries, bonuses and other compensation to be paid to officers and
other key employees of the Company.
The total compensation for the Company's executive officers principally consists
of cash and equity based compensation in the form of stock options. The equity
based component is intended to align the long range interests of key employees
with those of stockholders by providing such key employees with the opportunity
to build, through achievement of corporate performance goals, a meaningful
equity interest in the Company.
The Compensation Committee believes that the compensation of the chief executive
officer of the Company (the "Chief Executive Officer") should be based on the
Company's performance and the compensation components of the employment
agreement with the Chief Executive Officer have been structured accordingly. The
major elements of the Chief Executive Officer's compensation are, therefore,
directly tied to the Company's performance. Additionally, in establishing the
annual base salary and cash bonus levels of the Chief Executive Officer, the
Compensation Committee considers the annual base salaries and cash bonuses of
chief executive officers of comparably sized companies within the sporting goods
industry.
47
<PAGE> 50
In accordance with an employment agreement between the Company and Howard J.
Zunenshine dated as of January 1, 1993, for the years ended December 31, 1993,
1994 and 1995, the Chief Executive Officer's annual cash bonus and grant of
stock options would have been determined as a direct function of growth in the
Company's earnings per share for such year. The maximum bonus that could have
been earned for each such year was limited to 150% of the Chief Executive
Officer's base salary for each such year. The maximum number of stock options
that could have been earned for each such year was limited to options to
purchase 75,000 shares of Common Stock. For the years ended December 31, 1993,
1994 and 1995, Howard J. Zunenshine did not receive any cash bonus or options to
purchase shares of Common Stock pursuant to the employment agreement. However,
notwithstanding the foregoing, in December 1994, the Compensation Committee
awarded to Howard J. Zunenshine a cash bonus of $200,000 and options to purchase
225,000 shares of the Common Stock at $3.63 per share (the market value of the
Common Stock on the date of grant) in recognition of the increased
responsibilities resulting from the appointment in August 1994 of Mr. Zunenshine
as sole Chief Executive Officer of the Company and the significant challenge and
personal commitment necessary to lead the Company's financial turnaround as
necessitated by the significant losses sustained in its toy and fitness
businesses.
The Compensation Committee has adopted similar policies with respect to
compensation of other executive officers of the Company. Base salaries of other
executive officers are established after considering base salaries for persons
holding similarly responsible positions at other companies in the sporting goods
industry as well as the Company's performance and individual past performance
and future potential. Annual cash bonus and stock option grants are both tied to
individual performance and Company performance, namely growth in the Company's
earnings per share during the most recent fiscal year.
In formulating its compensation policies, the Compensation Committee will take
into consideration the anticipated tax treatment to the Company and the
executives. Effective for compensation paid after December 31, 1993, section
162(m) was added to the Internal Revenue Code of 1986 (the "Code") which could
limit the Company's tax deduction for such compensation paid to the executive
officers named in the Summary Compensation Table, above, to $1 million. Amounts
which constitute "performance-based compensation" are disregarded. At this time,
cash compensation opportunities at the Company do not exceed the $1 million cap
for any of the named executive officers. Therefore, the Compensation Committee
has not adopted any policy under section 162(m) with respect to cash
compensation payable to the named executive officers, but will review the
Company's compensation practices as circumstances warrant.
In December 1994, the Compensation Committee repriced certain options held by
three executive officers of the Company, as well as certain other key employees.
The repriced options held by the three executive officers (David Zunenshine,
Richard S. Levy and Kenneth A. Bloom) were exercisable at $13.79 per share, and
were repriced to the market price of the Common Stock on such date ($3.63 per
share). The Committee recognized these individuals, as well as the certain other
key employees as important members of the Company's management team charged with
restoring the Company's profitability and financial restructuring. The Committee
concluded that equity based incentives are the appropriate form of compensation
to accomplish this objective. However, rather than granting incremental options
to these executive officers, new ones were issued in exchange for the older
higher priced options. The new options vest over five years from the date of
grant.
COMPENSATION COMMITTEE
James C. Jarocki, Chairman
Donald M. Flaks
David Zunenshine
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Donald M.
Flaks, James C. Jarocki and David Zunenshine. The Chairman of the Compensation
Committee is James C. Jarocki. Messrs. Donald M. Flaks and James C. Jarocki are
independent, non-employee Directors. David Zunenshine is Chairman of the Board
of Directors of the Company.
Secretariat Realty Corp. ("Secretariat"), ZMD Sports Investment Inc. ("ZMD") and
Doulka Investments Inc. ("Doulka") (a related party of ZMD), companies
controlled by David and Michael Zunenshine, lease several properties to certain
of the Company's subsidiaries for annual rentals which aggregated approximately
48
<PAGE> 51
$1,791,000 for the year ended December 31, 1995. The Company believes that the
terms of these leases are comparable to or more favorable than those which could
be obtained from unaffiliated third parties.
Set forth below is table outlining the terms of such leases with Secretariat,
ZMD and Doulka.
<TABLE>
<CAPTION>
LESSEE/LESSOR LOCATION TERM CURRENT RENTAL (1) (2)
------------- -------- ---- ----------------------
<S> <C> <C> <C>
SLM Canada/Doulka Beauport, Quebec Expires on $503,800 Cdn.
January 31, 2005 (U.S. $369,200) per year net, net
Sport Maska/ZMD St. Jean, Quebec Expires on $434,700 Cdn.
November 30, 2004 (U.S. $318,600) per year net, net
Sport Maska/ZMD St. Hyacinthe, Quebec Expires on $324,000 Cdn.
January 31, 2005 (U.S. $237,500) per year net, net
Sport Maska/ZMD Cap de la Madeleine, Expires on $35,400 Cdn.
Quebec January 31, 2005 (U.S. $25,900) per year net, net
Sport Maska/ZMD St. Hyacinthe, Quebec Expires on $38,700 Cdn.
January 31, 2005 (U.S. $28,400) per year net, net
Maska U.S./Secretariat Peterborough, NH Expires on U.S. $468,000 per year net, net
January 17, 2014
</TABLE>
(1) Leases provide for rental increases at various dates during the lease terms.
Under a net, net lease, the tenant is required to pay all occupancy costs,
including taxes, maintenance, utilities and repairs. Certain leases are
subject to a 5% administrative fee. All Canadian dollar amounts have been
converted into United States dollars at the exchange rate in effect on
December 31, 1995.
(2) Under the Bankruptcy Code, the Company may elect to assume or reject
employment agreements, leases, service contracts and other executory
pre-Petition Date contracts, subject to Bankruptcy Court approval. The
Company cannot presently determine or reasonably estimate the effect or
ultimate liability which might result from the assumption or rejection of
the above leases.
During 1994, Elkana Limited Liability Co. ("Elkana"), a company beneficially
owned by the spouses of David and Michael Zunenshine, provided design,
engineering and construction management services, including the negotiation and
administration of, and supervision with respect to, construction contracts, to
the Company in connection with the construction of approximately 300,000 square
feet of manufacturing and distribution space at a facility in upstate New York,
the construction of approximately 25,000 square feet of offices and showrooms in
New York City and construction of approximately 144,000 square feet of warehouse
and office space in Peterborough, New Hampshire. The compensation to be paid to
Elkana for such services and the expenses related thereto are subject to
negotiation upon the completion of such construction projects. The payments due
Elkana in connection with the upstate New York and New York City projects have
not been finalized and Elkana holds construction liens on these facilities. The
amount billed by Elkana for the upstate New York project is $682,036. The amount
billed by Elkana for the New York City project is $268,212. The amount billed by
Elkana for the Peterborough, NH facility is $102,980.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement entered into with the Company, effective as
of January 1, 1993 and as amended from time to time (collectively, the "HJZ
Agreement"), Howard J. Zunenshine is entitled to receive a base salary in each
of the years 1993 through 1996 of $400,000. The annual base salary for 1997-1998
will be established by the Compensation Committee by December 1996. The HJZ
Agreement also contains certain bonus provisions which enable Howard J.
Zunenshine to earn in any year, in addition to his base salary, up to 150% of
his base salary and options to purchase up to 75,000 shares of Common Stock at
the prevailing market price on the date of grant if the Company's earnings per
share in that year increases by certain percentages as compared to the prior
year. The HJZ Agreement also contains provisions which require the Company, at
its expense and upon Howard J. Zunenshine's request (not to exceed one request
in any year), to register any Common Stock in which he currently has a
beneficial interest. The HJZ Agreement also requires the Company to purchase
split-dollar life insurance on the life of Howard J. Zunenshine having a death
benefit payable of $5,000,000. In the event of Howard J. Zunenshine's death, the
excess of the payout after deduction of premiums paid by the Company shall be
paid to his estate. In the event of the termination of Howard J. Zunenshine's
employment with the Company, he may purchase the policy for the value of the
amounts paid by the Company. In the event that the HJZ Agreement is terminated
on or before the completion of its term (other than for cause, as specified in
the agreement), Howard J. Zunenshine would be entitled to receive the greater of
(i) two times his then current annual base salary together with an amount equal
to two times the average bonus paid to him for
49
<PAGE> 52
the two years immediately prior to the year in which such termination occurred,
or (ii) the remainder of his salary payable through December 31, 1998, together
with an amount equal to two times the average bonus paid to him for the two
years immediately prior to the year in which such termination occurs. In
addition, certain benefits would continue to be paid.
In the event of a change of control or liquidation of the Company, Howard J.
Zunenshine may, at his option, terminate the HJZ Agreement and receive the
greater of (i) two times the then current annual base salary together with the
average annual bonus paid to him for the two years ending immediately prior to
the year in which such termination occurred or (ii) the remainder of the base
salary owed under the HJZ Agreement together with an amount equal to two times
the average bonus paid to him for the two years immediately prior to the year in
which such event occurs, as well as the payment of certain benefits. Howard J.
Zunenshine has agreed not to be associated with certain companies deemed to be
competitive with the Company and certain of its subsidiaries for three years
subsequent to the date of termination of the HJZ Agreement. The HJZ Agreement
expires on December 31, 1998.
Pursuant to an employment agreement with the Company, effective as of January 1,
1993, and as amended from time to time (collectively, the "DZ Agreement"), David
Zunenshine is entitled to receive a base salary in each of the years 1993, 1994
and 1995 of $205,000, $220,000 and $240,000, respectively. In addition, pursuant
to a management agreement between the Company and Elkana, Elkana will receive an
annual payment of $350,000 in each of the years 1993 through 1996. The DZ
Agreement and the management agreement each contain provisions which enable
David Zunenshine and Elkana, as the case may be, to earn in any year, in
addition to base compensation, up to 150% of the full amount of base
compensation if the Company's earnings per share in that year increases by
certain percentages as compared to the prior year. The DZ Agreement also
contains certain provisions which (i) enable David Zunenshine to earn in any
year options to purchase up to 150,000 shares of Common Stock at the prevailing
market price on the date of grant if the Company's earnings per share in that
year increases by certain percentages as compared to the prior year and (ii)
require the Company, at its expense and at David Zunenshine's request (not to
exceed one request in any year), to register any Common Stock in which David
Zunenshine currently has a beneficial interest. The DZ Agreement also requires
the Company to purchase split-dollar life insurance on the life of David
Zunenshine having a death benefit payable of $5,000,000. In the event of David
Zunenshine's death, the excess of the payout after deduction of premiums paid by
the Company shall be paid to his estate. In the event of David Zunenshine's
termination, he may purchase the policy for the value of the amounts paid by the
Company. In the event that the DZ Agreement or the management agreement is
terminated on or before the completion of its three-year term (other than for
cause, as specified in such agreements), David Zunenshine or Elkana, as the case
may be, would be entitled to receive two times the then current annual base
compensation paid to David Zunenshine or Elkana, as the case may be, together
with the average annual bonus paid to David Zunenshine or Elkana, as the case
may be, for the two years ending immediately prior to the year in which such
termination occurred. In the event of a change in control of the Company, David
Zunenshine and Elkana may, at his or its option, as the case may be, terminate
the agreement and receive the greater of (i) two times the then current annual
base compensation together with the average annual bonus paid to David
Zunenshine or Elkana, as the case may be, for the two years ending immediately
prior to the year in which such termination occurred or (ii) the remainder of
the base compensation owed under the agreement.
Pursuant to an employment agreement with the Company, effective as of October
12, 1994, and as amended from time to time (collectively, the "JAS Agreement"),
John A. Sarto is entitled to receive a base salary in each of the years 1995,
1996 and 1997 of $229,167, $262,500 and $275,000, respectively. The JAS
Agreement contains provisions which enable Mr. Sarto, to earn in any year, in
addition to base compensation, up to 150% of the full amount of base
compensation if the Company's earnings per share in that year increases by
certain percentages as compared to the prior year. The JAS Agreement also
contains certain provisions which (i) enable Mr. Sarto to earn in any year
options to purchase up to 50,000 shares of Common Stock at the prevailing market
price on the date of grant if the Company's earnings per share in that year
increases by certain percentages as compared to the prior year and (ii) require
the Company, at its expense and at Mr. Sarto's request (not to exceed one
request in any year), to register any Common Stock in which he currently has a
beneficial interest. In the event that the JAS Agreement is terminated on or
before the completion of its term (other than for cause, as specified in the
agreement), Mr. Sarto would be entitled to receive severance pay based on his
then current base salary for the greater of two years or the remaining portion
of the initial term or the renewal term, if any, as the case may be, together
with a pro-rated annual bonus, as well as the payment of certain benefits.
50
<PAGE> 53
In the event of a change of control of the Company, or if a relocation is
requested, Mr. Sarto may, at his option, terminate the JAS Agreement and receive
the greater of (i) two times the then current annual base salary together with
the average annual bonus paid to him for the two years ending immediately prior
to the year in which such termination occurred or (ii) the remainder of the base
salary owed under the JAS Agreement together with an amount equal to two times
the average bonus paid to him for the two years immediately prior to the year in
which such event occurs, as well as the payment of certain benefits. Mr. Sarto
has agreed not to be associated with certain companies deemed to be competitive
with the Company and certain of its subsidiaries for three years subsequent to
the date of termination of the JAS Agreement. The JAS Agreement expires on
December 31, 1997.
Pursuant to an employment agreement with the Company, effective as of January
30, 1995, and as amended from time to time (collectively, the "RSL Agreement"),
Richard S. Levy is entitled to receive a base salary in each of the years 1995,
1996 and 1997 of $160,000. The RSL Agreement contains provisions which enable
Mr. Levy to earn in any year, in addition to base compensation, up to 100% of
the full amount of base compensation if the Company's earnings per share in that
year increases by certain percentages as compared to the prior year. In the
event that the RSL Agreement is terminated on or before the completion of its
term (other than for cause, as specified in the agreement), Mr. Levy would be
entitled to receive severance pay based on his then current compensation for the
greater of eighteen months or the remaining portion of the initial term or the
renewal term, if any, as the case may be, together with a pro-rated annual
bonus, if any.
In the event of a change of control of the Company, Mr. Levy may, at his option,
terminate the RSL Agreement and receive the greater of (i) two times the then
current annual base salary and car allowance together with the average annual
bonus, if any, paid to him for the two years ending immediately prior to the
year in which such termination occurred or (ii) the remainder of the base salary
and car allowance owed under the RSL Agreement. Mr. Levy has agreed not to be
associated with certain companies deemed to be competitive with the Company and
certain of its subsidiaries for the greater of one year or the applicable
Severance Period subsequent to the date of termination of the RSL Agreement. The
RSL Agreement expires on December 31, 1997.
Under the Bankruptcy Code, the Company may elect to assume or reject executory
agreements, leases, service contracts and other executory pre-Petition Date
contracts including pre-Petition Date employment and severance agreements,
subject to the approval of the Bankruptcy Court. The Company cannot presently
determine or reasonably estimate the effect or ultimate liability which might
result from the assumption or rejection of the following Employment Agreements.
SEVERANCE AGREEMENT
On August 8, 1994, Earl Takefman resigned as Co-Chief Executive Officer of the
Company. Pursuant to an executive employment agreement, dated as of January 1,
1993, between Earl Takefman and the Company, he was entitled to receive
severance payments equal to (i) two times his annual base salary and (ii) two
times his average cash bonus for the two years immediately prior to the year in
which such termination occurs. Mr. Takefman and the Company entered into an
Agreement and Release, which provides that such severance payments, which in the
aggregate equaled $1,100,000, would be paid to Mr. Takefman in 24 equal monthly
installments of $45,833.33, commencing on August 8, 1994. The payments due Mr.
Takefman under the Agreement and Release are backed by a standby letter of
credit issued by the Company's banks. In addition, the Agreement and Release
provides, among other things, (a) for mutual releases by Mr. Takefman and the
Company, (b) for Mr. Takefman's continued assistance and cooperation with
respect to ongoing or future litigation and (c) that Mr. Takefman will not enter
into a business relationship with any of the Company's competitors listed
therein for a period of three years and that he will not entice away or obtain
the withdrawal of any employee of the Company or its subsidiaries for a period
of three years.
RETIREMENT AND LONG-TERM INCENTIVE PLANS
The Company does not maintain a defined benefit plan, nor does the Company
maintain a long-term incentive plan. The Company does maintain a 401(K) defined
contribution plan for its U.S. employees, under which the Company makes a
matching contribution of up to 50% of eligible employee contributions. During
the year ended December 31, 1995, no matching contributions were made to any of
the Company's executive officers.
51
<PAGE> 54
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with that of the NASDAQ Composite Index for U.S.
companies and the Dow Jones Recreation Products Group which is comprised of toy,
entertainment, sporting goods, recreation and leisure product companies.
[CUMULATIVE TOTAL RETURN GRAPH]
(1) Assumes $1,000 invested on November 27, 1991, the date of the initial public
offering of the Company's Common Stock, in the Company's Common Stock, the
NASDAQ Composite Index and the Dow Jones Recreation Products Group. Values
are as of December 31 of each year specified and assume dividend
reinvestment where applicable.
<TABLE>
<CAPTION>
Cumulative Total Return 1992 1993 1994 1995
----------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
SLM International, Inc. $ 2,095.24 $ 3,285.71 $ 366.07 $ 156.29
NASDAQ Composite Index 1,304.32 1,488.38 1,456.09 2,037.24
Recreation Products Group 1,198.82 1,489.67 1,349.48 1,556.00
</TABLE>
52
<PAGE> 55
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1996 (except where
otherwise noted) with respect to (a) each person known to be the beneficial
owner of more than 5% of the outstanding shares of Common Stock, (b) each
Director of the Company, (c) the Company's executive officers and (d) all
officers and directors of the Company as a group (except as indicated in the
footnotes to the table, all of such shares of Common Stock are owned with sole
voting and investment power):
<TABLE>
<CAPTION>
Of Total Number Of Shares Beneficially
Beneficial Ownership Owned, Shares Which May Be Acquired
Name Of Beneficial Owner (1) No. Of Shares % Of Class Within 60 Days
---------------------------- ------------- ---------- --------------------------------------
<S> <C> <C> <C>
Cinderland Trust (2)(3) 7,485,177 39.7% -0-
Hymson Holdings Inc. (2)(3) 7,485,177 39.7 -0-
Finansca Inc. (2)(3) 7,485,177 39.7 -0-
3100014 Canada Inc. (3) 5,611,513 29.8 -0-
3126323 Canada Inc. (3) 1,873,664 9.9 -0-
Howard J. Zunenshine (2)(4)(5) 302,481 1.6 150,000
3096041 Canada Inc. (3)(6) 42,997 0.2 -0-
David Zunenshine (2)(4)(5)(9) 33,021 0.2 30,000
3096033 Canada Inc. (3)(7) 25,843 0.1 -0-
3096025 Canada Inc. (3)(8) 7,496 -0- -0-
Michael Zunenshine (2)(4)(5) 3,021 -0- -0-
James C. Jarocki (10) 1,500 -0- -0-
Donald M. Flaks 3,000 -0- -0-
John A. Sarto 95,000 0.5 95,000
Richard S. Levy 22,500 0.1 22,500
Kenneth A. Bloom 9,750 0.1 9,750
All Officers and Directors as a 8,031,786 42.6% 307,250
Group (8 persons) (2)(3)(9)
</TABLE>
(1) The address for such owners is c/o Belcourt Property Management Inc., 6500
Trans Canada Highway, Suite 210, St. Laurent, Quebec, Canada H4T 1X4 except
for Howard J. Zunenshine, James C. Jarocki, Donald M. Flaks, John A. Sarto,
Richard S. Levy and Kenneth A. Bloom, for whom the address is c/o SLM
International, Inc., 30 Rockefeller Plaza, Suite 4314, New York, New York
10112-4399.
(2) Finansca Inc. is a wholly-owned subsidiary of Hymson Holdings Inc. The sole
stockholder of Hymson Holdings Inc. is Cinderland Trust, a trust for the
benefit of the three children of David Zunenshine, including Howard J.
Zunenshine, and the three children of Michael Zunenshine. David and Michael
Zunenshine are the trustees of Cinderland Trust.
(3) All the outstanding capital stock of each of 3100014 Canada Inc. and 3126323
Canada Inc. is owned by Finansca Inc. The beneficial owners of 3096041
Canada Inc., 3096033 Canada Inc., and 3096025 Canada Inc. are the spouses
and mother of David and Michael Zunenshine.
(4) The shares of Common Stock beneficially owned by (i) Howard J. Zunenshine
are owned through his personal holding company and (ii) David and Michael
Zunenshine are owned through Belcourt, Inc. ("Belcourt"), an office,
industrial, shopping center and hotel developer and real estate manager
active in Canada controlled by David and Michael Zunenshine.
(5) Does not include shares of Common Stock beneficially owned by Cinderland
Trust. David and Michael Zunenshine are the trustees of Cinderland Trust and
Howard J. Zunenshine is the beneficiary of one-sixth of Cinderland Trust's
assets.
(6) 3096041 Canada Inc. is owned by the spouse of David Zunenshine.
(7) 3096033 Canada Inc. is owned by the spouse of Michael Zunenshine.
(8) 3096025 Canada Inc. is owned by the mother of David and Michael Zunenshine.
(9) Does not include 165 shares of Common Stock held by David Zunenshine as
Trustee under a trust established for a relative who is a minor.
(10) These shares are owned by Mr. Jarocki's wife and Mr. Jarocki disclaims
beneficial ownership of such shares.
53
<PAGE> 56
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David and Michael Zunenshine, directors and controlling stockholders of the
Company, are also real estate developers and managers operating through
Secretariat, ZMD and Doulka. Secretariat, ZMD and Doulka lease several
properties to certain of the Company's subsidiaries for annual rentals which
aggregated approximately $1,791,000 for the year ended December 31, 1995. The
Company believes that the terms of these leases are comparable to or more
favorable than those which could be obtained from unaffiliated third parties.
Set forth below is table outlining the terms of such leases with Secretariat,
ZMD and Doulka.
<TABLE>
<CAPTION>
LESSEE/LESSOR LOCATION TERM CURRENT RENTAL (1) (2)
------------- -------- ---- ----------------------
<S> <C> <C> <C>
SLM Canada/Doulka Beauport, Quebec Expires on $503,800 Cdn.
January 31, 2005 (U.S. $369,200) per year net, net
Sport Maska/ZMD St. Jean, Quebec Expires on $434,700 Cdn.
November 30, 2004 (U.S. $318,600) per year net, net
Sport Maska/ZMD St. Hyacinthe, Quebec Expires on $324,000 Cdn.
January 31, 2005 (U.S. $237,500) per year net, net
Sport Maska/ZMD Cap de la Madeleine, Expires on $35,400 Cdn.
Quebec January 31, 2005 (U.S. $25,900) per year net, net
Sport Maska/ZMD St. Hyacinthe, Quebec Expires on $38,700 Cdn.
January 31, 2005 (U.S. $28,400) per year net, net
Maska U.S./Secretariat Peterborough, NH Expires on U.S. $468,000 per year net, net
January 17, 2014
</TABLE>
(1) Leases provide for rental increases at various dates during the lease terms.
Under a net, net lease, the tenant is required to pay all occupancy costs,
including taxes, maintenance, utilities and repairs. Certain leases are
subject to a 5% administrative fee. All Canadian dollar amounts have been
converted into United States dollars at the exchange rate in effect on
December 31, 1995.
(2) Under the Bankruptcy Code, the Company may elect to assume or reject
employment agreements, leases, service contracts and other executory
pre-Petition Date contracts, subject to Bankruptcy Court approval. The
Company cannot presently determine or reasonably estimate the effect or
ultimate liability which might result from the assumption or rejection of
the above leases.
During 1994, Elkana, a company beneficially owned by the spouses of David and
Michael Zunenshine, provided design, engineering and construction management
services, including the negotiation and administration of, and supervision with
respect to, construction contracts, to the Company in connection with the
construction of approximately 300,000 square feet of manufacturing and
distribution space at a facility in upstate New York and the construction of
approximately 25,000 square feet of offices and showrooms in New York City and
construction of approximately 144,000 square feet of warehouse and office space
in Peterborough, New Hampshire. The compensation to be paid to Elkana for such
services and the expenses related thereto are subject to negotiation upon the
completion of such construction projects. The payments due Elkana in connection
with the upstate New York and New York City projects have not been finalized and
Elkana holds construction liens on these facilities. The amount billed by Elkana
for the upstate New York project is $682,036. The amount billed by Elkana for
the New York City project is $268,212. The amount billed by Elkana for the
Peterborough, NH facility is $102,980.
54
<PAGE> 57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a)(1) Financial Statements required by Item 14 are included and indexed in Part
II, Item 8.
(a)(2) The financial statement schedules filed as part of this report include
the following:
<TABLE>
<CAPTION>
SCHEDULE PAGE
-------- ----
<S> <C> <C>
II Valuation and Qualifying Accounts and Reserves 43
</TABLE>
(a)(3) The following is a list of all Exhibits filed as part of this Report:
The exhibits designated by an asterisk are management contracts and
compensatory plans and arrangements required to be filed as exhibits to
this Form 10-K.
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of the Company. Filed as Exhibit
3.1 to the Company's Registration Statement (No. 33-43302) on
Form S-1 and incorporated herein by reference.
3.2 By-Laws of the Company. Filed as Exhibit 3.2 to the Company's
Registration Statement (No. 33- 43302) on Form S-1 and
incorporated herein by reference.
3.3 Amendment to the Certificate of Incorporation of the Company
dated May 26, 1994.
3.4 Certificate of Designations, Preferences and Rights of Series
A Junior Preferred Shares.
4.1 Rights Agreement, dated February 1, 1995, between the Company
and Fleet National Bank, as rights agent.
10.1 Employment Agreement, dated January 1, 1993, between Howard J.
Zunenshine and the Company filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.*
10.2 Lease, dated October 22, 1991, between ZDM Sports Investments
Inc. and SLM Canada Inc. Filed as Exhibit 10.39 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.3 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.40 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.4 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.41 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.5 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.42 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.6 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sports Maska Inc. Filed as Exhibit 10.43 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.7 Form of Grant of Stock Option under 1991 Stock Option Plan of
the Company. Filed as Exhibit 10.68 to the Company's
Registration Statement (No. 33-43302) on Form S-1 and
incorporated herein by reference.*
10.8 Form of Grant of Stock Option under 1991 Stock Option Plan of
the Company. Filed as Exhibit 10.69 to the Company's
Registration Statement (No. 33-43302) on Form S-1 and
incorporated by reference.*
10.9 Employment Agreement, dated as of January 1, 1993, between
David Zunenshine and the Company filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.*
55
<PAGE> 58
10.10 Management Agreement, dated as of July 1, 1994, between Elkana
Limited Liability Co. and the Company filed as Exhibit 10.11
to the Company's Annual Report on Form 10 - K for the year
ended December 31, 1994 and incorporated herein by reference.*
10.11 Loan and Security Agreement dated as of December 3, 1992 among
SLM International, Inc., SLM Inc., SLM Canada Inc., Sport
Maska, Inc., Maska U.S. Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, the lenders named therein and
Fleet Credit Corporation. Filed as Exhibit 1 to the Form 8-K
of the Company filed on December 28, 1992.
10.12 First Amendment to Loan and Security Agreement, dated as of
June 23, 1993, among the Company, SLM Inc., SLM Canada Inc.,
Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
InfoMarketing Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 1 to the Form 8-K of
the Company filed on July 9, 1993.
10.13 Canadian Asset Purchase Agreement, dated as of January 18,
1994, between K-Brand Ltd. and K- Products, Inc. and #1
Apparel Canada Inc. and the Company. Filed as Exhibit 1 to the
Form 8-K of the Company filed on February 14, 1994.
10.14 U.S. Asset Purchase Agreement, dated as of January 18, 1994,
between K-Products, Inc. and #1 Apparel, Inc. and the Company
Filed as Exhibit 2 to the Form 8-K of the Company filed on
February 14, 1994.
10.15 Fourth Amendment to Loan and Security Agreement, dated as of
March 4, 1994, among the Company, Buddy L Inc. (f/k/a SLM
Inc.), Buddy L. Canada Inc. (f/k/a SLM Canada Inc.), Sport
Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, The Toy Factory, Inc., Consumer
InfoMarketing, Inc. (f/k/a InfoMarketing Inc.,), #1 Apparel,
Inc., #1 Apparel Canada Inc., Buddy L St. Thomas, Inc., the
lenders named therein and Fleet Credit Corporation, as agent.
Filed as Exhibit 1 to the Form 8-K filed by the Company on
March 25, 1994.
10.16 Note Purchase Agreements, dated as of February 15, 1994, among
the Company, Buddy L Inc., Buddy L Canada Inc., Sport Maska
Inc., Maska U.S., Inc., Mitchel & King Skates Limited, The Toy
Factory, Inc., Consumer InfoMarketing, Inc., #1 Apparel, Inc.,
#1 Apparel Canada Inc. and the purchasers listed therein.
Filed as Exhibit 2 to the form 8-K filed by the Company on
March 25, 1994.
10.17 Agented Co-Pledge Agreement, dated as of March 4, 1994, among
the Company, the lenders named therein, the purchasers named
therein and United States Trust Company of New York, as Pledge
Agent. Filed as Exhibit 3 to the Form 8-K filed by the Company
on March 25, 1994.
10.18 Agented Co-Pledge Agreement, dated as of March 4, 1994, among
Buddy L Inc., the lenders named therein, the purchasers named
therein and United States Trust Company of New York, as Pledge
Agent. Filed as Exhibit 4 to the Form 8-K filed by the Company
on March 25, 1994.
10.19 Fifth Amendment to Loan and Security Agreement, dated as of
March 31, 1994, among the Company, Buddy L Inc. (f/k/a SLM
Inc.), Buddy L. Canada Inc. (f/k/a SLM Canada Inc.), Sport
Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, The Toy Factory, Inc., Consumer
InfoMarketing, Inc. (f/k/a InfoMarketing Inc.,), #1 Apparel,
Inc., #1 Apparel Canada Inc., Buddy L St. Thomas, Inc., the
lenders named therein and Fleet Credit Corporation, as agent.
Filed as Exhibit 10.33 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated
herein by reference.
10.20 Executive Employment Agreement, dated as of October 12, 1994,
between John A. Sarto and the Company. Filed as Exhibit 12.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended October 1, 1994.*
10.21 Retail License Agreement, dated March 8, 1995, between Maska
U.S. Inc. and NHL Enterprises Inc. Filed as Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.*
56
<PAGE> 59
10.22 Retail License Agreement, dated March 8, 1995, between Sport
Maska, Inc. and NHL Enterprises Canada Inc. Filed as Exhibit
10.31 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference.*
10.23 Sixth Amendment to Loan and Security Agreement, dated as of
July 13, 1994, among the Company, Buddy L Inc., Buddy L Canada
Inc., Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
Consumer InfoMarketing, Inc., #1 Apparel, Inc., Buddy L St.
Thomas, Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 1 to the Form 8-K
filed by the Company on August 1, 1994.
10.24 Amendment to Loan and Security Agreement dated as of February
23, 1995, among the Company, Buddy L Inc., Buddy L Canada
Inc., Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
Consumer InfoMarketing, Inc., #1 Apparel, Inc., Buddy L St.
Thomas, Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 10.33 to the Company's
Annual Report on Form 10 - K for the year ended December 31,
1994 and incorporated herein by reference.
10.25 Amendment, dated as of December 2, 1994, to the Employment
Agreement dated as of January 1, 1993 between Howard J.
Zunenshine and the Company filed as Exhibit 10.34 to the
Company's Annual Report on Form 10 - K for the year ended
December 31, 1994 and incorporated herein by reference.*
10.26 Amendment to Executive Employment Agreement, dated June 1,
1995, between the Company and Howard J. Zunenshine (filed
herewith).*
10.27 Second Amendment to Executive Employment Agreement, dated
October 15, 1995, between the Company and Howard J. Zunenshine
(filed herewith).*
10.28 Amendment to Executive Employment Agreement, dated June 1,
1995, between the Company and John A. Sarto (filed herewith).*
10.29 Second Amendment to Executive Employment Agreement, dated
September 15, 1995, between the Company and John A. Sarto
(filed herewith).*
10.30 Term Note, issued in the principal sum of $6,000,000, dated
June 28, 1995, between Maska U.S., Inc., as Payor, and T.
Copeland & Sons, Inc. and Copeland Properties, Inc.,
collectively, as Payee (filed herewith).
10.31 Retail License Agreement, dated October 6, 1995, between NHL
Enterprises and Maska U.S., Inc. (filed herewith).*
10.32 Retail License Agreement, dated October 6, 1995, between NHL
Enterprises and Sport Maska, Inc. (filed herewith).*
10.33 Settlement Agreement, dated June 28, 1995, between T. Copeland
& Sons, Inc. and Copeland Properties, Inc. and Howard J.
Zunenshine and Maska U.S., Inc. (filed herewith).
10.34 Lease, dated January 18, 1994, between Secretariat Realty
Corp. and Maska U.S., Inc. (filed herewith).*
10.35 Deed of Lease, dated November 1, 1994, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.36 Deed of Lease, dated January 27, 1995, between Doulka
Investments Inc. and Buddy L Canada Inc. (filed herewith).*
10.37 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.38 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.39 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.40 Settlement Agreement, dated November 21, 1995, among the
Company, certain subsidiaries, the Buddy L Creditors Committee
and certain Lenders (filed herewith).
57
<PAGE> 60
10.41 Standstill Agreement, dated as of June 5, 1995, among the
Company, certain subsidiaries of the Company, certain lenders
and certain shareholder entities. Filed as Exhibit 1 to the
Form 8-K filed by the Company on June 9, 1995.
10.42 Registration Rights Agreement, dated as of June 5, 1995,
between the Company and certain lenders. Filed as Exhibit 2 to
the Form 8-K filed by the Company on June 9, 1995.
10.43 Form of Non-Escrowed Common Stock Warrant issued to certain
lenders. Filed as Exhibit 3 to the Form 8-K filed by the
Company on June 9, 1995.
10.44 Form of Escrowed Common Stock Warrant issued to certain
lenders. Filed as Exhibit 4 to the Form 8- K filed by the
Company on June 9, 1995.
10.45 Forbearance Agreement, dated as of June 5, 1995, among the
Company, certain subsidiaries of the Company, certain lenders
and certain shareholder entities. Filed as Exhibit 5 to the
Form 8-K filed by the Company on June 9, 1995.
10.46 Registration Rights Agreement, dated as of June 5, 1995,
between the Company and Fleet Credit Corporation. Filed as
Exhibit 6 to the Form 8-K filed by the Company on June 9,
1995.
10.47 Form of Common Stock Warrant issued to certain bank lenders.
Filed as Exhibit 7 to the Form 8-K filed by the Company on
June 9, 1995.
10.48 Intercreditor Agreement, dated as of June 5, 1995, among
certain bank lenders, certain lenders, The Chase Manhattan
Bank, N.A. and United States Trust Company of New York. Filed
as Exhibit 8 to the Form 8-K filed by the Company on June 9,
1995.
10.49 Executive Employment Agreement, dated as of January 30, 1995,
between the Company and Richard S. Levy (filed herewith).*
10.50 Amendment to Executive Employment Agreement, dated as of
September 10, 1995, between the Company and Richard S. Levy
(filed herewith).*
21 Subsidiaries of the Company (filed herewith).
23.1 Consent of Coopers & Lybrand L.L.P. (filed herewith).
23.2 Consent of Raymond, Chabot, Martin Pare (filed herewith).
(b) Reports on Form 8-K.
1. On March 2, 1995, the Company filed a Form 8-K with respect to (i)
the filing of a Chapter 11 petition by Buddy L Inc., (ii) the
entering into of an agreement to sell certain assets of Buddy L
Inc. and Buddy L (Hong Kong) Limited and (iii) the acceleration of
indebtedness by certain Lenders to the Company. This report was
filed in compliance with Item 5 of Form 8-K.
2. On May 19, 1995, the Company filed a Form 8-K with respect to the
sale of certain assets of Buddy L Inc. and Buddy L (Hong Kong)
Limited to Empire of Carolina, Inc. This report was filed in
compliance with Item 5 of Form 8-K.
3. On June 9, 1995, the Company filed a Form 8-K with respect to
entering into a Standstill Agreement and Forbearance Agreement
with certain Lenders. This report was filed in compliance with
Item 5 of Form 8-K.
4. On July 7, 1995, the Company filed a Form 8-K with respect to (i)
the completion of the sale of Buddy L Inc. and Buddy L (Hong Kong)
Limited and (ii) the completion of the sale of its fitness
business. This report was filed in compliance with Item 5 of Form
8-K.
5. On October 24, 1995, the Company filed a Form 8-K with respect to
the filing of a Chapter 11 petition by the Company in the United
States Bankruptcy Court for the District of Delaware. This report
was filed in compliance with Item 5 of Form 8-K.
58
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 9th day of May, 1996.
SLM INTERNATIONAL, INC.
By: /s/ John A. Sarto
------------------------------------------
Name: John A. Sarto
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has
been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature to this Form 10-K appears below hereby
appoints John A. Sarto as his attorney-in-fact to sign on his behalf
individually and in the capacity stated below and to file all amendments and
post-effective amendments to this Form 10-K, and any and all instruments or
documents filed as part of or in connection with this Form 10-K or the
amendments thereto, and any such attorney-in-fact may make such changes and
additions in this Form 10-K as such attorney-in-fact may deem necessary or
appropriate.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David Zunenshine Chairman of the Board and Director May 9, 1996
-------------------------
David Zunenshine
/s/ Howard J. Zunenshine Chief Executive Officer and Director May 3, 1996
------------------------- (Principal Executive Officer)
Howard J. Zunenshine
/s/ John A. Sarto Vice President and Chief Financial Officer May 9, 1996
------------------------- (Principal Financial Officer)
John A. Sarto
/s/ Kenneth A. Bloom Vice President May 9, 1996
------------------------- (Principal Accounting Officer)
Kenneth A. Bloom
/s/ Michael Zunenshine Director May 9, 1996
-------------------------
Michael Zunenshine
/s/ James C. Jarocki Director May 9, 1996
-------------------------
James C. Jarocki
/s/ Donald M. Flaks Director May 9, 1996
-------------------------
Donald M. Flaks
</TABLE>
<PAGE> 62
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of the Company. Filed as Exhibit
3.1 to the Company's Registration Statement (No. 33-43302) on
Form S-1 and incorporated herein by reference.
3.2 By-Laws of the Company. Filed as Exhibit 3.2 to the Company's
Registration Statement (No. 33- 43302) on Form S-1 and
incorporated herein by reference.
3.3 Amendment to the Certificate of Incorporation of the Company
dated May 26, 1994.
3.4 Certificate of Designations, Preferences and Rights of Series
A Junior Preferred Shares.
4.1 Rights Agreement, dated February 1, 1995, between the Company
and Fleet National Bank, as rights agent.
10.1 Employment Agreement, dated January 1, 1993, between Howard J.
Zunenshine and the Company filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.*
10.2 Lease, dated October 22, 1991, between ZDM Sports Investments
Inc. and SLM Canada Inc. Filed as Exhibit 10.39 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.3 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.40 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.4 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.41 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.5 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sport Maska Inc. Filed as Exhibit 10.42 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.6 Lease, dated October 22, 1991, between ZMD Sports Investments
Inc. and Sports Maska Inc. Filed as Exhibit 10.43 to the
Company's Registration Statement (No. 33-43302) on Form S-1
and incorporated herein by reference.
10.7 Form of Grant of Stock Option under 1991 Stock Option Plan of
the Company. Filed as Exhibit 10.68 to the Company's
Registration Statement (No. 33-43302) on Form S-1 and
incorporated herein by reference.*
10.8 Form of Grant of Stock Option under 1991 Stock Option Plan of
the Company. Filed as Exhibit 10.69 to the Company's
Registration Statement (No. 33-43302) on Form S-1 and
incorporated by reference.*
10.9 Employment Agreement, dated as of January 1, 1993, between
David Zunenshine and the Company filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.*
10.10 Management Agreement, dated as of July 1, 1994, between Elkana
Limited Liability Co. and the Company filed as Exhibit 10.11
to the Company's Annual Report on Form 10 - K for the year
ended December 31, 1994 and incorporated herein by reference.*
10.11 Loan and Security Agreement dated as of December 3, 1992 among
SLM International, Inc., SLM Inc., SLM Canada Inc., Sport
Maska, Inc., Maska U.S. Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, the lenders named therein and
Fleet Credit Corporation. Filed as Exhibit 1 to the Form 8-K
of the Company filed on December 28, 1992.
<PAGE> 63
10.12 First Amendment to Loan and Security Agreement, dated as of
June 23, 1993, among the Company, SLM Inc., SLM Canada Inc.,
Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
InfoMarketing Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 1 to the Form 8-K of
the Company filed on July 9, 1993.
10.13 Canadian Asset Purchase Agreement, dated as of January 18,
1994, between K-Brand Ltd. and K- Products, Inc. and #1
Apparel Canada Inc. and the Company. Filed as Exhibit 1 to the
Form 8-K of the Company filed on February 14, 1994.
10.14 U.S. Asset Purchase Agreement, dated as of January 18, 1994,
between K-Products, Inc. and #1 Apparel, Inc. and the Company
Filed as Exhibit 2 to the Form 8-K of the Company filed on
February 14, 1994.
10.15 Fourth Amendment to Loan and Security Agreement, dated as of
March 4, 1994, among the Company, Buddy L Inc. (f/k/a SLM
Inc.), Buddy L. Canada Inc. (f/k/a SLM Canada Inc.), Sport
Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, The Toy Factory, Inc., Consumer
InfoMarketing, Inc. (f/k/a InfoMarketing Inc.,), #1 Apparel,
Inc., #1 Apparel Canada Inc., Buddy L St. Thomas, Inc., the
lenders named therein and Fleet Credit Corporation, as agent.
Filed as Exhibit 1 to the Form 8-K filed by the Company on
March 25, 1994.
10.16 Note Purchase Agreements, dated as of February 15, 1994, among
the Company, Buddy L Inc., Buddy L Canada Inc., Sport Maska
Inc., Maska U.S., Inc., Mitchel & King Skates Limited, The Toy
Factory, Inc., Consumer InfoMarketing, Inc., #1 Apparel, Inc.,
#1 Apparel Canada Inc. and the purchasers listed therein.
Filed as Exhibit 2 to the form 8-K filed by the Company on
March 25, 1994.
10.17 Agented Co-Pledge Agreement, dated as of March 4, 1994, among
the Company, the lenders named therein, the purchasers named
therein and United States Trust Company of New York, as Pledge
Agent. Filed as Exhibit 3 to the Form 8-K filed by the Company
on March 25, 1994.
10.18 Agented Co-Pledge Agreement, dated as of March 4, 1994, among
Buddy L Inc., the lenders named therein, the purchasers named
therein and United States Trust Company of New York, as Pledge
Agent. Filed as Exhibit 4 to the Form 8-K filed by the Company
on March 25, 1994.
10.19 Fifth Amendment to Loan and Security Agreement, dated as of
March 31, 1994, among the Company, Buddy L Inc. (f/k/a SLM
Inc.), Buddy L. Canada Inc. (f/k/a SLM Canada Inc.), Sport
Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong) Limited,
Mitchel & King Skates Limited, The Toy Factory, Inc., Consumer
InfoMarketing, Inc. (f/k/a InfoMarketing Inc.,), #1 Apparel,
Inc., #1 Apparel Canada Inc., Buddy L St. Thomas, Inc., the
lenders named therein and Fleet Credit Corporation, as agent.
Filed as Exhibit 10.33 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated
herein by reference.
10.20 Executive Employment Agreement, dated as of October 12, 1994,
between John A. Sarto and the Company. Filed as Exhibit 12.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended October 1, 1994.*
10.21 Retail License Agreement, dated March 8, 1995, between Maska
U.S. Inc. and NHL Enterprises Inc. Filed as Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.*
10.22 Retail License Agreement, dated March 8, 1995, between Sport
Maska, Inc. and NHL Enterprises Canada Inc. Filed as Exhibit
10.31 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference.*
<PAGE> 64
10.23 Sixth Amendment to Loan and Security Agreement, dated as of
July 13, 1994, among the Company, Buddy L Inc., Buddy L Canada
Inc., Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
Consumer InfoMarketing, Inc., #1 Apparel, Inc., Buddy L St.
Thomas, Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 1 to the Form 8-K
filed by the Company on August 1, 1994.
10.24 Amendment to Loan and Security Agreement dated as of February
23, 1995, among the Company, Buddy L Inc., Buddy L Canada
Inc., Sport Maska Inc., Maska U.S., Inc., Buddy L (Hong Kong)
Limited, Mitchel & King Skates Limited, The Toy Factory, Inc.,
Consumer InfoMarketing, Inc., #1 Apparel, Inc., Buddy L St.
Thomas, Inc., the lenders named therein and Fleet Credit
Corporation, as agent. Filed as Exhibit 10.33 to the Company's
Annual Report on Form 10 - K for the year ended December 31,
1994 and incorporated herein by reference.
10.25 Amendment, dated as of December 2, 1994, to the Employment
Agreement dated as of January 1, 1993 between Howard J.
Zunenshine and the Company filed as Exhibit 10.34 to the
Company's Annual Report on Form 10 - K for the year ended
December 31, 1994 and incorporated herein by reference.*
10.26 Amendment to Executive Employment Agreement, dated June 1,
1995, between the Company and Howard J. Zunenshine (filed
herewith).*
10.27 Second Amendment to Executive Employment Agreement, dated
October 15, 1995, between the Company and Howard J. Zunenshine
(filed herewith).*
10.28 Amendment to Executive Employment Agreement, dated June 1,
1995, between the Company and John A. Sarto (filed herewith).*
10.29 Second Amendment to Executive Employment Agreement, dated
September 15, 1995, between the Company and John A. Sarto
(filed herewith).*
10.30 Term Note, issued in the principal sum of $6,000,000, dated
June 28, 1995, between Maska U.S., Inc., as Payor, and T.
Copeland & Sons, Inc. and Copeland Properties, Inc.,
collectively, as Payee (filed herewith).
10.31 Retail License Agreement, dated October 6, 1995, between NHL
Enterprises and Maska U.S., Inc. (filed herewith).*
10.32 Retail License Agreement, dated October 6, 1995, between NHL
Enterprises and Sport Maska, Inc. (filed herewith).*
10.33 Settlement Agreement, dated June 28, 1995, between T. Copeland
& Sons, Inc. and Copeland Properties, Inc. and Howard J.
Zunenshine and Maska U.S., Inc. (filed herewith).
10.34 Lease, dated January 18, 1994, between Secretariat Realty
Corp. and Maska U.S., Inc. (filed herewith).*
10.35 Deed of Lease, dated November 1, 1994, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.36 Deed of Lease, dated January 27, 1995, between Doulka
Investments Inc. and Buddy L Canada Inc. (filed herewith).*
10.37 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.38 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
10.39 Deed of Lease, dated January 27, 1995, between ZMD Sports
Investments Inc. and Sport Maska Inc. (filed herewith).*
<PAGE> 65
10.40 Settlement Agreement, dated November 21, 1995, among the
Company, certain subsidiaries, the Buddy L Creditors Committee
and certain Lenders (filed herewith).
10.41 Standstill Agreement, dated as of June 5, 1995, among the
Company, certain subsidiaries of the Company, certain lenders
and certain shareholder entities. Filed as Exhibit 1 to the
Form 8-K filed by the Company on June 9, 1995.
10.42 Registration Rights Agreement, dated as of June 5, 1995,
between the Company and certain lenders. Filed as Exhibit 2 to
the Form 8-K filed by the Company on June 9, 1995.
10.43 Form of Non-Escrowed Common Stock Warrant issued to certain
lenders. Filed as Exhibit 3 to the Form 8-K filed by the
Company on June 9, 1995.
10.44 Form of Escrowed Common Stock Warrant issued to certain
lenders. Filed as Exhibit 4 to the Form 8- K filed by the
Company on June 9, 1995.
10.45 Forbearance Agreement, dated as of June 5, 1995, among the
Company, certain subsidiaries of the Company, certain lenders
and certain shareholder entities. Filed as Exhibit 5 to the
Form 8-K filed by the Company on June 9, 1995.
10.46 Registration Rights Agreement, dated as of June 5, 1995,
between the Company and Fleet Credit Corporation. Filed as
Exhibit 6 to the Form 8-K filed by the Company on June 9,
1995.
10.47 Form of Common Stock Warrant issued to certain bank lenders.
Filed as Exhibit 7 to the Form 8-K filed by the Company on
June 9, 1995.
10.48 Intercreditor Agreement, dated as of June 5, 1995, among
certain bank lenders, certain lenders, The Chase Manhattan
Bank, N.A. and United States Trust Company of New York. Filed
as Exhibit 8 to the Form 8-K filed by the Company on June 9,
1995.
10.49 Executive Employment Agreement, dated as of January 30, 1995,
between the Company and Richard S. Levy (filed herewith).*
10.50 Amendment to Executive Employment Agreement, dated as of
September 10, 1995, between the Company and Richard S. Levy
(filed herewith).*
21 Subsidiaries of the Company (filed herewith).
23.1 Consent of Coopers & Lybrand L.L.P. (filed herewith).
23.2 Consent of Raymond, Chabot, Martin Pare (filed herewith).
<PAGE> 1
Exhibit 10.26
<PAGE> 2
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the "Amendment"), dated as
of the 1st day of June, 1995, between SLM International, Inc., a Delaware
corporation (the "Company"), and Howard J. Zunenshine ("Employee").
WHEREAS, the parties hereto are party to that certain Executive
Employment made as of the 1st day of January, 1993 (the "Employment Agreement");
WHEREAS, Section 12.3 of the Employment Agreement provides that the
Employment Agreement can only be modified by written agreement signed by the
parties; and
WHEREAS, the parties desire to modify the terms of their relationship
and amend the Employment Agreement in order to reflect such modifications;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings assigned to such terms in the
Employment Agreement.
2. Stock Options. Section 3.3 of the Employment Agreement is hereby
amended to add the following new paragraphs to the end of that Section:
In addition, in the event (i) Employee elects to terminate his
employment with the Company within six (6) months following the date on
which a Change of Control or Total Liquidation occurs, or (ii)
Employee's employment by the Company is terminated, other than for
Cause, at any time (in either case, the "Termination Date"), then on
the date three months after the Termination Date (the "Grant Date").
Employee shall receive options (the "Severance Options") to purchase
the same number of shares of the Company's Common Stock as Employee was
otherwise entitled to purchase on the Termination Date, less the number
of shares of the Company's Common Stock that Employee purchases
pursuant to the exercise of such options after the Termination Date and
prior to the Grant Date, pursuant to outstanding options that had been
granted to Employee prior to the Termination Date, whether those
options are vested or unvested on the Termination Date and whether
those options were granted pursuant to this Agreement or otherwise (the
"Pre-Termination Options"), at exercise prices per share equal to
<PAGE> 3
the exercise prices for the same number of Pre-Termination Options. In
exchange for the grant of the Severance Options, all unexercised
Pre-Termination Options shall be forfeited by Employees without further
action. All of the Severance Options shall vest immediately on the
Grant Date and shall be exercisable for a period of one year and nine
months thereafter. The number of shares that may be purchased pursuant
to the Severance Options shall be subject to adjustment as provided in
Section 4.7 of the Agreement.
Employee acknowledges and understands that the Severance Options will
not be issued under the Company's 1991 Stock Option Plan. The Company
hereby agrees to take all reasonable actions following the Termination
Date to cause the Severance Options to be registered under the
Company's Registration Statement on Form S-8, or to file and cause to
become effective a new Registration Statement on Form S-8 covering the
Severance Options, no later than the Grant Date. The Company further
agrees to take all reasonable actions to cause such registration to
remain effective until the expiration of the Severance Options. The
Company shall be responsible for all costs and expenses related to the
registration of the Severance Options.
3. Special Termination Clause.
(a) Section 7.1 of the Employment Agreement is hereby amended so that
the phrase "or a Total Liquidation (as hereinafter defined)" is added in the
second line after the close of the parenthesis at the start of that line.
(b) Section 7.2 of the Employment Agreement is hereby amended so that
the phrase "(other than from the Company)" in the first line of paragraph (A)
shall be and hereby is deleted.
(c) Section 7.2 of the Employment Agreement is hereby further amended
to change the period to ", or" at the end of subparagraph (B) and to add the
following new subparagraph (C) after the subparagraph (B) of the definition of
"Change of Control."
(C) approval by the stockholders of the Company of any
reorganization, merger, consolidation or other business combination, in
each case with respect to which persons who were the stockholders of
the Company immediately prior to such reorganization, merger,
consolidation or other business combination do not, immediately
thereafter, own more than 50% of the combined voting power entitled to
vote generally in the election of directors of the surviving
corporation, or the sale or lease of all or substantially all of the
assets of the Company.
2
<PAGE> 4
(d) Section 7.2 of the Employment Agreement is hereby further amended
to add the following new paragraph at the end of the Section:
For purposes of this Agreement, a "Total Liquidation" shall mean the
dissolution or liquidation of the Company, whether in one or a series
of related transactions, involving in the aggregate more than 60% of
its total assets, with the total assets being measured immediately
prior to the commencement, and after the completion, of any such
transaction or series of related transactions.
4. Continuing Effect. All provisions of the Employment Agreement not
otherwise amended by this Amendment shall continue in full force and effect.
5. Miscellaneous.
(a) No changes, modifications or amendments shall be made to this
Amendment, except in writing and signed by the parties hereto.
(b) This Amendment shall be binding upon and shall inure to the benefit
of the respective successors and assigns of the parties hereto.
(c) This Amendment shall be governed by the laws of the State of New
York.
(d) This Amendment may be signed in counterparts, each of which shall
be deemed an original and, when taken together, shall be deemed but one
instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the date first hereinabove written.
SLM INTERNATIONAL, INC.
By: /s/ Howard J. Zunenshine
--------------------------- ----------------------------
Name: Howard J. Zunenshine
Title: Chairman of the Board
3
<PAGE> 1
Exhibit 10.27
<PAGE> 2
SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the "Amendment"),
dated as of the 1st day of October, 1995, between SLM International, Inc., a
Delaware corporation (the "Company"), and Howard J. Zunenshine ("Employee").
WHEREAS, the parties hereto are party to that certain Executive
Employment Agreement made as of the 1st day of January, 1993 and the Amendment
to Executive Employment Agreement made as of the first day June 1, 1995 (as so
amended, the "Employment Agreement");
WHEREAS, Section 12.3 of the Employment Agreement provides that the
Employment Agreement can only be modified by written agreement signed by the
parties; and
WHEREAS, the parties desire to modify the terms of their relationship
and amend the Employment Agreement in order to reflect such modifications.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings assigned to such terms in the
Employment Agreement.
2. Change of Control. (a) Sections 7.1, 7.2 and 7.3 of the Employment
Agreement are hereby amended and restated to read as follows:
7.1. In the event of a Change of Control (as hereinafter defined) or a
Total Liquidation (as defined below), the Employee, at his sole option,
shall have the right to terminate his employment within six (6) months
of the date on which such event occurs (such period referred to as the
"Six Month Period") and, in such event, the Employee shall be entitled
to immediate payment by the Company of the greater of (i) two (2) years
of his then-current Salary, together with an amount equal to two (2)
times the average bonus paid to the Employee for the two years
immediately prior to the year in which such event occurs, or (ii) the
remainder of his Salary payable through December 31, 1998, together
with an amount equal to two (2) times the average bonus paid to the
Employee for the two years immediately prior to the year in which such
event
<PAGE> 3
occurs. In the event that the Employee's employment with the Company is
terminated, other than for Cause, during the Six Month Period, then,
notwithstanding the provisions of Section 3.3 of this Agreement, the
Employee shall be entitled to immediate payment of the amounts set
forth in the preceding sentence.
7.2. For the purposes of this Agreement, a "Change of Control" shall
mean any event that is required to be reported by the Company as a
change of control on a Form 8-K or any other report filed with the
Securities and Exchange Commission, including, without limitation, any
of the following:
(A) the acquisition by any person, entity or "group" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), excluding for this purpose, the
Company and any employee benefit plan of the Company which acquires
beneficial ownership of voting securities of the Company, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then-outstanding
shares of Common Stock, provided that such shares of Common Stock must
constitute a larger number of shares of Common Stock than the number of
shares of Common Stock held by members of the families of David and
Michael Zunenshine or any trust, corporation, partnership or other
entity controlled by those families and provided further that
acquisition of a proxy or voting control of twenty percent (20%) or
more of the then-outstanding shares of Common Stock shall be considered
to be acquisition of beneficial ownership for purposes of this clause
(A); or
(B) reconstitution of the Board of Directors to the extent that
individuals who, as of the date hereof, constitute the Board of
Directors cease for any reason to constitute at least a majority of the
Board of Directors; or
(C) approval by the stockholders of the Company of any reorganization,
merger, consolidation or other business combination, in each case with
respect to which persons who were the stockholders of the Company
immediately prior to such reorganization, merger, consolidation or
other business combination do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the
election of directors of the surviving corporation, or a liquidation or
dissolution of
2
<PAGE> 4
the Company or the sale or lease of all or substantially all of the
assets of the Company; or
(D) a member of the families of David or Michael Zunenshine cease to be
or act as Chief Executive Officer of the Company or continues to be
Chief Executive Officer but no longer holds the highest executive
position with the Company; or
(E) the entering into a management or similar contract with any person,
entity or "group" pursuant to which such person, entity or "group"
agrees to assume any management functions on behalf of the Company; or
(F) a member of the families of David or Michael Zunenshine is not
personally responsible for management of the Company's business,
operations and /or affairs on a daily basis.
In addition, in the event of a Change of Control, Employee shall be entitled to
(A) immediate payment of his monthly car allowance, in the same amount as then
in effect, such immediate payment to be made in one lump sum in an amount equal
to the greater of (i) 24 times the monthly car allowance and (ii) the remainder
of the monthly car payments that would be paid through the Term or the Renewal
Term, as the case may be, and (B) either continuation of all other benefits
(i.e. group medical, disability and term life insurance) through the longer of
(x) 24 months from the date of termination or (y) the Term or the Renewal Term,
as the case may be, or payment of the value of such benefits in one lump sum
payment upon the date of termination of employment.
For purposes of this Agreement, a "Total Liquidation" shall mean the dissolution
or liquidation of the Company, whether in one or a series of related
transactions, involving in the aggregate more than 60% of its total assets, with
the total assets being measured immediately prior to the commencement, and after
the completion, of any such transaction or series of related transactions.
7.3. In the event the Employee elects to terminate this Agreement and receive a
payment under this Section 7, he may not, directly or indirectly, in any manner
whatsoever, including, without limitation, either individually or in partnership
or jointly, or in conjunction with any other person or persons, firm,
association, syndicate, company or corporation, as principal, agent,
shareholder, employee or in any other manner whatsoever, enter into a new
employment, consulting or other contractual relationship with the Company, or
any successor thereof, within twelve (12) months of receipt of such payment.
3
<PAGE> 5
3. Continuing Effect. All provisions of the Employment Agreement not
otherwise amended by this Amendment shall continue in full force and effect.
4. Miscellaneous.
(a) No changes, modifications or amendments shall be made to this
Amendment, except in writing and signed by the parties hereto.
(b) This Amendment shall be binding upon and shall inure to the benefit
of the respective successors and assigns of the parties hereto.
(c) This Amendment shall be governed by the laws of the State of
New York.
(d) This Amendment may be signed in counterparts, each of which shall
be deemed an original and, when taken together, shall be deemed but one
instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the date first hereinabove written.
SLM INTERNATIONAL, INC.
By: /s/ HOWARD J. ZUNENSHINE
---------------------------- ------------------------------
Name: Howard J. Zunenshine
Title:
4
<PAGE> 1
Exhibit 10.28
<PAGE> 2
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT ( the "Amendment"), dated
as of the 1st day of June, 1995, between SLM International, Inc., a Delaware
corporation (the "Company"), and John A. Sarto ("Employee").
WHEREAS, the parties hereto are party to that certain Executive
Employment Agreement dated as of October 12, 1994 (the "Employment Agreement"),
and that certain Letter Agreement, dated February 27, 1995, from the Company to
Employee (the "Letter Agreement");
WHEREAS, Section 11.04 of the Employment Agreement provides that the
Employment Agreement can only be modified by written agreement signed by the
parties; and
WHEREAS, the parties desire to modify the terms of their relationship
and amend the Employment Agreement in order to reflect such modifications.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings assigned to such terms in the
Employment Agreement.
2. Term.
(a) Schedule A of the Employment Agreement is hereby amended so that
the Initial Term shall be, and is, October 13, 1994 through December 31, 1997.
(b) Subsection 2.03 of the Employment Agreement is hereby amended by
replacing "October 1, 1996" with "October 1, 1997" in each of the third and
thirteenth lines of that Subsection. Subsection 2.03 of the Employment Agreement
is further amended so that the Renewal Term shall be, and is, from January 1,
1998 through December 31, 2000.
(c) Subsection 2.03 of the Employment Agreement is hereby further
amended to add the following new paragraph at the end of the subsection:
This Agreement is subject to an unlimited number of additional renewal
terms ("Additional Renewal Terms") following the Renewal Term so as to
make the term of
<PAGE> 3
immediately thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
surviving corporation, or the sale or lease of all or substantially all
of the assets of the Company.
6. Compensation. Paragraph A of Schedule C of the Employment
Agreement is hereby replaced with the following:
<TABLE>
<CAPTION>
A. PERIOD ANNUAL BASE SALARY
<S> <C>
June 1, 1995 - June 30, 1996 $250,000
July 1, 1996 - December 31, 1997 $275,000
</TABLE>
7. Continuing Effect. All provisions of the Employment Agreement not
otherwise amended by this Amendment shall continue in full force and effect.
8. Miscellaneous.
(a) No changes, modifications or amendments shall be made to this
Amendment, except in writing and signed by the parties hereto.
(b) This Amendment shall be binding upon and shall inure to the benefit
of the respective successors and assigns of the parties hereto.
(c) This Amendment shall be governed by the laws of the State of New
York.
(d) This Amendment may be signed in counterparts, each of which shall
be deemed an original and, when taken together, shall be deemed but one
instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the date first hereinabove written.
SLM INTERNATIONAL, INC.
By: /s/ John A. Sarto
----------------------------- -----------------------------
Name: John A. Sarto
Title: Chairman of the Board
<PAGE> 1
Exhibit 10.29
<PAGE> 2
SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the "Amendment"),
dated as of the ___ day of September, 1995, between SLM International, Inc., a
Delaware corporation (the "Company"), and John A. Sarto ("Employee").
WHEREAS, the parties hereto are party to that certain Executive
Employment Agreement dated as of October 12, 1994, that certain Letter
Agreement, dated February 27, 1995, from the Company to Employee, and that
certain Amendment to Executive Employment Agreement dated as of June 1, 1995
(collectively, the "Employment Agreement");
WHEREAS, Section 11.04 of the Employment Agreement can only be modified
by written agreement signed by the parties; and
WHEREAS, the parties desire to modify the terms of their relationship
and amend the Employment Agreement in order to reflect such modifications.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings assigned to such terms in the
Employment Agreement.
2. Chance of Control. (a) Section 2.05 of the Employment Agreement is
hereby amended and restated to read as follows:
2.05. In the event of a Change of Control (as hereinafter defined) or a
Total Liquidation (as defined below), the Employee, at his sole
option, shall have the right to terminate his employment within six (6)
months of the date on which such event occurs (such period referred to
as the "Six Month Period") and, in such event, the Employee shall be
entitled to immediate payment by the Company of the greater of (i) two
(2) years of his then-current Salary, together with an amount equal to
two (2) times the average bonus paid to the Employee for the two years
immediately prior to the year in which such event occurs, or (ii) the
remainder of his Salary payable through December 31, 1997, together
with an amount equal to two (2) times the average bonus paid to the
Employee for the two years
<PAGE> 3
immediately prior to the year in which such event occurs. In the event
that the Employee's employment with the Company is Terminated (as
defined in Section 2.02) during the Six Month Period then,
notwithstanding the provisions of Schedule B to this Agreement, the
Employee shall be entitled to immediate payment of the amounts set
forth in the preceding sentence.
For the purposes of this Agreement, a "Change of Control" shall mean
any event that is required to be reported by the Company as a change of
control on a Form 8-K or any other report filed with the Securities and
Exchange Commission, including, without limitation, any of the
following:
(A) the acquisition by any person, entity or "group" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), excluding for this purpose, the
Company and any employee benefit plan of the Company which acquires
beneficial ownership of voting securities of the Company, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then-outstanding
shares of Common Stock, provided that such shares of Common Stock must
constitute a larger number of shares of Common Stock than the number of
shares of Common Stock held by members of the families of David and
Michael Zunenshine or any trust, corporation, partnership or other
entity controlled by those families and provided further that
acquisition of a proxy or voting control of twenty percent (20%) or
more of the then-outstanding shares of Common Stock shall be considered
to be acquisition of beneficial ownership for purposes of this clause
(a); or
(B) reconstitution of the Board of Directors to the extent that
individuals who, as of the date hereof, constitute the Board of
Directors cease for any reason to constitute at least a majority of the
Board of Directors; or
(C) approval by the stockholders of the Company of any reorganization,
merger, consolidation or any other business combination, in each case
with respect to which persons who were the stockholders of the Company
immediately prior to such reorganization, merger, consolidation or
other business combination do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the
election of directors of the surviving
2
<PAGE> 4
corporation, or a liquidation or dissolution of the Company or the sale
or lease of all or substantially all of the assets of the Company; or
(D) a member of the families of David or Michael Zunenshine cease to be
or act as Chief Executive Officer of the Company or continues to be
Chief Executive Officer but no longer holds the highest executive
position with the Company; or
(E) the entering into a management or similar contract with any person,
entity or "group" pursuant to which such person, entity or "group"
agrees to assume any management functions on behalf of the Company; or
(F) a member of the families of David or Michael Zunenshine is not
personally responsible for management of the Company's business,
operations and/or affairs on a daily basis.
In addition, in the event of a Change of Control, Employee shall be entitled to
(a) immediate payment of his monthly car allowance, in the same amount as then
in effect, such immediate payment to be made in one lump sum in an amount equal
to the greater of (i) 24 times the monthly car allowance and (ii) the remainder
of the monthly car payments that would be paid through the Term or the Renewal
Term, as the case may be, and (B) either continuation of all other benefits
(i.e. group medical, disability and term life insurance) through the longer of
(x) 24 months from the date of termination or (y) the Term or the Renewal Term,
as the case may be, or payment of the value of such benefits in one lump sum
payment upon the date of termination of employment.
For purposes of this Agreement, a "Total Liquidation" shall mean the dissolution
or liquidation of the Company, whether in one or a series of related
transactions, involving in the aggregate more than 60% of its total assets, with
the total assets being measured immediately prior to the commencement, and after
the completion, of any such transaction or series of related transactions.
In the event the Employee elects to terminate this Agreement and receive a
payment under this Section 2.05, he may not, directly or indirectly, in any
manner whatsoever, including, without limitation, either individually or in
partnership or jointly, or in conjunction with any other person or persons,
firm, association, syndicate, company or corporation, as principal, agent,
shareholder, employee or in any other manner whatsoever, enter into a new
employment, consulting or other contractual relationship with the Company, or
any
3
<PAGE> 5
successor thereof, within twelve (12) months of receipt of such payment.
3. Continuing Effect. All provisions of the Employment Agreement not
otherwise amended by this Amendment shall continue in full force and effect.
4. Miscellaneous.
(a) No changes, modifications or amendments shall be made to this
Amendment, except in writing and signed by the parties hereto.
(b) This Amendment shall be binding upon and shall inure to the benefit
of the respective successors and assigns of the partes hereto.
(c) This Amendment shall be governed by the laws of the State of New
York.
(d) This Amendment may be signed in counterparts, each of which shall
be deemed an original and, when taken together, shall be deemed but one
instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the date first hereinabove written.
SLM INTERNATIONAL, INC.
By: /s/ JOHN A. SARTO
---------------------------- --------------------------
Name: John A. Sarto
Title:
4
<PAGE> 1
Exhibit 10.30
<PAGE> 2
TERM NOTE
$6,000,000 Pierson, Vermont
June 28, 1995
On or before June 28, 2000, for value received, the undersigned, MASKA, U.S.,
Inc. ("Payor"), promises to pay to T. Copeland & Sons, Inc. and Copeland
Properties, Inc. (collectively, "Payee"), or order, at Pierson Industrial Park,
Bradford, Vermont 05033, or such other place as the Payee may designate in a
writing delivered to Payor, the principal sum of Six Million Dollars
($6,000,000) U.S. together with accrued interest at 10% per annum calculated on
the basis of the actual days elapsed and a 365-day year and a 366-day leap year,
and other fees and charges due or to become due hereunder.
1. Repayment. Principal and interest shall be payable as follows:
a. On the last day of each calendar year quarter, beginning on
September 30, 1995 and continuing until maturity, Payor shall make a
combined quarterly payment of principal and interest in the amount of
One Hundred Seventy-Four Thousand One Hundred Fifty-Six Dollars and
27/100 ($174,156.27).
b. In addition to the quarterly payments required under subparagraph
(a) above, Payor shall immediately, and without demand, pay or cause to
be paid to Payee any and all cash, checks, money, personal property,
promissory notes, or other consideration of any kind received or
recovered by Payor, SLM International, Inc. ("SLM") or Howard J.
Zunenshine from any insurance company as a result of ligation now
pending in the U.S. District Court in the District of Vermont, Docket
No. 5:93-CV-309; such payment shall be a mandatory prepayment of
principal hereunder.
c. The entire principal balance of this Note, plus accrued and unpaid
interest and any other charges due hereunder, shall be due and payable
on June 28, 2000, if not paid sooner.
2. Prepayment. (a) In the event that:
Payor or SLM refinance all of the $75 million Senior Notes
outstanding to the senior unsecured creditors of SLM issued pursuant to
the Note Purchase Agreement dated as of February 15, 1994, then any
amounts refinanced in excess of $75 million shall be used to prepay
principal on this Note; or
Payor or SLM shall sell or transfer all or a substantial
portion of their business or assets to any person or entity other than
a sale or transfer to an affiliate with the prior written consent of
Payee, such consent to be not unreasonably withheld, then Payor shall
prepay this Note in full.
(b) This Note may be prepaid in whole or in part at any time without
prepayment penalty. Any partial prepayment shall be applied first
against the balloon payment due at maturity and then to principal
installments in inverse order of maturity. Partial prepayments shall
not postpone the due date of any subsequent quarterly installments or
change the amount of such installments, unless Payee shall otherwise
agree in writing.
3. Waivers; Binding Effect. Presentment for payment, protest, notice of
protest, demand, and notice of non-payment are hereby waived by all
makers, sureties, guarantors and endorsers. This Note shall be the
joint and several obligation of all markets, sureties, guarantors and
endorsers, and shall be binding
<PAGE> 3
upon them and their successors and assigns. The parties acknowledge
that SLM is not a maker, surety, guarantor or endorser of this Note.
4. Representations and Warranties. Payor represents and warrants that this
Note has been duly authorized, executed and delivered by Payor, and is
a valid and binding obligation of Payor, enforceable in accordance with
its terms.
5. Covenants. (a) Payor and SLM shall each provide Payee with copies
of any information that it provides to the Securities and Exchange
Commission or any public information relating to its financial
condition as they are released to the SEC. Payor and SLM shall also
provide Payee on a quarterly basis copies of any interim financial
statements prepared by it or on its behalf within 45 days of the close
of the quarter; (b) Payor and SLM shall each notify Payee 30 days in
advance of any sale or transfer of a substantial portion of its
business or assets to any person or entity, or any refinancing of all
or a substantial portion of its $75 million in long-term obligations to
its senior unsecured creditors.
6. Events of Default. Any one or more of the following shall constitute an
Event of Default under this Note: (a) if Payor fails to make any
regular quarterly payment within thirty days of the date such payment
is due; provided, however, that the failure to pay the regular
quarterly payment due on September 30, 1995 shall not constitute an
Event of Default unless and until 60 days shall have passed from such
date; (b) if Payor, SLM or Howard J. Zunenshine recover any cash,
checks, money, personal property, promissory notes, or other
consideration of any kind from any insurance company as a result of
litigation now pending in the U.S. District Court in the District of
Vermont, Docket No. 5:93-CV-309 and all such cash, checks, money,
personal property, promissory notes, or other consideration is not
immediately paid or transferred to Payee pursuant to Section 1(b)
hereof; or (c) Payor breaches any of the representations, warranties or
covenants of this Note except that breaches of the obligations of
paragraph 5(a) shall not be considered an Event of Default unless such
breach remains unremedied for a period of 10 days after notice thereof
from Payee to Payor and SLM at their addresses set forth below.
7. Remedies. Upon the occurrence of an Event of Default, subject to the
following provisions of this section 7, the outstanding principal
balance of this Note, plus accrued interest, fees and charges shall be
immediately due and payable, and Payee shall be entitled to exercise
any and all rights and remedies available under this Note or applicable
law, including, without limitation, the right to execute upon any
uncollected amounts under that certain Judgment Order entered against
Payor in favor of Payee by the Orange Superior Court, Docket No.
S118-92 OeC, dated June 28, 1995 in the amount of Seven Million Dollars
($7,000,000). Notwithstanding the foregoing, upon an Event of Default
under section 6(a), Payor agrees to pay Payee an additional one-time
payment of Five Hundred Thousand Dollars ($500,000), which amount shall
be automatically added to the principal balance due under this Note.
Upon the occurrence of any Event of Default, and for so long as such
Event of Default continues uncured, amounts outstanding under this Note
shall accrue interest at the rate of 12% per annum.
8. Costs of Collection. Upon any Event of Default, Payor promises to pay
all costs and expenses of collection in enforcement of this Note,
including reasonable attorneys' fees.
9. Miscellaneous. If any provision of this Note should conflict with
applicable law, such conflict shall not affect any other provision
which can be given effect without the conflicting provision, and to
this end the provisions of this Note are declared to be severable. All
rights and obligations hereunder shall be governed by the laws of the
State of Vermont, and Payor and SLM hereby submit to the jurisdiction
of any court of competent jurisdiction in Vermont. Payor and SLM
expressly waive trial by jury of any issue arising out of Payee's
enforcement of this Note.
- 2 -
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Note as of the date set
forth above.
MASKA, U.S., INC.
By:
----------------------------------
Duly Authorized Agent
Address for Notice:
-------------------------------------
-------------------------------------
The undersigned has executed this Note not as a maker, surety, guarantor or
endorser, but solely for purposes of Sections 1(b), 2, 5, 6 and 9 hereof.
SLM INTERNATIONAL, INC.
By:
---------------------------------------
Duly Authorized Agent
Address for Notice:
------------------------------------------
------------------------------------------
- 3 -
<PAGE> 1
Exhibit 10.31
<PAGE> 2
CONFIDENTIAL TREATMENT
NHL ENTERPRISES, INC.
1251 AVENUE OF THE AMERICAS, 47TH FLOOR
NEW YORK, NEW YORK 10020
TEL: (212) 789-2000
FAX: (212) 789-2020
RETAIL LICENSE AGREEMENT
No.: 10158A
Date: October 6, 1995
LICENSEE: Maska U.S., Inc. Tel: 802/222-4751
ADDRESS: 9 Vose Farm Road Fax: 802/222-5441
Peterborough, NH 03458
Attn: Howard Zunenshine, CEO
This License Agreement, when executed by each of the parties hereto,
shall amend and restate in its entirety, as of July 1, 1995, Retail License
Agreement No. 10158 dated March 8, 1995 between the parties hereto.
NHL ENTERPRISES, INC. ("NHLE") has the right to license for
commercial purposes the use of certain properties of the National Hockey League
("NHL") and of the teams comprising said League ("Member Teams"), specifically
-- the names, nicknames, slogans, symbols, logos, emblems, insignia, colors,
uniform designs and other indicia of each of the Member Teams of the National
Hockey League; the city or regional identification of each of the National
Hockey League Member Teams in conjunction with their colors and an appropriate
professional ice hockey reference: the name, initials, insignia, colors and
other indicia of the National Hockey League, including the Conference and
Division names and/or logos; the name and logo of the NHL All-Star Game; the
name and logo of the Stanley Cup Playoffs; and the name and logo of the Stanley
Cup (the "NHL Marks"); and that except as stated in paragraph 3(a) hereinafter,
no other entity has the right to license said NHL Marks for such purposes.
LICENSEE, whose full name and address are set forth above,
desires to obtain the right from NHLE to utilize the NHL Marks in connection
with the manufacture, distribution, sale and advertising of certain products
specified hereinafter (the "Products") in accordance with the conditions and
provisions set forth in this License Agreement.
Therefore, in consideration of the promises, covenants and
undertakings contained in this License Agreement, the parties hereto agree, as
follows:
1. GRANT OF LICENSE.
For purposes of this License Agreement, the definitions set
forth in paragraph 2 below or otherwise in this License Agreement shall be
applicable and controlling. Subject to such definitions, NHLE hereby grants to
LICENSEE the non-exclusive right (except as set forth in paragraph 1(g) below)
to use the NHL Marks on the Products throughout the Territory during the Term in
accordance with all of the provisions, conditions, and undertakings specified
hereinafter in this License Agreement.
(a) PRODUCT(S). The Products are as follows:
(i) Authentic (otherwise known as "Center Ice")
home and away jerseys of each of the Member
Teams, and authentic third jerseys of each
of the Member Teams that has a third jersey;
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<PAGE> 3
(ii) Replica home and away jerseys of each of the
Member Teams, and replica third jerseys of
each of the Member Teams that has a third
jersey;
(iii) Authentic and replica Eastern and Western
Conference NHL All-Star Game jerseys; and
(iv) Authentic and replica practice jerseys of
each of the Member Teams.
Notwithstanding the foregoing, LICENSEE may not manufacture
and sell (1) authentic home and away jerseys of the new
Colorado Member Team during the period from July 1, 1995
through June 30, 1996 (the "Y2 Selected Team") and (2)
authentic home, away and (if applicable) third jerseys during
the period from July 1, 1996 through June 30, 1997, from July
1, 1997 through June 30, 1998 and from July 1, 1998 through
June 30, 1999 of such Member Teams as NHLE shall have selected
(after consultation with LICENSEE but ultimately at NHLE's
sole discretion) and specified in a written notice to LICENSEE
by December 31, 1995, December 31, 1996 and December 31, 1997,
respectively (the "Y3 Selected Teams", the "Y4 Selected Teams"
and the "Y5 Selected Teams", respectively).
NHLE agrees that, in exercising its sole discretion in
selecting the Y3 Selected Teams, Y4 Selected Teams and Y5
Selected Teams and in its consultation with LICENSEE as noted
above, NHLE shall duly consider such factors as, including
by way of illustration only CONFIDENTIAL TREATMENT REQUESTED
FOR THESE PORTIONS, FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
Each of the Products shall be manufactured and sold only in
approved styles and fabrications, and in adult and youth
sizes.
(Each individual item must be reviewed and approved
in writing by NHLE prior to manufacturing.)
(b) TERRITORY. The Territory is the United States, including its
territories and possessions and its Armed Forces or similar
Exchange Services.
(c) TERM. The Term hereof shall be for the period commencing on
July 1, 1994 and terminating on June 30, 1999.
(d) LICENSEE PAYMENTS. In consideration for the rights herein
granted to LICENSEE, LICENSEE shall pay to NHLE the following:
(i) Royalty Rate: LICENSEE will pay NHLE at such times
and under the circumstances specified hereinafter a
Royalty Payment in amount equal to the Royalty Rate
(as defined below) times Net Sales. "Royalty Rate"
shall mean (1) CONFIDENTIAL TREATMENT REQUESTED FOR
THESE PORTIONS, FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION with respect to replica home,
away, third, Eastern and Western Conference NHL
All-Star Game and practice jerseys sold hereunder on
or before CONFIDENTIAL TREATMENT REQUESTED FOR THESE
PORTIONS, FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION and CONFIDENTIAL TREATMENT
REQUESTED FOR THESE PORTIONS, FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION with respect
to such Products sold hereunder thereafter; and (2)
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS,
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION with respect to authentic home, away,
third, Eastern and Western Conference NHL All-Star
Game and practice jerseys sold hereunder.
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<PAGE> 4
(ii) Guaranteed Minimum Payment: LICENSEE guarantees
payment to NHLE of an aggregate of CONFIDENTIAL
TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION during the Term (the "Guaranteed Minimum
Payment"). The Guaranteed Minimum Payment shall be
payable in installments on or before the dates
specified in the schedule below, which installments
shall be credited against Royalty Payments due NHLE
hereunder.
AMOUNT DUE DATE
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS,
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Notwithstanding the foregoing, LICENSEE shall not
have earned and paid to NHLE hereunder an aggregate
of CONFIDENTIAL TREATMENT REQUESTED FOR THESE
PORTIONS, FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION royalties during the Term, then
LICENSEE shall receive a credit against the
Guaranteed Minimum Payment for the excess (if any) of
(1) royalties earned and paid in Canadian dollars to
NHL Enterprises Canada Inc. by Sport Maska, Inc.
pursuant to, and during the term of, Retail License
Agreement No. 20047A of even date herewith over (2)
the guaranteed minimum payment required pursuant
thereto; provided, however, that in no event shall
such credit exceed the Guaranteed Minimum Payment.
Such credit (if any) shall be calculated by NHLE on
June 30, 1999 by converting such excess (if any) as
of such date to U.S. dollars at the then prevailing
exchange rate. NHLE shall refund to LICENSEE (in U.S.
dollars) the amount of such credit (if any) on or
before July 31, 1999.
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTION,
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
(e) PRODUCT TO MEMBER TEAMS AND NHL.
(i) Each License Year, LICENSEE shall supply each of the
Member Teams (except during the second License Year
in the case of clauses (1) and (2) below, the Y2
Selected Team, during the third License Year in the
case of clauses (1) and (2) below, the Y3 Selected
Teams, during the fourth License Year in the case of
clauses (1) and (2) below, the Y4 Selected Teams, and
during the fifth License Year in the case of clauses
(1) and (2) below, the Y5 Selected Teams) whose home
arena is located within the Territory with the
following, at no charge, at such times as such Member
Teams request but not later than April 1 of such
License Year, for use in connection with such License
Year's NHL season (provided such Member Teams notify
LICENSEE in writing regarding sizes and, in the case
of practice jerseys, colors and quantities/color, in
a timely manner): (1) three sets of home and away
game jerseys for each such Member Team (with 30 home
and 30 away jerseys/set, for a total of 180 such
jerseys/Member Team), (2) one set of third game
jerseys for each such Member Team that uses a third
game jersey (with 30 third game jerseys/set, for a
total of 30 such
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<PAGE> 5
jerseys/Member Team); (3) three sets of home and away
stockings for each such Member Team (with 30 pairs of
home and 30 pairs of away stockings/set, for a total
of 180 pairs of stockings/Member Team); and (4) one
set of practice jerseys for each such Member Team
(with each such Member Team being able to choose up
to six colors and any number of practice
jerseys/color, up to a total of 60 practice
jerseys/set). LICENSEE shall supply each of the
Member Teams whose home arena is located within the
Territory and which plays in the Stanley Cup Finals
during any License Year (except for the Y2 Selected
Team, Y3 Selected Teams, Y4 Selected Teams and Y5
Selected Teams) with an additional set of home and
away game jerseys for such License Year, at no
charge, not later than three days before the first
game of the Stanley Cup Finals for such License Year.
(ii) Each License Year, LICENSEE shall supply the NHL with
the following, at no charge, not later than fourteen
days before the first day of such License Year's NHL
All-Star Weekend, for use in connection with such
License Year's NHL All-Star Weekend: (1) two sets of
Eastern and Western Conference NHL All-Star Game
jerseys (with 30 Eastern and 30 Western Conference
jerseys/set, for a total of 120 such jerseys); (2)
one set of Eastern and Western Conference NHL
All-Star Game stockings (with 30 pairs of Eastern and
30 pairs of Western Conference stockings/set, for a
total of 60 pairs of such stockings); (3) one set of
Eastern and Western Conference NHL All-Star Game
shells/pants (with 30 Eastern and 30 Western
Conference shells/pants per set, for a total of 60
such shells/pants); (4) one set of Eastern and
Western Conference NHL All-Star Game helmets (with 30
Eastern and 30 Western Conference helmets/set, for a
total of 60 such helmets); (5) one set of Heroes of
Hockey home and away game jerseys (with 25 home and
25 away jerseys/set, for a total of 50 such jerseys)
(provided that, at NHLE's election, LICENSEE shall
furnish the NHL with one set of home or away game
jerseys of the Member Team hosting that License
Year's NHL All-Star Game instead of one such set of
Heroes of Hockey jerseys); (6) one set of Heroes of
Hockey home and away stockings (with 25 pairs of home
and 25 pairs of away stockings/set, for a total of 50
pairs of such stockings) (or, at NHLE's election, one
set of home or away stockings of such host Member
Team instead of one set of such Heroes of Hockey
stockings); (7) one set of Heroes of Hockey home and
away shells/pants (with 25 home and 25 away
shells/pants per set for a total of 50 such
shells/pants); and (8) one set of Heroes of Hockey
home and away helmets (with 25 home and 25 away
helmets/set, for a total of 50 such helmets) (or, at
NHLE's election, one set of home or away helmets of
such host Member Team instead of one such set of
Heroes of Hockey helmets).
(iii) LICENSEE may incorporate the CCM logo on each of the
items supplied to the Member Teams or the NHL
pursuant to this paragraph 1(e) (except stockings)
subject to NHLE's written approval regarding the
prominence and placement of such logo and the number
of times such logo appears thereon.
(iv) NHLE shall use its best efforts to ensure that each
of the Member Teams whose home arena is located
within the Territory wears LICENSEE-supplied
practice jerseys during team practices.
(f) OFFICIAL SUPPLIER DESIGNATION. Without limiting NHLE's
approval rights pursuant to paragraph 7 below, LICENSEE may
use the designation an "Official Supplier to the NHL" (the
"Designation") with reference to CCM in connection with
LICENSEE's advertisement and promotion of the Licensed
Products hereunder.
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<PAGE> 6
(g) EXCLUSIVITY. All rights in and to the NHL Marks and the
Designation not expressly granted hereunder are reserved to
NHLE for use without restriction, provided, however, that NHLE
agrees that (x) it will not grant to any third party other
than LICENSEE any license:
(i) to sell within the Territory, on or before June 30,
1995, pursuant to any retail license agreement,
authentic home or away jerseys of any of the Member
Teams;
(ii) to sell within the Territory on or before June 30,
1996, pursuant to any retail license agreement,
authentic or replica third jerseys of any of the
Member Teams;
(iii) to sell within the Territory, during the Term,
pursuant to any retail license agreement, authentic
Eastern or Western Conference NHL All-Star Game
jerseys;
(iv) to sell within the Territory, during the Term,
pursuant to any retail license agreement, authentic
or replica practice jerseys of the Member Teams;
(v) to supply any of the Member Teams whose home arenas
are located within the Territory with home, away or
third game jerseys for use by the players on such
Member Teams, on or before June 30, 1995, on-ice
during NHL games;
(vi) to supply any of the Member Teams whose home arenas
are located within the Territory with practice
jerseys for use by the players on such Member Teams,
during the Term, on-ice during Member Team practices;
or
(vii) to supply the NHL with authentic Eastern or Western
Conference NHL All-Star Game jerseys for use by NHL
players, during the Term, on-ice during the NHL
All-Star Game; and
(y) it will not grant to any single third party any
license:
(i) to sell within the Territory, during any License
Year, pursuant to any retail license agreement,
authentic home, away and third jerseys of a number of
Member Teams that is greater than the number of
Member Teams as to which LICENSEE has the right to
sell within the Territory, during such License Year,
authentic home, away and third jerseys hereunder; or
(ii) to supply, during any License Year, authentic home,
away and third jerseys to a number of Member Teams
that is greater than the number of Member Teams as to
which LICENSEE has the right to supply authentic
home, away and third jerseys hereunder, in each case
for use by the players on such Member Teams on-ice
during NHL games during such License Year; and
(z) LICENSEE shall have the right throughout the Term:
(i) to sell within the Territory authentic home, away and
third jerseys of at least 50% of the Member Teams
that shall have first joined the NHL and started
playing regular season games during the Term
(so-called "expansion teams" -- it being understood
and agreed that such requirement does not apply to
such Member Teams as had been playing regular season
games prior to the commencement of the Term,
regardless of whether any of such Member Teams
relocates during the Term);
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<PAGE> 7
(ii) to supply authentic home, away and third jerseys to
at least 50% of the Member Teams that shall have
first joined the NHL and started playing regular
season games during the Term (so-called "expansion
teams" -- it being understood and agreed that such
requirement does not apply to such Member Teams as
had been playing regular season games prior to the
commencement of the Term, regardless of whether any
of such Member Teams relocates during the Term), for
use by the players on such Member Teams on-ice during
NHL games during the Term; and
(iii) the parties hereby agree that the selection of the
expansion teams which shall be supplied by LICENSEE
and in respect of which LICENSEE shall be entitled to
market as provided in this paragraph (z) shall be
made by NHLE in good faith, after consultation with
LICENSEE, but ultimately at NHLE's sole discretion,
in accordance with the factors and procedures set
forth in paragraph 1(a)(iv) hereof as such factors
may be applicable thereto.
(h) ADVERTISING AND PROMOTION. During the Term, LICENSEE shall,
together with Sport Maska, Inc., expend at least CONFIDENTIAL
TREATMENT REQUESTED FOR THIS PORTION, FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION (the "Advertising
Minimum") on NHLE- (or NHLEC-) approved consumer directed
advertising and promotion of the Licensed Products in the
United States and Canada. NHLE and LICENSEE (and their
respective affiliates) shall consult with each other prior to
the beginning of each License Year and mutually agree on the
allocation of the Advertising Minimum for such License Year.
LICENSEE shall submit to NHLE, along with the last monthly
statement it submits to NHLE pursuant to paragraph 4 below
with respect to each License Year, a detailed accounting of
all amounts spent by LICENSEE and Sport Maska, Inc. pursuant
to this paragraph 1(h) in respect of the Advertising Minimum
(which amounts shall include the purchase price for media, but
not creative or other expenses). If, at the end of the Term,
LICENSEE and Sport Maska, Inc. shall not have spent at least
the Advertising Minimum as required pursuant hereto, then
LICENSEE shall remit to NHLE, along with the accounting
required pursuant to the preceding sentence with respect to
the last License Year, the difference between the Advertising
Minimum and the aggregate amount spent by LICENSEE pursuant
hereto in respect thereof.
(i) CENTER ICE PRODUCTS. Without limiting any other term hereof
and subject to the rules of the NHL Center Ice/Authentics
Program (as such rules may be amended from time to time, which
rules (and amendments thereto) LICENSEE hereby agrees to
comply with), NHLE hereby grants to LICENSEE the right to use
the NHL Center Ice/Authentics Program name and logo in
connection with the sale of authentic home, away, third,
Eastern and Western Conference NHL All-Star Game and practice
jerseys hereunder, and each such authentic jersey shall have a
separate hang tag and label that bears such name and/or logo.
Such name and logo shall constitute "NHL Marks" when used in
connection with such authentic jerseys.
(j) WORK STOPPAGE. The parties agree that, should NHL league play
be suspended in any License Year due to a player strike,
management lockout, postponement, or comparable work stoppage
league wide (singly or together, a "Work Stoppage"), then the
installment of the Guaranteed Minimum Payment due during such
License Year pursuant to paragraph 1(d)(ii) above, the
Guaranteed Minimum Payment and the Advertising Minimum shall
be adjusted as follows:
(i) Such installment, the Guaranteed Minimum Payment and
the Advertising Minimum shall not be subject to
adjustment if 25% or fewer of such License Year's
scheduled regular season NHL games are canceled due
to the Work Stoppage.
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<PAGE> 8
(ii) If more than 25% but fewer than 50% of such License
Year's scheduled regular season NHL games are
canceled due to the Work Stoppage, then (1) such
installment shall be reduced by 25%, (2) the
Guaranteed Minimum Payment shall be reduced by the
same amount by which such installment shall have been
reduced pursuant to clause (1) above and (3) the
Advertising Minimum shall be reduced by the same
proportion as the Guaranteed Minimum Payment shall
have been reduced pursuant to clause (2) above.
(iii) If 50% or more of such License Year's scheduled
regular season NHL games are canceled due to the Work
Stoppage, then (1) such installment shall be reduced
by 50%, (2) the Guaranteed Minimum Payment shall be
reduced by the same amount by which such installment
shall have been reduced pursuant to clause (1) above
and (3) the Advertising Minimum shall be reduced by
the same proportion as the Guaranteed Minimum Payment
shall have been reduced pursuant to clause (2) above.
Any refund of any installment of the Guaranteed Minimum
Payment required pursuant to this paragraph 1(j) shall be made
by NHLE to LICENSEE within 30 days after the end of the
relevant License Year.
(k) PRESS RELEASE. The parties shall issue a mutually acceptable,
positive press release in the Territory with respect to this
License Agreement at a mutually agreeable time (but not later
than the beginning of the NHL's 1995-96 regular season).
STANDARD TERMS AND CONDITIONS
2. DEFINITIONS
(a) "Territory" -- the geographical area in which LICENSEE is
authorized to use the NHL Marks -- is specified in paragraph
1(b) above.
(b) "License Year" means each period during the Term commencing on
July 1 of one year and ending on June 30 of the next year.
(c) "Term" -- the period during which this License Agreement is in
effect whether or not it is renewed -- is set forth in
paragraph 1(c) above. "Renewal Term(s)," if any, are specified
in paragraph 1 above, and are those License Year(s)
immediately following the last License Year of the Term or any
prior Renewal Term.
(d) "Product(s)" are identified in paragraph 1(a) above, and
become "Licensed Product(s)" when LICENSEE applies or uses the
licensed NHL Marks strictly in accordance with the provisions,
conditions and undertakings set forth in this License
Agreement.
(e) "Premiums" means any product, including but not limited to
Licensed Product(s), sold at any price or given away for the
purpose of promoting, publicizing or increasing the sale of
any other product or service, including but not limited to
incentives for a sales force or distributorship(s), or for
trade or consumer promotions.
(f) "Licensed Sales" means the sale of Licensed Products directly
to or for retail outlets, mail order or catalogs, including
electronic and video marketing entities, where the Licensed
Products are ultimately sold to consumers. Licensed Sales do
not include the sale of Licensed Products as Premiums, which
require separate agreements executed by NHLE with both the
manufacturer and user of the premium.
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<PAGE> 9
(g) "Net Sales" means the gross amount of Licensed Sales of
Licensed Products in U.S. dollars at the invoiced selling
price net normal and reasonable quantity discounts and returns
for credit; no deductions shall be made for costs incurred in
manufacturing, selling, distributing or advertising (including
cooperative and promotional allowances), for uncollectible
accounts or for any other amounts of any type.
(h) "Royalty Rate" has the meaning as set forth in paragraph
1(d)(i) above.
(i) "Royalty Payment" is the Royalty Rate specified in paragraph
1(d)(i) above times Net Sales of Licensed Products, calculated
and payable in U.S. dollars to NHLE.
(j) "Guaranteed Minimum Payment" - the minimum amount of Royalty
Payment in U.S. dollars which LICENSEE shall pay during the
Term, irrespective of the amount of Net Sales actually made
during such period - is specified in paragraph 1(d)(ii) above.
(k) "Advance" -- the amount of the Guaranteed Minimum Payment in
U.S. dollars which LICENSEE shall remit to NHLE upon the
signing of this License Agreement by LICENSEE (if any) -- is
specified in paragraph 1(d)(ii) above.
(l) "NHL Indicia" means the following matter as it appears on or
in connection with Licensed Products or packaging, labeling,
advertising or promotional material therefor or related
thereto: (1) NHL Marks; (2) words, phrases, slogans and the
like ("Words") derived from or incorporating NHL Marks; (3)
caricatures, graphics, images, designs and the like
("Graphics") derived from NHL Marks or incorporating NHL Marks
or any recognizable part thereof; and (4) Words or Graphics
that are ice hockey specific or are used exclusively or
substantially exclusively in association with NHL Marks or
other NHL Indicia. Words and Graphics that appear on or in
connection with Licensed Products or packaging, labeling,
advertising or promotional material therefor or related
thereto and which either (x) were used by LICENSEE in an
ordinary commercial manner on unlicensed products or products
licensed by others prior to the entry by LICENSEE into
negotiations with NHLE for this License Agreement, or (y) are
virtually identical to elements so used by LICENSEE on
unlicensed products or on products licensed by others, shall
not be deemed to be NHL Indicia pursuant to clause (4) above.
(m) "Designation" has the meaning set forth in paragraph 1(f)
above.
(n) "Advertising Minimum" has the meaning set forth in paragraph
1(h) above.
(o) "Work Stoppage" has the meaning set forth in paragraph 1(j)
above.
(p) "Y2 Selected Team" has the meaning set forth in paragraph 1(a)
above.
(q) "Y3 Selected Team" has the meaning set forth in paragraph 1(a)
above.
(r) "Y4 Selected Team" has the meaning set forth in paragraph 1(a)
above.
(s) "Y5 Selected Team" has the meaning set forth in paragraph 1(a)
above.
3. LIMITATIONS OF LICENSE.
In addition to the provisions, conditions and undertakings set forth in
other paragraphs herein, the license granted to LICENSEE is subject to the
following understandings, limitations and conditions:
(a) Each NHL Member Team has retained the right to license its own
marks individually for products other than jackets, replica
jersey/sweaters and trading cards; the sale of
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<PAGE> 10
Member-Team-licensed products generally shall be restricted to
within a seventy-five mile radius of the Member Team's home
arena, and no such local license may be granted to LICENSEE
for the Products.
(b) To the extent the NHL Marks licensed by this License Agreement
include the names, logos, colors, etc. of the NHL Member
Teams, they include such marks of each of the Member Teams,
and LICENSEE agrees that each Licensed Product will be
designed and offered for sale in enough styles so that there
shall be at least one style of each Licensed Product with the
name, logo, colors, etc. of each NHL Member Team with a home
arena in the Territory.
(c) This license to use the NHL Marks and the Designation does not
constitute and may not be used to imply the endorsement of the
Licensed Product(s) or any other product of LICENSEE, and the
NHL Marks are not licensed herein as certification marks or an
indication of a particular standard of quality.
(d) LICENSEE may not sell, distribute or make available Licensed
Products as Premiums without a prior written license agreement
from NHLE. In the event such a license is granted to LICENSEE,
the Licensed Products may only be sold to a user specifically
approved and licensed by NHLE for such purpose pursuant to a
separate agreement.
(e) The Licensed Products shall not knowingly be sold or
distributed for retail sale in combination with any other
product for a single price to the exclusion of the opportunity
to purchase the Licensed Products separately.
(f) LICENSEE will not sell the Licensed Products to parties whom
it knows or reasonably should know will resell or distribute
the Licensed Products outside the Territory.
(g) LICENSEE shall not:
(i) assign, transfer or sublicense any or all of the
rights granted herein to any third party, or
(ii) pledge or otherwise encumber any or all of the rights
granted herein as security or collateral for any
obligation of LICENSEE (or of any affiliate of
LICENSEE), or
(iii) effect, or cause to effect, or otherwise have
effected, whether in a single transaction or a series
of related transactions, the sale or other transfer
of more than fifty percent (50%) of the beneficial
ownership of the voting shares in the capital stock
of the LICENSEE, a controlling interest of the
LICENSEE or a majority of the operating assets
necessary to carry on the LICENSEE's business, to any
person or entity or to any "group" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended),
(such events being referred to herein collectively as the
"Changes" and individually as the "Change") without the prior
written consent of NHLE, which may be withheld within its sole
discretion. NHLE agrees and covenants that in exercising its
sole discretion to consent to such Change or to withhold such
consent, NHLE shall consider such factors as, including by way
of illustration only, the compatibility of the proposed
transaction and the proposed assignee, transferee,
sublicensee, pledgee or purchaser, as the case may be (any
such person being referred to herein as the "Proposed Party"),
with the reasonable business objectives of NHLE and its
affiliates, the reputation of the Proposed Party within the
Proposed Party's business or industry for offering quality and
reliable services or products or both (as the case may be) and
the ability of the Proposed Party to fulfill the obligations
of the LICENSEE as the same are set forth in this License
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<PAGE> 11
Agreement, the consideration of such factors by NHLE to be
made, at all times, in good faith.
(h) No use of the NHL Marks or the Designation shall be preprinted
by LICENSEE on its stationery, envelopes, business cards,
invoices, statements, packing slips or other similar documents
or materials unless approved in advance by NHLE.
(i) LICENSEE shall not purchase or otherwise obtain the Licensed
Products it its authorized to sell under this Agreement from
any other entity without the prior written consent of NHLE,
unless such other enters into a written agreement with
LICENSEE, in a form which is acceptable to NHLE in its sole
discretion, which agreement limits said other entity's rights
solely to supplying LICENSEE with Licensed Products pursuant
to the written agreement.
(j) LICENSEE agrees that it will cause to appear conspicuously,
indelibly and legibly on each of the Licensed Product(s) and
on all advertising material, tags, labels and devices bearing
any of the NHL Marks or other NHL Indicia, such proper
trademark, copyright or other notices of property right in the
NHL Marks or other NHL Indicia or other material as may be
designated by NHLE. In addition, LICENSEE shall place a notice
specified by NHLE that the Licensed Products are genuine
merchandise officially licensed.
(k) In the event LICENSEE uses authors, photographers, artists or
any other persons to create and/or design NHL Indicia for or
in connection with the Licensed Products or packaging,
labeling, advertising or promotional material therefor or
related thereto. LICENSEE shall either use personnel within
its employ so such work qualifies as a "work made for hire"
under the Copyright Act (17 U.S.C. Section 101) and assign
copyright in such work to NHLE, or, if LICENSEE engages
personnel under conditions which do not give rise to such a
"work made for hire," LICENSEE shall obtain an assignment of
copyright to NHLE of any copyrightable material prepared or
depicted by such author, photographer, artist or other person
for the Licensed Products or such packaging, labeling,
advertising or promotional material. Such obligations shall
apply only to those parts of otherwise unified textual or
graphic matter which qualify as NHL Indicia. In addition to
all other rights and remedies afforded by this License
Agreement and applicable law. LICENSEE agrees to hold harmless
NHLE, NHL and its Member Teams, other NHLE Licensees and the
officers, directors, employees and agents thereof, from any
claim, suit or damage, including attorney's fees, judgments,
court costs and consequential damages, that arise out of
LICENSEE's failure to deliver to NHLE the assignment(s) of
copyright required by this provision.
(l) LICENSEE further agrees that it will not apply for or seek to
obtain trademark, copyright or any other proprietary right in
the NHL Marks or any other NHL Indicia on Licensed Products or
packaging, labeling, advertising or promotional material
therefor or related thereto. NHLE, NHL and/or any or all of
its Member Teams, jointly and severally, may, at their option,
apply for and obtain in any or all of their own names
trademark, copyright or other property right protection for
the NHL Marks or other NHL Indicia (furnished or provided by
LICENSEE or NHLE) for the Licensed Product(s) or packaging,
labeling, advertising or promotional material therefor or
related thereto. Upon request, LICENSEE will furnish (i)
necessary specimens or facsimiles for such purpose free of
cost, (ii) evidence of the date of first shipment or sale of
each Licensed Product in commerce and also, if earlier, in
intrastate commerce, and (iii) such additional information
documents, specimens and facsimiles as may be reasonably
required to evidence and perfect the trademark, copyright or
other property right protection for the NHL Marks or other NHL
Indicia (all free of cost).
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(m) If demanded by LICENSEE, NHLE shall undertake to procure and
obtain in its own name, or the name of the National Hockey
League or any or all of its Member Teams, trademark,
copyright, design patent or other property right protection of
the NHL Marks or other matter (furnished or provided by NHLE
or LICENSEE) for the Licensed Product(s) at LICENSEE's
expense, including reasonable attorneys' fees.
(n) LICENSEE agrees that if LICENSEE receives knowledge of any
manufacture or sale by anyone other than LICENSEE of products
licensed under this License Agreement or of such products as
would be confusingly similar in the minds of the public and
which bear or are promoted in association with the NHL Marks
or other NHL Indicia under this License Agreement, or any
names, symbols, emblems, designs or colors which may be
confusingly similar in the minds of the public to such NHL
Marks or other NHL Indicia, LICENSEE will call such fact to
the attention of NHLE. NHLE shall then have the exclusive
right in its sole discretion to prosecute any such manufacture
or sale, either in its own name or the name of the National
Hockey League and/or one or more of its Member Teams, and
LICENSEE shall cooperate and assist in the prosecution of any
such action. If demanded by NHLE, LICENSEE shall join in or
cooperate in the prosecution of any such action as may be
instituted by NHLE; all such prosecution shall be at NHLE's
expense, including reasonable attorneys' fees. The proceeds
recovered in any such prosecution in the form of damages,
profits or other recovery shall belong solely to NHLE.
LICENSEE shall not commence any action of its own to restrain
or recover damages for any alleged infringements of the NHL
Marks or other NHL Indicia without first obtaining express
written permission to do so from NHLE.
(o) LICENSEE will not attack the title or right of NHLE or NHL
and/or its Member Teams in and to the NHL Marks, other NHL
Indicia or any copyright or trademark pertaining thereto, nor
will it attack the validity of the License granted hereunder
during the Term hereof or thereafter.
(p) LICENSEE will not harm, misuse or bring into disrepute the NHL
Marks, their reputation or that of their owners.
(q) LICENSEE acknowledges that except as expressly provided
herein, there is no right to renew this License Agreement, and
no options to extend this License Agreement have been granted
or implied hereunder.
(r) LICENSEE will manufacture, sell and distribute the Licensed
Product(s) in an ethical manner and in accordance with the
terms and intent of this License Agreement.
(s) LICENSEE will not incur or create any expenses chargeable to
NHLE, NHL or its Member Teams without the prior written
approval of NHLE.
(t) LICENSEE will protect to the best of its ability, its right to
manufacture, sell and distribute the Licensed Product(s)
hereunder.
(u) LICENSEE will comply with all laws and regulations relating or
pertaining to the manufacture, sale, advertising or use of the
Licensed Product(s), shall maintain high quality and standards
commensurate with LICENSEE's market, and shall comply with any
regulatory agencies which shall have jurisdiction over the
Licensed Product(s).
(v) LICENSEE will never disclose any confidential and non-public
information about NHLE, NHL and/or its Member Teams which it
acquires from any source during the Term or any Renewal
Term(s) hereof.
4. REPORTS AND PAYMENTS.
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On or before the twentieth (20th) day following each month of
the Term or any Renewal Term(s), LICENSEE shall submit to NHLE, or in accordance
with written instructions given by NHLE, a full and accurate statement showing
the quantity, description and Net Sales of each of the Licensed Products sold or
distributed during such month on forms to be furnished by NHLE. Simultaneously
with the submission of such statement, LICENSEE shall remit the Royalty Payment
due on Net Sales for each such month by check or electronic transfer payable to
"NHL Enterprises, Inc." and delivered directly to NHLE or, in accordance with
written instructions given to LICENSEE by NHLE. Such statements shall be
submitted whether or not they reflect any Net Sales of Licensed Products.
Receipt and acceptance by NHLE of any statement furnished by LICENSEE or Royalty
Payments paid hereunder shall not preclude NHLE from questioning the correctness
thereof at any time; in the event any errors are disclosed, such statements
shall be rectified and any differences in Royalty Payments remitted within ten
(10) days to NHLE. LICENSEE acknowledges that time is of the essence in making
payments to NHLE. If any payments to NHLE are not remitted on the date due,
LICENSEE shall pay interest at the rate of one and one-half percent (1.5%) per
month from such date until payment thereof is made to NHLE. If requested by
NHLE, LICENSEE at its own expense shall provide NHLE within sixty (60) days of
the end of each License Year a detailed statement for such License Year,
certified by an independent certified public accountant approved by NHLE,
showing the Net Sales of each Licensed Product sold or distributed by LICENSEE
during such year, together with a computation of Royalty Payments on Net Sales
due NHLE for such year.
5. CATALOG CONTRIBUTIONS.
NHLE shall have the right but not the obligation to publish
catalogs, sales sheets and brochures ("Catalogs") during any License Year in
order to promote the sale of Licensed Products. The format and style of any such
Catalog will be in NHLE's sole discretion. LICENSEE undertakes (i) to contribute
to each such Catalog by furnishing, free of charge, such samples, artwork,
photography and the like as may be available to it and requested, and (ii) to
participate in each such Catalog and pay for a minimum of one page at NHLE's
prevailing rate to cover the cost of such publication, including distribution
costs to retailers, wholesalers, mail order houses and other outlets for
Licensed Products. The payment by LICENSEE for such participation will be in
addition to any Advances, Guaranteed Minimum Payments and Royalty Payments due
NHLE as specified herein.
6. BOOKS AND RECORDS.
LICENSEE agrees to keep accurate books of account and records
covering all transactions relating to this License. NHLE and its duly authorized
representative shall have the right at all reasonable hours of the day to
examine and audit such books of account and records and all other documents and
material in LICENSEE's possession or under its control with respect to the
subject matter and terms of this License Agreement, and shall have free and full
access thereto for such purposes. All such books of account and records shall be
kept available for at least two years after termination of this License
Agreement. LICENSEE will designate a symbol or number which will be used
exclusively in connection with Licensed Products and with no other articles
which LICENSEE may manufacture, sell, or distribute. In the event that an audit
by NHLE reveals an underpayment by LICENSEE, LICENSEE shall immediately upon
demand remit payment to NHLE in the amount of such underpayment plus interest
calculated at the rate of one-and-one-half percent (1.5%) per month from the
date such payment was actually due until the date such payment is made. LICENSEE
shall reimburse NHLE for the entire costs and expenses of such audit if the
underpayment is two percent (2%) or more than the amount required to be paid to
NHLE for the applicable License Year.
7. QUALITY CONTROL OF LICENSED PRODUCTS.
LICENSEE agrees that the Licensed Product(s) shall be of high
standard and of such style, appearance and quality as shall be adequate and
suitable to their promotion, distribution and sale to the best advantage of
LICENSEE, NHLE, NHL and its Member Teams. To this end LICENSEE shall perform as
follows:
(a) Before selling or distributing any of the Licensed Product(s),
LICENSEE shall submit without charge samples of each such
Licensed Product, including all styles, colors and
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variations, together with its cartons and containers,
including packaging and wrapping material, hang tags and
labels (the "Related Materials"), for NHLE's written approval
in accordance with procedures specified hereafter. LICENSEE
shall submit for review all Licensed Products and Related
Materials at each of the following stages of production: 1)
rough sketches or layout concepts; 2) finished artwork or
final proofs; 3) pre-production samples or strike-offs; and 4)
finished products suitable for retail sale. The samples of
Licensed Products and Related Materials submitted by LICENSEE
for quality control purposes shall be delivered directly to
NHLE at its address specified first above or in accordance
with written instructions given by NHLE. The quality and style
of each such Licensed Product and its Related Materials shall
be subject to NHLE's prior approval. In the event that any
item submitted to NHLE shall not have been approved,
disapproved or otherwise commented upon within twenty (20)
business days after receipt thereof by NHLE, then LICENSEE
shall have the right to so notify NHLE of such fact by
telegram or telefax message. In the event that NHLE fails to
then approve, disapprove or otherwise comment upon the
submitted items within ten (10) business days after receipt by
it of such communication, any items so submitted by LICENSEE
shall be deemed to have been approved. LICENSEE shall, in
addition, thereafter furnish to NHLE free of cost for its
prior written approval six (6) production samples of each such
Licensed Product, together with their Related Materials,
within fifteen (15) days of the start of each License Year
that this License Agreement is in effect.
(b) After samples of each Licensed Product(s) and Related
Materials have been approved pursuant to this paragraph.
LICENSEE shall not depart therefrom in any material respect
without NHLE's prior written consent.
(c) NHLE shall have the right to withdraw its approval of approved
samples of Licensed Products and Related Materials if the
quality of any such item ceases to be acceptable or in the
event of some factor which reflects unfavorably upon the
professional, business or personal reputation of NHL, its
Member Teams or NHLE.
(d) Subject to terms and conditions hereof, LICENSEE may utilize
the NHL Marks and the Designation for such selling,
advertising, promotional and display materials for the
Licensed Product(s) as in its judgment will best promote the
sale of said Licensed Product(s). LICENSEE agrees that it will
not use the NHL Marks or any reproduction thereof or the
Designation in any advertising, promotional or display
material or in any other manner without NHLE's prior written
approval. In the event that any advertising, promotional or
display material submitted to NHLE shall not have been
approved, disapproved or otherwise commented upon within
twenty (20) business days after receipt thereof by NHLE, then
LICENSEE shall have the right to so notify NHLE of such fact
by telegram or telefax message. In the event that NHLE fails
to then approve, disapprove or otherwise comment upon the
submitted items within ten (10) business days after receipt by
it of such telegraphic or telefax communication, any items so
submitted shall be deemed to have been approved. Prior to use
by LICENSEE, six (6) production copies of all such
advertising, promotional and display materials will be
furnished to NHLE free of charge.
8. PROMOTIONAL SUPPORT OF NHL TEAMS AND
DISTRIBUTION OF LICENSED PRODUCTS.
(a) LICENSEE undertakes to support the National Hockey
League and its Member Teams by supplying to NHLE free of
charge samples of Licensed Products to a total value at
LICENSEE's lowest wholesale price of five hundred U.S. dollars
($500.00) annually. Such free samples will be distributed by
NHLE to NHL and/or the Member Teams directly or used by NHLE
in its discretion for promotions directly benefiting the
Member Teams. In addition to supplying such samples of
Licensed Products free of charge,
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LICENSEE also undertakes to supply NHLE at NHLE's
expense samples of Licensed Products at LICENSEE's
cost in such quantities as requested by NHLE for the
Member Teams or for promotions authorized by NHLE.
(b) LICENSEE undertakes to sell Licensed Products to
retail outlets owned and/or operated by NHL Member
Teams: i) at the lowest minimum quantities; ii) at
the lowest prices charged by LICENSEE to any other
third party; and iii) at the most advantageous credit
terms and return privileges offered by LICENSEE to
any other third party. LICENSEE also agrees to
deliver new styles or designs of Licensed Products to
retail outlets owned and/or operated by NHL Member
Teams on a prompt and timely basis, and in no event
later than to outlets not owned and/or operated by
NHL Member Teams, provided orders have been placed
with LICENSEE for said new styles or designs by said
NHL Team Outlets on as timely a basis as those orders
placed by other outlets.
(c) LICENSEE undertakes to sell, distribute, and
supply, within the Territory, the Licensed Products
in such manner as may be required to meet the
competition by manufacturers of similar articles.
LICENSEE further undertakes to make and maintain
adequate arrangements for the broadest possible
distribution of Licensed Products throughout the
Territory through all regular channels of
distribution consistent with Licensed Sales,
including but not limited to: companies selling
through mail order catalogs; companies consisting of
or operating groups of stores or department stores
commonly known as "chains;" independently run stores;
and wholesale distributors selling to retail outlets.
LICENSEE will use its best efforts to place Licensed
Products in at least one first class retail outlet in
the marketing area of each NHL Member Team within the
Territory, and to sell to each catalog merchant and
"chain" buying the Licensed Product(s) merchandise
bearing the NHL Marks of each NHL Member Team
operating within the geographic area served by said
catalog merchant or "chain". LICENSEE agrees to
maintain adequate inventories of the Licensed
Products as an essential part of its distribution
program. LICENSEE will not sell Licnesed Products to
any retail outlet within any area to the exclusion of
other retail outlets that may desire to purchase
Licensed Products and whose credit rating and sales
merchandising policies warrant such sales. In the
event LICENSEE sells or distributes other merchandise
of the same grade and quality as the Licensed
Products, but which do not bear any of the Licensed
Marks, LICENSEE will not discriminate in the granting
of commissions and discounts to salesmen, dealers and
distributors for the Licensed Products. LICENSEE
acknowledges and agrees that the foregoing provisions
of this paragraph 8 are material provisions of this
License Agreement.
9. GOODWILL.
LICENSEE recognizes the great value of the reputation and
goodwill associated with the NHL Marks, other NHL Indicia and Designation and,
in such connection, acknowledges that such goodwill belongs exclusively to NHL
and its Member Teams, that LICENSEE's use of the NHL Marks, other NHL Indicia
and Designation will inure to the benefit of NHL and its Member Teams, and that
the NHL Marks and other NHL Indicia have acquired a secondary meaning in the
mind of the purchasing public related to NHL and its Member Teams. LICENSEE
further recognizes and acknowledges that a breach by LICENSEE of any of its
covenants, agreements or undertakings hereunder will cause immediate irreparable
damage which cannot be readily remedied in damages in an action at law, and
which, in addition thereto, constitutes an infringement of rights in the NHL
Marks, other NHL Indicia and Designation, thereby entitling NHLE, NHL and its
Member Teams to equitable remedies, costs and damages, including reasonable
attorneys' fees.
10. INDEMNIFICATIONS.
(a) LICENSEE hereby indemnifies and agrees to hold NHLE,
NHL, its Member Teams and their agents, servants,
employees, officers, directors and other officials
harmless from
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any loss, liability, damage, cost or expense
(including reasonable attorneys' fees), arising out
of the manufacture, distribution, advertising,
promotion, offering for sale and sale of the Licensed
Products, or arising out of any of LICENSEE's NHL-
themed advertising and promotion, including without
limitation any claims or suits against any of them by
reason of or alleging any unauthorized or infringing
use by LICENSEE of any patent, process, trade secret,
copyright, trademark, or publicity right or other
similar property (other than the NHL Marks covered by
this License Agreement) or any alleged defects
(design, manufacturing, handling or other) or
inherent dangers in said Licensed Product(s) or the
use thereof. LICENSEE agrees to obtain, at its own
expense, product liability insurance providing
adequate protection for NHLE, NHL, its Member Teams
and their agents, servants, employees, officers,
directors and other officials and LICENSEE against
any such claims or suits in amounts no less than
$3,000,000 per claim or suit. Within thirty (30) days
from the date thereof, LICENSEE will submit to NHLE a
fully paid policy or certificate of insurance naming
NHLE, NHL, its Member Teams and their agents,
servants, employees, officers, directors and other
officials as an insured party, providing that
coverage shall extend to all claims or suits arising
out of the use of Licensed Product(s) manufactured or
sold under this License Agreement, no matter when
such claim or suit may be asserted, and further
providing that the insurer shall not terminate or
materially modify such coverage without written
notice to NHLE at least twenty (20) days in advance
thereof, and that if it does so, NHLE will have the
option to pay the premiums necessary to maintain or
continue such insurance in effect and obtain
reimbursement from LICENSEE.
(b) The indemnifications provided for herein are
conditioned upon the indemnified party's furnishing
the indemnifying party with prompt written notice of
any such claim or suit and upon the indemnified
party's furnishing of reasonable cooperation and
witnesses, if necessary, in defense of such claim or
suit. In such event, the indemnifying party shall
have the option and right to undertake and conduct
the defense of any such claim or suit.
11. TERMINATION.
(a) NHLE shall have the right to terminate this License
Agreement without prejudice to any rights which it
may have in the premises, whether in law, or in
equity, or otherwise, upon the occurrence of any one
or more of the following events (herein called
"defaults"):
(i) If any governmental agency finds that the
Licensed Product(s) are defective in any
way, manner or form;
(ii) If LICENSEE distributes, sells or offers to
sell any Licensed Products not made in
complete conformity to the provisions of
Paragraph 7 of this License Agreement, or
distributes, sells or offers to sell any
merchandise bearing a copy or simulation of
any NHL Mark or other NHL Indicia other than
the Products;
(iii) If LICENSEE shall be unable to pay its debts
when due, or shall make any assignment for
the benefit of creditors, or shall file any
petition under the bankruptcy or insolvency
laws of any nation, jurisdiction, county or
place, or shall have or suffer a receiver or
trustee to be appointed for its business or
property, or be adjudicated a bankrupt or an
insolvent;
(iv) In the event that LICENSEE does not commence
in good faith to manufacture, distribute and
sell each Licensed Product throughout the
Territory within sixty (60) days of the
commencement of the Term hereof and fails to
maintain an inventory of Licensed Products
sufficient to supply the market demand
therefor;
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(v) If there is a change in more than fifty
percent (50%) ownership or controlling
interest of LICENSEE or a change in any
members of the senior management of LICENSEE
or their respective responsibilities which
would, in NHLE's reasonable judgment,
adversely affect the LICENSEE's business to
a material extent, except as may be
otherwise consented to by NHLE pursuant to
paragraph 3(g) above; or
(vi) If Sport Maska, Inc. violates, breaches or
defaults in performing any of the provisions
of Retail License Agreement No. 20047A of
even date herewith and does not fully cure
such violation, breach or default within the
applicable cure period (if any).
(b) In the event LICENSEE violates, breaches or defaults
in performing any of the provisions of this License
Agreement other than those identified in provision
11(a) above, and does not fully cure such violation,
breach or default within ten (10) days notice from
NHLE, this License Agreement shall automatically
terminate. In the event of any termination pursuant
to paragraph 11(a) or (b), LICENSEE shall pay NHLE
within thirty (30) days without further demand all
amounts then due NHLE and also shall pay therewith as
liquidated damages all amounts still due NHLE as
Guaranteed Minimum Payment for the remainder of the
Term. If such payments are not remitted when due,
LICENSEE consents to the entry of judgment for such
amount by a court having jurisdiction over LICENSEE
or any of its assets. In addition, NHLE shall be
entitled to sue for injunctive relief and other
consequential damages, including reasonable
attorneys' fees incurred by NHLE, NHL and/or its
Member Teams as a result of any such violation,
breach or default by LICENSEE.
(c) It is agreed and recognized that the nature of the
business of NHLE, NHL and its Member Teams requires
great public respect for and trust in the reputation
and integrity of NHL and its Member Teams.
Accordingly, it is agreed that in the event of some
unanticipated factor, development or event which, in
NHLE's reasonable opinion, causes continued
association of NHL and/or its Member Teams with
LICENSEE or the Licensed Products to have a
materially adverse reflection upon NHL or its Member
Teams, NHLE may terminate this License unilaterally
by written notice to LICENSEE. In the event of such
termination, LICENSEE shall be excused from all
further (but not past due or subsequently earned)
royalty obligations; the pro-rated amount of any
minimum guarantee paid in advance will be refunded to
LICENSEE; and NHLE will, in the event it cannot
approve distribution of the remainder of LICENSEE's
inventory and work in process, reimburse LICENSEE for
its expenses of salvage or, for unsalvageable
products, for LICENSEE's cost of manufacturing or
acquiring the same.
(d) In the event of termination of this License
Agreement, LICENSEE will refrain from further use of
the Designation, the NHL Marks and the other NHL
Indicia (or any further reference to all or each of
them, direct or indirect, or any simulation of the
NHL Marks or other NHL Indicia). LICENSEE agrees that
the Designation, the NHL Marks and the other NHL
Indicia possess a special, unique and extraordinary
character which makes difficult the assessment of the
monetary damage sustained by unauthorized use.
LICENSEE recognizes that irreparable injury would be
caused by unauthorized use and agrees that injunctive
and other equitable relief would be appropriate in
the event of a breach of this License Agreement,
provided, however, that such remedy shall not be
exclusive of other legal remedies otherwise
available to NHLE, NHL and/or its Member Teams.
12. FINAL STATEMENT.
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LICENSEE shall deliver, as soon as practicable, to NHLE,
following expiration or termination of this License Agreement, a statement
indicating the number and description of Licensed Product(s) on hand. Following
expiration of this License Agreement, LICENSEE may manufacture no more Licensed
Product(s) in association with the NHL Marks and/or other NHL Indicia but may
continue to distribute and sell its remaining inventory for a period not to
exceed sixty (60) days following such expiration, subject to payment of
applicable royalties thereto, provided, however, that LICENSEE shall have no
such right if this License Agreement is terminated pursuant to paragraph 11.
Following expiration or termination of this License Agreement for whatever
reason, LICENSEE agrees to make no use of the Designation, the NHL Marks and/or
the other NHL Indicia whatsoever, either in or on products or in advertising,
publicity, promotional or display materials. NHLE shall have the right to
conduct a physical inventory in order to ascertain or verify such inventory
and/or statement. In the event LICENSEE refuses to permit NHLE to conduct such
physical inventory, LICENSEE shall forfeit its right hereunder to dispose of
such inventory. In addition to such forfeiture, NHLE shall have recourse to any
and all other legal remedies available to it. Notwithstanding the foregoing, in
the event that NHLE terminates this License Agreement pursuant to any of the
provisions of this License Agreement, LICENSEE shall have no right to dispose of
its inventory beyond the effective date of such termination and shall be subject
to the payment of damages specified herein.
13. NOTICES.
All notices which either party hereto is required or may
desire to give to the other shall be given by addressing the same to the other
at the address above written, or at such other address as may be designated in
writing or by telefax message by any such party in a notice to the other given
in the manner prescribed in this paragraph. All such notices shall be
sufficiently given when the same shall be received by telefax message, or
after such notice is deposited so addressed, postage prepaid, in the United
States or Canadian mail, and/or when the same shall have been delivered, so
addressed, to a telegraph or cable company toll prepaid. The date of actual
receipt of such telefax message, mail or telegraphing shall be the date of
the giving of such notice.
14. NO PARTNERSHIP OR JOINT VENTURE, ETC.
This License Agreement does not constitute and shall not be
construed as constituting a partnership, joint venture or agency between
LICENSEE and either the NHLE, NHL and/or its Member Teams. Neither party shall
have any right to obligate or bind the other party in any manner whatsoever, and
nothing herein contained shall give, or is intended to give, any rights of any
kind to any third persons.
15. CONSTRUCTION.
This License Agreement shall be construed in accordance with
the laws of the State of New York and the United States of America.
16. WAIVER, MODIFICATION, ETC.
This License Agreement represents the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all pervious representations, understandings or agreements
between the parties hereto. No waiver, modification or cancellation of any term
or condition of this License Agreement shall be effective unless executed in
writing by the party charged therewith. No written waiver shall excuse the
performance of any act other than those specifically referred to therein. NHLE
makes no warranties to the LICENSEE except those specifically expressed on the
first page hereof.
17. NO ENDORSEMENT BY PLAYERS, ETC.
This License Agreement does not carry with it any right to use
the name, likeness, reputation, goodwill, persona, or any other aspect of the
right of privacy, personality or publicity of any individual or group, including
any individual, or group of, current or former NHL player(s). LICENSEE
understands and agrees that it is LICENSEE's responsibility to secure whatever
rights may be required for the use of any such
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<PAGE> 19
name, likeness, reputation, goodwill, persona or other aspect in connection with
the Licensed Products. LICENSEE further understands and agrees that neither the
execution hereof nor any grant of approval hereunder nor any other act or
omission by NHLE shall operate or be construed as a grant by NHLE of any such
rights or as approval by NHLE of the use of any such name, likeness, reputation,
goodwill, persona or other aspect in connection with the Licensed Products in
the event LICENSEE shall not have secured such rights. LICENSEE shall not
exercise the rights granted hereunder in any manner that will constitute an
endorsement of a Licensed Product by any current or former NHL player(s) without
the specific consent of such player(s).
18. ARBITRATION.
(a) Any dispute or disagreement between the parties
hereto seeking to enjoin or restrain LICENSEE's sale
or distribution of the Licensed Products or of any
other Products or merchandise bearing NHL Marks or
other NHL Indicia or any copy or simulation thereof,
or otherwise use of the Designation, the NHL Marks or
the other NHL Indicia, may be determined in any forum
of NHLE's choosing, and LICENSEE hereby consents to
venue and personal jurisdiction in the Supreme Court
of the State of New York and/or United States
District Court in the State of New York. In any such
action, the forum may retain jurisdiction to award
damages, profits, attorneys' fees or costs, as
allowed in such matters.
(b) Any other dispute or disagreement between the parties
hereto arising out of or relating to this License
Agreement shall be settled by binding arbitration in
New York City under the rules then in effect of the
American Arbitration Association, and judgment upon
the award may be entered in the courts of the State
of New York and also in any court having
jurisdiction. Arbitration shall not preempt the
seeking of relief provided by paragraph (a) hereof,
and if relief is sought thereunder any Court in which
such action is commenced, not any Arbitration panel,
shall determine whether any particular matter is
justiciable by the Court or only arbitrable.
19. ACCEPTANCE BY NHLE.
This instrument, when signed by LICENSEE, shall be deemed an
application for a license and not a binding agreement unless and until accepted
by NHLE by signature of a duly authorized officer and the delivery of such a
signed copy to LICENSEE. The receipt and/or deposit by NHLE of any check or
other consideration given by LICENSEE and/or the delivery of any material by
NHLE to LICENSEE shall not be deemed an acceptance by NHL of this application.
The foregoing shall apply to any documents relating to renewals or modifications
hereof.
IN WITNESS WHEREOF, the parties hereto have signed this
License Agreement as of the day and year first above written.
NHL ENTERPRISES, INC.: LICENSEE:
By: /s/ Fred Scalera By: /s/ Howard Zunenshine
------------------------ ------------------------
Name: Fred Scalera Name: Howard Zunenshine
------------------------
Title: Vice President Title: Chief Executive Officer
------------------------
18
<PAGE> 1
Exhibit 10.32
<PAGE> 2
CONFIDENTIAL TREATMENT
NHL ENTERPRISES CANADA INC.
75 INTERNATIONAL BLVD., SUITE 301
REXDALE, ONT. M9W 6L9
TEL: (416) 798-9388
FAX: (416) 798-9395
RETAIL LICENSE AGREEMENT
No.: 20047A
Date: October 6, 1995
LICENSEE: Sport Maska, Inc. Tel: 514/331-5150
ADDRESS: 7405 Trans Canada Highway, Suite 300 Fax: 514/331-7061
St. Laurent, Quebec H4T 1Z2
CANADA Attn: Howard Zunenshine, CEO
This License Agreement, when executed by each of the parties hereto,
shall amend and restate in its entirety, as of July 1, 1995, Retail License
Agreement No. 20047 dated March 8, 1995 between the parties hereto.
NHL ENTERPRISES CANADA INC. ("NHLEC") has the right to license for
commercial purposes the use in Canada of certain properties of the National
Hockey League ("NHL") and of the teams comprising said League ("Member Teams"),
specifically -- the names, nicknames, slogans, symbols, logos, emblems,
insignia, colors, uniform designs and other indicia of each of the Member Teams
of the National Hockey League; the city or regional identification of each of
the National Hockey League Member Teams in conjunction with their colors and an
appropriate professional ice hockey reference; the name, initials, insignia,
colors and other indicia of the National Hockey League, including the Conference
and Division names and/or logos; the name and logo of the NHL All-Star Game; the
name and logo of the Stanley Cup Playoffs; and the name and logo of the Stanley
Cup (the "NHL Marks"); and that except as stated in paragraph 3(a) hereinafter,
no other entity has the right to license said NHL Marks for such purposes.
LICENSEE, whose full name and address are set forth above, desires to
obtain the right from NHLEC to utilize the NHL Marks in connection with the
manufacture, distribution, sale and advertising of certain products specified
hereinafter (the "Products") in accordance with the conditions and provisions
set forth in this License Agreement.
Therefore, in consideration of the promises, covenants and
undertakings contained in this License Agreement, the parties hereto agree, as
follows:
1. GRANT OF LICENSE.
For purposes of this License Agreement, the definitions set forth in
paragraph 2 below or otherwise in this License Agreement shall be applicable and
controlling. Subject to such definitions, NHLEC hereby grants to LICENSEE the
non-exclusive right (except as set forth in paragraph 1(g) below) to use the NHL
Marks on the Products throughout the Territory during the Term in accordance
with all of the provisions, conditions, and undertakings specified hereinafter
in this License Agreement.
(a) PRODUCT(S). The Products are as follows:
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(i) Authentic (otherwise known as "Center Ice") home and away
jerseys of each of the Member Teams, and authentic third
jerseys of each of the Member Teams that has a third jersey;
(ii) Replica home and away jerseys of each of the Member Teams,
and replica third jerseys of each of the Member Teams that
has a third jersey;
(iii) Authentic and replica Eastern and Western Conference NHL
All-Star Game jerseys; and
(iv) Authentic and replica practice jerseys of each of the Member
Teams.
Notwithstanding the foregoing, LICENSEE may not manufacture and
sell authentic home, away and (if applicable) third jerseys during
the period from July 1, 1996 through June 30, 1997, from July 1,
1997 through June 30, 1998 and from July 1, 1998 through June 30,
1999 of such Member Teams as NHLEC shall have selected (after
consultation with LICENSEE, but ultimately at NHLEC's sole
discretion) and specified in a written notice to LICENSEE by
December 31, 1995, December 31, 1996 and December 31, 1997,
respectively (the "Y3 Selected Teams", the "Y4 Selected Teams" and
the "Y5 Selected Teams", respectively).
NHLEC agrees in exercising its sole discretion in selecting the Y3
Selected Teams. Y6 Selected Teams an Y5 Selected Teams and in its
consultation with LICENSEE as noted above NHLEC shall duly
consider such factors as, including by was of illustration only.
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
Each of the Products shall be manufactured and sold only in
approved styles and fabrications, and in adult and youth sizes.
(Each individual item must be reviewed and approved
in writing by NHLEC prior to manufacturing.)
(b) TERRITORY. Canada.
(C) TERM. The term hereof shall be for the period commencing on July
1, 1994 and terminating on June 30, 1999.
(d) LICENSEE PAYMENTS. In consideration for the rights herein granted
to LICENSEE, LICENSEE shall pay to NHLEC the following:
(i) Royalty Rate: LICENSEE will pay NHLEC at such times and under
the circumstances specified hereinafter, a Royalty Payment in
amount equal to the Royalty Rate (as defined below) times Net
Sales. "Royalty Rate" shall mean (1) CONFIDENTIAL TREATMENT
REQUESTED FOR THESE PORTIONS, FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION with respect to replica
home, away, third, Eastern and Western Conference NHL All-
Star Game and practice jerseys sold hereunder on or before
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION and
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION with
respect to such Products sold hereunder thereafter; and (2)
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION with
respect to authentic home, away, third, Eastern and Western
Conference NHL All-Star Game and practice jerseys sold
hereunder.
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<PAGE> 4
(ii) Guaranteed Minimum Payment. LICENSEE guarantees payment to
NHLEC of an aggregate of CONFIDENTIAL TREATMENT REQUESTED
FOR THESE PORTIONS, FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION during the term (the "Guaranteed Minimum
Payment"). The Guaranteed Minimum Payment shall be payable
in installments on or before the dates specified in the
schedule below, which installments shall be credited against
Royalty Payments due NHLEC hereunder:
AMOUNT DUE DATE
------ --------
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
Notwithstanding the foregoing, if LICENSEE shall not have
earned and paid to NHLEC hereunder an aggregate of
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION in
royalties during the Term, then LICENSEE shall receive a
credit against the Guaranteed Minimum Payment for the excess
(if any) of (1) royalties earned and paid in U.S. dollars to
NHL Enterprises, Inc. by Maska U.S., Inc. pursuant to, and
during the term of, Retail License Agreement No. 10158A of
even date herewith over (2) the guaranteed minimum payment
required pursuant thereto; provided, however, that in no
event shall such credit exceed the Guaranteed Minimum
Payment. Such credit (if any) shall be calculated by NHLEC
on June 30, 1999 by converting such excess (if any) as of
such date to Canadian dollars at the then prevailing
exchange rate. NHLEC shall refund to LICENSEE (in Canadian
dollars) the amount of such credit (if any) on or before
July 31, 1999.
CONFIDENTIAL TREATMENT REQUESTED FOR THESE PORTIONS, FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
(e) PRODUCT TO MEMBER TEAMS.
(i) Each License Year, LICENSEE shall supply each of the Member
Teams (except during the third License Year in the case of
clauses (1) and (2) below, the Y3 Selected Teams, during
the fourth License Year in the case of clauses (1) and (2)
below, the Y4 Selected Teams, and during the fifth License
Year in the case of clauses (1) and (2) below, the Y5
Selected Teams) whose home arena is located within the
Territory with the following, at no charge, at such times
as such Member Teams request but not later than April 1 of
such License Year, for use in connection with such License
Year's NHL season (provided such Member Teams notify
LICENSEE in writing regarding sizes and, in the case of
practice jerseys, colors and quantities/color, in a timely
manner): (1) three sets of home and away game jerseys for
each such Member Team (with 30 home and 30 away jerseys
set, for a total of 150 such jerseys/Member Team; (2) one
set of third game jerseys for each such Member Team that
uses a third game jersey (with 30 third game jerseys/set,
for a total of 30 such jerseys/Member Team); (3) three sets
of home and away stockings for each such Member Team (with
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<PAGE> 5
30 pairs of home and 30 pairs of away stockings/set, for a
total of 180 pairs of stockings/Member Team); and (4) one
set of practice jerseys for each such Member Team (with
each such Member Team being able to choose up to six colors
and any number of practice jerseys/color, up to a total of
60 practice jerseys/set). LICENSEE shall supply each of the
Member Teams whose home arena is located within the
Territory and which plays in the Stanley Cup Finals during
any License Year (except for the Y3 Selected Teams, Y4
Selected Teams and Y5 Selected Teams) with an additional
set of home and away game jerseys for such License Year, at
no charge, not later than three days before the first game
of the Stanley Cup Finals for such License Year.
(ii) LICENSEE may incorporate the CCM logo on each of the items
supplied to the Member Teams pursuant to this paragraph
1(e) (except stockings) subject to NHLEC's written approval
regarding the prominence and placement of such logo and the
number of times such logo appears thereon.
(iii) NHLEC shall use its best efforts to ensure that each of the
Member Teams whose home arena is located within the
Territory wears LICENSEE-supplied practice jerseys during
team practices.
(f) OFFICIAL SUPPLIER DESIGNATION. Without limiting NHLEC's approval
rights pursuant to paragraph 7 below, LICENSEE may use the
designation an "Official Supplier to the NHL" (the "Designation")
with reference to CCM in connection with LICENSEE's advertisement
and promotion of the Licensed Products hereunder.
(g) EXCLUSIVITY. All rights in and to the NHL Marks and the
Designation not expressly granted hereunder are reserved to NHLEC
for use without restriction, provided, however, that NHLEC agrees
that (x) it will not grant to any third party other than LICENSEE
any license:
(i) to sell within the Territory, on or before June 30, 1996,
pursuant to any retail license agreement, replica home, away
or third jerseys of any of the Member Teams;
(ii) to sell within the Territory, on or before June 30, 1996,
pursuant to any retail license agreement, authentic home,
away or third jerseys of any of the Member Teams;
(iii) to sell within the Territory, on or before June 30, 1996,
pursuant to any retail license agreement, replica Eastern or
Western Conference NHL All-Star Game jerseys;
(iv) to sell within the Territory, during the Term, pursuant to
any retail license agreement, authentic Eastern or Western
Conference NHL All-Star Game jerseys;
(v) to sell within the Territory, during the Term, pursuant to
any retail license agreement, authentic or replica practice
jerseys of the Member Teams;
(vi) to supply any of the Member Teams whose home arena is
located within the Territory with home, away or third game
jerseys for use by the players on such Member Teams, on or
before June 30, 1997, on-ice during NHL games; or
(vii) to supply any of the Member Teams whose home arenas are
located within the Territory with practice jerseys for use
by the players on such Member Teams, during the Term,
on-ice during Member Team practices; and
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<PAGE> 6
(y) it will not grant to any single third party any license:
(i) to sell within the Territory, during any License Year,
pursuant to any retail license agreement, authentic home,
away and third jerseys of a number of Member Teams that is
greater than the number of Member Teams as to which
LICENSEE has the right to sell within the Territory, during
such License Year, authentic home, away and third jerseys
hereunder; or
(ii) to supply, during any License Year, authentic home, away and
third jerseys to a number of Member Teams that is greater
than the number of Member Teams as to which LICENSEE has
the right to supply authentic home, away and third jerseys
hereunder, in each case for use by the players on such
Member Teams on-ice during NHL games during such License
Year; and
(z) LICENSEE shall have the right throughout the Term:
(i) to sell within the Territory authentic home, away and third
jerseys of at least 50% of the Member Teams that shall have
first joined the NHL and started playing regular season
games during the Term (so-called "expansion teams" -- it
being understood and agreed that such requirement does not
apply to such Member Teams as had been playing regular
season games prior to the commencement of the Term,
regardless of whether any of such Member Teams relocates
during the term
(ii) to supply authentic home, away and third jerseys to at least
50% of the Member Teams that shall have first joined the
NHL and started playing regular season games during the
Term (so-called "expansion teams" -- it being understood
and agreed that such requirement does not apply to such
Member Teams as had been playing regular season games prior
to the commencement of the Term, regardless of whether any
of such Member Teams relocates during the Term), for use by
the players on such Member Teams on-ice during NHL games
during the Term; and
(iii) the parties hereby agree that the selection of the expansion
teams which shall be supplied by LICENSEE and in respect of
which LICENSEE shall be entitled to market as provided in
this paragraph (z) shall be made by NHLEC in good faith,
after consultation with LICENSEE, but ultimately at NHLEC's
sole discretion, in accordance with the factors and
procedures set forth in paragraph 1(a)(iv) hereof as such
factors may be applicable thereto.
(h) ADVERTISING AND PROMOTION. LICENSEE shall use its best efforts to
advertise and promote the sale of Licensed Products in Canada, and
its commitment to consumer directed advertising and promotion of
the Licensed Products in Canada shall be consistent with the
commitment made in paragraph 1(h) of Retail License Agreement No.
10158A of even date herewith.
(i) CENTER ICE PRODUCTS. Without limiting any other term hereof
and subject to the rules of the NHL Center Ice/Authentics
Program (as such rules may be amended from time to time,
which rules (and amendments thereto) LICENSEE hereby agrees
to comply with), NHLEC hereby grants to LICENSEE the right
to use the NHL Center Ice/Authentics Program name and logo
in connection with the sale of authentic home, away, third,
Eastern and Western Conference NHL All-Star Game and
practice jerseys hereunder, and each such authentic jersey
shall have a separate hang tag and label that bears such
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<PAGE> 7
name and/or logo. Such name and logo shall constitute "NHL Marks"
when used in connection with such authentic jerseys.
(j) WORK STOPPAGE. The parties agree that, should NHL league play be
suspended in any License Year due to a player strike, management
lockout, postponement, or comparable work stoppage league wide
(singly or together, a "Work Stoppage"), then the installment of
the Guaranteed Minimum Payment due during such License Year
pursuant to paragraph 1(d)(ii) above and the Guaranteed Minimum
Payment shall be adjusted as follows:
(i) Such installment and the Guaranteed Minimum Payment shall
not be subject to adjustment if 25% or fewer of such
License Year's scheduled regular season NHL games are
canceled due to the Work Stoppage.
(ii) If more than 25% but fewer than 50% of such License Year's
scheduled regular season NHL games are canceled due to the
Work Stoppage, then (1) such installment shall be reduced
by 25% and (2) the Guaranteed Minimum Payment shall be
reduced by the same amount by which such installment shall
have been reduced pursuant to clause (1) above.
(iii) If 50% or more of such License Year's scheduled regular
season NHL games are canceled due to the Work Stoppage,
then (1) such installment shall be reduced by 50% and (2)
the Guaranteed Minimum Payment shall be reduced by the same
amount by which such installment shall have been reduced
pursuant to clause (1) above.
Any refund of any installment of the Guaranteed Minimum Payment
required pursuant to this paragraph 1(j) shall be made by NHLEC to
LICENSEE within 30 days after the end of the relevant License
Year.
(k) PRESS RELEASE. The parties shall issue a mutually acceptable,
positive press release in the Territory with respect to this
License Agreement at a mutually agreeable time (but not later than
the beginning of the NHL's 1995-96 regular season).
STANDARD TERMS AND CONDITIONS
2. DEFINITIONS.
(a) "Territory" -- the geographical area in which LICENSEE is
authorized to use the NHL Marks -- is specified in paragraph 1(b)
above.
(b) "License Year" -- means each period during the Term commencing on
July 1 of one year and ending on June 30 of the next year.
(c) "Term" -- the period during which this License Agreement is in
effect whether or not it is renewed -- is set forth in paragraph
1(C) above. "Renewal Term(s)," if any, are specified in paragraph
1 above, are those License Year(s) immediately following the last
License Year of the Term or any prior Renewal Term.
(d) "Product(s)" are identified in paragraph 1(a) above, and become
"Licensed Product(s)" when LICENSEE applies or uses the licensed
NHL Marks strictly in accordance with the provisions, conditions
and undertakings set forth in this License Agreement.
(e) "Premiums" means any product, including but not limited to
Licensed
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<PAGE> 8
Products(s), sold at any price or given away for the purpose of
promoting, publicizing or increasing the sale of any other product
or service, including but not limited to incentives for a sales
force or distributorship(s), or for trade or consumer promotions.
(f) "Licensed Sales" means the sale of Licensed Products directly to
or for retail outlets, mail order or catalogs, including
electronic and video marketing entities, where the Licensed
Products are ultimately sold to consumers. Licensed Sales do not
include the sale of Licensed Products as Premiums, which require
separate agreements executed by NHLEC with both the manufacturer
and user of the premium.
(g) "Net Sales" means the gross amount of Licensed Sales of Licensed
Products in Canadian dollars at the invoiced selling price net
normal and reasonable quantity discounts and returns for credit;
no deductions shall be made for costs incurred in manufacturing,
selling, distributing or advertising (including cooperative and
promotional allowances), for uncollectible accounts or for any
other amounts of any type.
(h) "Royalty Rate" has the meaning set forth in paragraph 1(d)(i)
above.
(i) "Royalty Payment" is the Royalty Rate specified in paragraph
1(d)(i) above times Net Sales of Licensed Products, calculated and
payable in Canadian dollars to NHLEC.
(j) "Guaranteed Minimum Payment" -- the minimum amount of Royalty
Payment in Canadian dollars which LICENSEE shall pay during the
Term, irrespective of the amount of Net Sales actually made during
such period -- is specified in paragraph 1(d)(ii) above.
(k) "Advance" -- the amount of the Guaranteed Minimum Payment in
Canadian dollars which LICENSEE shall remit to NHLEC upon the
signing of this License Agreement by LICENSEE (if any) -- is
specified in paragraph 1(d)(ii) above.
(l) "NHL Indicia" means the following matter as it appears on or in
connection with Licensed Products or packaging, labeling,
advertising or promotional material therefor or related thereto:
(1) NHL Marks; (2) words, phrases, slogans and the like ("Words")
derived from or incorporating NHL Marks; (3) caricatures,
graphics, images, designs and the like ("Graphics") derived from
NHL Marks or incorporating NHL Marks or any recognizable part
thereof; and (4) Words or Graphics that are ice hockey specific or
are used exclusively or substantially exclusively in association
with NHL Marks or other NHL Indicia. Words and Graphics that
appear on or in connection with Licensed Products or packaging,
labeling, advertising or promotional material therefor or related
thereto and which either (x) were used by LICENSEE in an ordinary
commercial manner on unlicensed products or products licensed by
others prior to the entry by LICENSEE into negotiations with NHLEC
for this License Agreement, or (y) are virtually identical to
elements so used by LICENSEE on unlicensed products or on products
licensed by others, shall not be deemed to be NHL indicia pursuant
to clause (4) above.
(m) "Designation" has the meaning set forth in paragraph 1(f) above.
(n) "Work Stoppage" has the meaning set forth in paragraph 1(j) above.
(o) "Y3 Selected Teams" has the meaning set forth in paragraph 1(a)
above.
(p) "Y4 Selected Teams" has the meaning set forth in paragraph 1(a)
above.
(q) "Y5 Selected Teams" has the meaning set forth in paragraph 1(a)
above.
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3. LIMITATIONS OF LICENSE.
In addition to the provisions, conditions and under-takings set forth
in other paragraphs herein, the license granted to licensee is subject to the
following understandings, limitations and conditions:
(a) Each NHL Member Team has retained the right to license its own
marks individually for products other than jackets, replica
jersey/sweaters and trading cards: the sale of
Member-Team-licensed products generally shall be restricted to
within a seventy-five mile radius of the Member Team's home arena,
and no such local license may be granted to LICENSEE for the
Products.
(b) To the extent the NHL Marks licensed by this License Agreement
include the names, logos, colors, etc. of the NHL Member Teams,
they include such marks of each of the Member Teams and LICENSEE
agrees that each Licensed Product will be designed and offered for
sale in enough styles so that there shall be at least one style of
each Licensed Product with the name, logo, colors, etc. of each
NHL Member Team with a home arena in the Territory.
(c) This license to use the NHL Marks and the Designation does not
constitute and may not be used to imply the endorsement of the
Licensed Product(s) or any other product of LICENSEE.
(d) LICENSEE may not sell, distribute or make available Licensed
Products as Premiums without a prior written license agreement
from NHLEC. In the event such a license is granted to LICENSEE,
the Licensed Products may only be sold to a user specifically
approved and licensed by NHLEC for such purpose pursuant to a
separate agreement.
(e) The Licensed Products shall not knowingly be sold or distributed
for retail sale in combination with any other product for a single
price to the exclusion of the opportunity to purchase the Licensed
Products separately.
(f) LICENSEE will not sell the Licensed Products to parties whom it
knows or reasonably should know will resell or distribute the
Licensed Products outside the Territory.
(g) LICENSEE shall not:
(i) assign, transfer or sublicense any or all of the rights
granted herein to any third party, or
(ii) pledge or otherwise encumber any or all of the rights
granted herein as security or collateral for any obligation
of LICENSEE (or of any affiliate of LICENSEE), or
(iii) effect, or cause to effect, or otherwise have effected,
whether in a single transaction or a series of related
transactions, the sale or other transfer of more than fifty
percent (50%) of the beneficial ownership of the voting
shares in the capital stock of the LICENSEE, a controlling
interest of the LICENSEE or a majority of the operating
assets necessary to carry on the LICENSEE's business to any
person or entity or to any "group" (within the meaning of
Section 13(d)(2) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended),
(Such events being referred to herein collectively as the
"Changes" and individually as the "Change") without the prior
written consent of NHLEC, which may be withheld within its sole
discretion. NHLEC agrees and covenants that in exercising its sole
discretion to consent to such Change or to withhold such consent,
NHLEC shall consider such factors as, including by way of
illustration only, the compatibility of the
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<PAGE> 10
proposed transaction and the proposed assignee, transferee,
sublicensee, pledge or purchaser, as the case may be (any such
person being referred to herein as the "Proposed Party"), with the
reasonable business objectives of NHLEC and its affiliates, the
reputation of the Proposed Party within the Proposed Party's
business or industry for offering quality and reliable services or
products or both (as the case may be) and the ability of the
Proposed Party to fulfill the obligations of the LICENSEE as the
same are set forth in this License Agreement, the consideration of
such factors by NHLEC to be made, at all times, in good faith.
(h) No use of the NHL Marks or the Designation shall be preprinted by
LICENSEE on its stationery, envelopes, business cards, invoices,
statements, packing slips or other similar documents or materials
unless approved in advance by NHLEC.
(i) LICENSEE shall not purchase or otherwise obtain the Licensed
Products it is authorized to sell under this Agreement from any
other entity without the prior written consent of NHLEC, unless
such other entity enters into a written agreement with LICENSEE,
in a form which is acceptable to NHLEC in its sole discretion,
which agreement limits said other entity's rights solely to
supplying LICENSEE with Licensed Products pursuant to the written
agreement.
(j) LICENSEE agrees that it will cause to appear conspicuously,
indelibly and legibly on each of the Licensed Product(s) and on
all advertising material, tags, labels and devices bearing any of
the NHL Marks or other NHL Indicia, such proper trademark,
copyright or other notices of property right in the NHL Marks or
other NHL Indicia or other material as may be designated by NHLEC.
In addition, LICENSEE shall place a notice specified by NHLEC that
the Licensed Products are genuine merchandise officially licensed.
(k) In the event LICENSEE uses authors, photographers, artists or any
other persons to create and/or design NHL Indicia for or in
connection with the Licensed Products or packaging, labeling,
advertising or promotional material therefor or related thereto,
LICENSEE shall either use personnel within its employ so such work
qualifies as a "work made under a contract of services and within
the course of employment" under Section 13(3) of the Canadian
Copyright Act, R.S.C., 1985, C-42 (as amended) and assign
copyright in such work to NHLEC, or, if LICENSEE engages personnel
under conditions which do not give rise to such a "work made under
a contract services and within the course of employment", LICENSEE
shall obtain an assignment of copyright to NHLEC of any
copyrightable material prepared or depicted by such author,
photographer, artist or other person for the Licensed Products or
such packaging, labeling, advertising or promotional material. In
either of the above mentioned circumstances, LICENSEE shall also
obtain from any authors, photographers, artists or other persons
appropriate written waivers or assignments (as applicable under
the domestic laws of any country) to NHLEC of any moral rights in
such copyrightable material and such packaging, labeling,
advertising and promotional material related thereto. Such
obligations shall apply only to those parts of otherwise unified
textual or graphic matter which qualify as NHL Indicia. In
addition to all other rights and remedies afforded by this License
Agreement and applicable law, LICENSEE agrees to hold harmless
NHLEC, NHL and its Member Teams, other NHLEC Licensees and the
officers, directors, employees and agents thereof, from any claim,
suit or damage, including attorney's fees, judgments, court costs
and consequential damages, that arise out of LICENSEE's failure to
deliver to NHLEC the assignment(s) of copyright required by this
provision.
(l) LICENSEE further agrees that it will not apply for or seek to
obtain trademark, copyright or any other proprietary right in the
NHL Marks or any other NHL Indicia on Licensed Products or
packaging, labeling, advertising or promotional material therefor
or related
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thereto. NHLEC, NHL and/or any or all of its Member Teams, jointly
and severally, may, at their option, apply for and obtain in any
or all of their own names trademark, copyright or other property
right protection for the NHL Marks or other NHL Indicia (furnished
or provided by LICENSEE or NHLEC) for the Licensed Product(s) or
packaging, labeling, advertising or promotional material therefor
or related thereto. Upon request, LICENSEE will furnish (i)
necessary specimens or facsimiles for such purpose free of cost,
(ii) evidence of the date of first shipment or sale of each
Licensed Product in Canada and (iii) such additional information
documents, specimens and facsimiles as may be reasonably required
to evidence and perfect the trademark, copyright or other property
right protection for the NHL Marks or other NHL Indicia (all free
of cost).
(m) If demanded by LICENSEE, NHLEC shall undertake to procure and
obtain in its own name, or the name of the National Hockey League
or any or all of its Member Teams, trademark, copyright, design
patent or other property right protection of the NHL Marks or
other matter (furnished or provided by NHLEC or LICENSEE) for the
Licensed Product(s) at LICENSEE's expense, including reasonable
attorneys' fees.
(n) LICENSEE agrees that if LICENSEE receive knowledge of any
manufacture or sale by anyone other than LICENSEE of products
licensed under this License Agreement or of such products as would
be confusingly similar in the minds of the public and which bear
or are promoted in association with the NHL Marks or other NHL
Indicia under this License Agreement, or any names, symbols,
emblems, designs or colors which may be confusingly similar in the
minds of the public to such NHL Marks or other NHL Indicia,
LICENSEE will call such fact to the attention of NHLEC. NHLEC
shall then have the exclusive right in its sole discretion to
prosecute any such manufacture or sale, either in its own name or
the name of the National Hockey League and/or one or more of its
Member Teams, and LICENSEE shall cooperate and assist in the
prosecution of any such action. If demanded by NHLEC, LICENSEE
shall join in or cooperate in the prosecution of any such action
as may be instituted by NHLEC; all such prosecution shall be at
NHLEC's expense, including reasonable attorneys' fees. The
proceeds recovered in any such prosecution in the form of damages,
profits or other recovery shall belong solely to NHLEC. LICENSEE
shall not commence any action of its own to restrain or recover
damages for any alleged infringements of the NHL Marks or other
NHL Indicia without first obtaining express written permission to
do so from NHLEC.
(o) LICENSEE will not attack the title or right of NHLEC or NHL and/or
its Member Teams in and to the NHL Marks, other NHL Indicia or any
copyright or trademark pertaining thereto, nor will it attack the
validity of the License granted hereunder during the Term hereof
or thereafter.
(p) LICENSEE will not harm, misuse or bring into disrepute the NHL
Marks, their reputation or that of their owners.
(q) LICENSEE acknowledges that except as expressly provided herein,
there is no right to renew this License Agreement, and no options
to extend this License Agreement have been granted or are implied
hereunder.
(r) LICENSEE will manufacture, sell and distribute the Licensed
Product(s) in an ethical manner and in accordance with the terms
and intent of this License Agreement.
(s) LICENSEE will not incur or create any expenses chargeable to
NHLEC, NHL or its Member Teams without the prior written approval
of NHLEC.
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(t) LICENSEE will protect to the best of its ability, its right to
manufacture, sell and distribute the Licensed Product(s)
hereunder.
(u) LICENSEE will comply with all laws and regulations relating or
pertaining to the manufacture, sale, advertising or use of the
Licensed Product(s), shall maintain high quality and standards
commensurate with LICENSEE's market, and shall comply with any
regulatory agencies which shall have jurisdiction over the
Licensed Product(s).
(v) LICENSEE will never disclose any confidential and non-public
information about NHLEC, NHL and/or its Member Teams which it
acquires from any source during the Term or Renewal Term(s)
hereof.
4. REPORTS AND PAYMENTS.
On or before the twentieth (20th) day following each month of the
Term or any Renewal Term(s), LICENSEE shall submit to NHLEC, or in accordance
with written instructions given by NHLEC, a full and accurate statement showing
the quantity, description and Net Sales of each of the Licensed Products sold or
distributed during such month on forms to be furnished by NHLEC. Simultaneously
with the submission of such statement, LICENSEE shall remit the Royalty Payment
due on Net Sales for each such month plus applicable Goods and Sales Tax by
check or electronic transfer payable to "NHL Enterprises Canada Inc." and
delivered directly to NHLEC or, in accordance with written instructions given to
LICENSEE by NHLEC. Such statements shall be submitted whether or not they
reflect any Net Sales of Licensed Products. Receipt and acceptance by NHLEC of
any statement furnished by LICENSEE or Royalty Payments paid hereunder shall not
preclude NHLEC from questioning the correctness thereof at any time; in the
event any errors are disclosed such statements shall be rectified and any
differences in Royalty Payments remitted within ten (10) days to NHLEC. LICENSEE
acknowledges that time is of the essence in making payments to NHLEC. If any
payments to NHLEC are not remitted on the date due, LICENSEE shall pay interest
at the rate of one and one-half percent (1.5%) per month from such date until
payment thereof is made to NHLEC. If requested by NHLEC, LICENSEE at its own
expense shall provide NHLEC within sixty (60) days of the end of each License
Year a detailed statement for such License Year, certified by an independent
certified public accountant approved by NHLEC, showing the Net Sales of each
Licensed Product sold or distributed by LICENSEE during such year, together with
a computation of Royalty Payments on Net Sales due NHLEC for such year.
5. CATALOG CONTRIBUTIONS.
NHLEC shall have the right but not the obligation to publish catalogs,
sales sheets and brochures ("Catalogs") during any License Year in order to
promote the sale of Licensed Products. The format and style of any such Catalog
will be in NHLEC's sole discretion. LICENSEE undertakes (i) to contribute to
each such catalog by furnishing, free of charge, such samples, artwork,
photography and the like as may be available to it and requested, and (ii) to
participate in each such Catalog and pay for a minimum of one page at NHLEC's
prevailing rate to cover the cost of such publication, including distribution
costs to retailers, wholesalers, mail order houses and other outlets for
Licensed Products. The payment by LICENSEE for such participation will be in
addition to any Advances, Guaranteed Minimum Payments and Royalty Payments due
NHLEC as specified herein.
6. BOOKS AND RECORDS.
LICENSEE agrees to keep accurate books of account and records covering
all transactions relating to this License. NHLEC and its duly authorized
representative shall have the right at all reasonable hours of the day to
examine and audit such books of account and records and all other documents and
material in LICENSEE's possession or under its control with respect to the
subject matter and terms of this License Agreement, and shall have free and full
access thereto for such purposes. All such books of account and records shall be
kept available for at least two years after termination of this License
Agreement. LICENSEE will designate a symbol or number which will be used
exclusively in connection with Licensed
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Products and with no other articles which LICENSEE may manufacture, sell or
distribute. In the event that an audit by NHLEC reveals an underpayment by
LICENSEE, LICENSEE shall immediately upon demand remit payment to NHLEC in the
amount of such underpayment plus interest calculated at the rate of
one-and-one-half percent (1.5%) per month from the date such payment was
actually due until the date such payment is made. LICENSEE shall reimburse
NHLEC for the entire costs and expenses of such audit if the underpayment is
two percent (2%) or more than the amount required to be paid to NHLEC for the
applicable License Year.
7. QUALITY CONTROL OF LICENSED PRODUCTS.
LICENSEE agrees that the Licensed Product(s) shall be of high
standard and of such style, appearance and quality as shall be adequate and
suitable to their promotion, distribution and sale to the best advantage of
LICENSEE, NHLEC, NHL and its Member Teams. To this end LICENSEE shall perform
as follows:
(a) Before selling or distributing any of the Licensed Product(s),
LICENSEE shall submit without charge samples of each such Licensed
Product, including all styles, colors and variations, together
with its cartons and containers, including packaging and wrapping
material, hangtags and labels (the "Related Materials"), for
NHLEC's written approval in accordance with procedures specified
hereafter. LICENSEE shall submit for review all Licensed Products
and Related Materials at each of the following stages of
production: 1) rough sketches or layout concepts: 2) finished
artwork or final proofs; 3) pre-production samples or strike-offs;
and 4) finished products suitable for retail sale. The samples of
Licensed Products and Related Materials submitted by LICENSEE for
quality control purposes shall be delivered directly to NHLEC at
its address specified first above or in accordance with written
instructions given by NHLEC. The quality and style of each such
Licensed Product and its Related Materials shall be subject to
NHLEC's prior approval. In the event that any item submitted to
NHLEC shall not have been approved, disapproved or otherwise
commented upon within twenty (20) business days after receipt
thereof by NHLEC, then LICENSEE shall have the right to so notify
NHLEC of such fact by telegram or telefax message. In the event
that NHLEC fails to then approve, disapprove or otherwise comment
upon the submitted items within ten (10) business days after
receipt by it of such communication, any items so submitted by
LICENSEE shall be deemed to have been approved. LICENSEE shall, in
addition, thereafter furnish to NHLEC free of cost for its prior
written approval six (6) production samples of each such Licensed
Product, together with their Related Materials, within fifteen
(15) days of the start of each License Year that this License
Agreement is in effect.
(b) After samples of each Licensed Product(s) and Related Material
have been approved pursuant to this paragraph, LICENSEE shall not
depart therefrom in any material respect without NHLEC's prior
written consent.
(c) NHLEC shall have the right to withdraw its approval of approved
samples of Licensed Products and Related Materials if the quality
of any such item ceases to be acceptable or in the event of some
factor which reflects unfavorably upon the professional, business
or personal reputation of NHL, its Member Teams or NHLEC.
(d) Subject to the terms and conditions hereof, LICENSEE may utilize
the NHL Marks and the Designation for such selling, advertising,
promotional and display materials for the Licensed Product(s) as
in its judgment will best promote the sale of said Licensed
Product(s). LICENSEE agrees that it will not use the NHL Marks or
any reproduction thereof or the Designation in any advertising,
promotional or display material or in any other manner without
NHLEC's prior written approval. In the event that any advertising,
promotional or display material submitted to NHLEC shall not have
been approved, disapproved or otherwise commented upon within
twenty (20) business days
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after receipt thereof by NHLEC, then LICENSEE shall have the right
to so notify NHLEC of such fact by telegram or telefax message. In
the event that NHLEC fails to then approve, disapprove or
otherwise comment upon the submitted items within ten (10)
business days after receipt by it of such telegraphic or telefax
communication, any items so submitted shall be deemed to have been
approved. Prior to use by LICENSEE, six (6) production copies of
all such advertising, promotional and display materials will be
furnished to NHLEC free of charge.
8. PROMOTIONAL SUPPORT OF NHL TEAMS AND
DISTRIBUTION OF LICENSED PRODUCTS
(a) LICENSEE undertakes to support the National Hockey League and its
Member Teams by supplying to NHLEC free of charge samples of
Licensed Products to a total value at LICENSEE's lowest wholesale
price of five hundred Canadian dollars ($500.00) annually. Such
free samples will be distributed by NHLEC to NHL and/or the Member
Teams directly or used by NHLEC in its discretion for promotions
directly benefiting the Member Teams. In addition to supplying
such samples of Licensed Products free of charge, LICENSEE also
undertakes to supply NHLEC at NHLEC's expense samples of Licensed
Products at LICENSEE's cost in such quantities as requested by
NHLEC for the Member Teams or for promotions authorized by NHLEC.
(b) LICENSEE undertakes to sell Licensed Products to retail outlets
owned and/or operated by NHL Member Teams: i) at the lowest
minimum quantities; ii) at the lowest prices charged by LICENSEE
to any other third party; and iii) at the most advantageous credit
terms and return privileges offered by LICENSEE to any other third
party; LICENSEE also agrees to deliver new styles or designs of
Licensed Products to retail outlets owned and/or operated by NHL
Member Teams on a prompt and timely basis, and in no event later
than to outlets not owned and/or operated by NHL Member Teams,
provided orders have been placed with LICENSEE for said new styles
or designs by said NHL Team outlets on as timely a basis as those
orders placed by other outlets.
(c) LICENSEE undertakes to sell, distribute, and supply, within the
Territory, the Licensed Products in such manner as may be required
to meet the competition by manufacturers of similar articles.
LICENSEE further undertakes to make and maintain adequate
arrangements for the broadest possible distribution of Licensed
Products throughout the Territory through all regular channels of
distribution consistent with Licensed Sales, including but not
limited to: companies selling through mail order catalogs;
companies consisting of or operating groups of stores or
department stores commonly known as "chains;" independently run
stores; and wholesale distributors selling to retail outlets.
LICENSEE will use its best efforts to place Licensed Products in
at least one first class retail outlet in the marketing area of
each NHL Member Team within the Territory, and to sell to each
catalog merchant and "chain" buying the Licensed Product(s)
merchandise bearing the NHL marks of each NHL Member Team
operating within the geographic area served by said catalog
merchant or "chain". LICENSEE agrees to maintain adequate
inventories of the Licensed Products as an essential part of its
distribution program. LICENSEE will not sell Licensed Products to
any retail outlet within any area to the exclusion of other retail
outlets that may desire to purchase Licensed Products and whose
credit rating and sales merchandising policies warrant such sales.
In the event LICENSEE sells or distributes other merchandise of
the same grade and quality as the Licensed Products, but which do
not bear any of the Licensed Marks, LICENSEE will not discriminate
in the granting of commissions and discounts to salesmen, dealers
and distributors for the Licensed Products. LICENSEE acknowledges
and agrees that the foregoing provisions of this paragraph 8 are
material provisions of this License Agreement.
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9. GOODWILL.
LICENSEE recognizes the great value of the reputation and goodwill
associated with the NHL Marks, other NHL Indicia and Designation and,in such
connection, acknowledges that such goodwill exclusively belongs to NHL and its
Member Teams, that LICENSEE's use of the NHL Marks, other NHL Indicia and
Designation will inure to the benefit of NHL and its Member Teams, and that the
NHL Marks and other NHL Indicia have acquired a secondary meaning in the mind
of the purchasing public related to NHL and its Member Teams. LICENSEE further
recognizes and acknowledges that a breach by LICENSEE of any of its covenants,
agreements or undertakings hereunder will cause immediate irreparable damage
which cannot be readily remedied in damages in an action at law, and which, in
addition thereto, constitutes an infringement of rights in the NHL Marks, other
NHL Indicia and Designation, thereby entitling NHLEC, NHL and its Member Teams
to equitable remedies, costs and damages, including reasonable attorneys' fees.
10. INDEMNIFICATIONS
(a) LICENSEE hereby indemnifies and agrees to hold NHLEC, NHL, its
Member Teams and their agents, servants, employees, officers,
directors and other officials harmless from any loss, liability,
damage, cost or expense (including reasonable attorneys' fees),
arising out of the manufacture, distribution, advertising,
promotion, offering for sale and sale of the Licensed Products, or
arising out of any of LICENSEE's NHL-themed advertising and
promotion, including without limitation any claims or suits
against any of them by reason of or alleging any unauthorized or
infringing use by LICENSEE of any patent, process, trade secret,
copyright, trademark, or publicity right or other similar property
(other than the NHL Marks covered by this License Agreement) or
any alleged defects (design, manufacturing, handling or other) or
inherent dangers in said Licensed Product(s) or the use thereof.
LICENSEE agrees to obtain, at its own expense, product liability
insurance providing adequate protection for NHLEC, NHL, its Member
Teams and their agents, servants, employees, officers, directors
and other officials and LICENSEE against any such claims or suits
in amounts no less than $3,000,000 per claim or suit. Within
thirty (30) days from the date thereof, LICENSEE will submit to
NHLEC a fully paid policy or certificate of insurance naming
NHLEC, NHL, its Member Teams and their agents, servants,
employees, officers, directors and other officials as an insured
party, providing that coverage shall extend to all claims or suits
arising out of the use of Licensed Product(s) manufactured or sold
under this License Agreement, no matter when such claim or suit
may be asserted, and further providing that the insurer shall not
terminate or materially modify such coverage without written
notice to NHLEC at least twenty (20) days in advance thereof, and
that if it does so, NHLEC will have the option to pay the premiums
necessary to maintain or continue such insurance in effect and
obtain reimbursement from LICENSEE.
(b) The indemnification provided for herein are conditioned upon the
indemnified party's furnishing the indemnifying party with prompt
written notice of any such claim or suit and upon the indemnified
party's furnishing of reasonable cooperation and witnesses, if
necessary, in defense of such claim or suit. In such event, the
indemnifying party shall have the option and right to undertake
and conduct the defense of any such claim or suit.
11. TERMINATION.
(a) NHLEC shall have the right to terminate this License Agreement
without prejudice to any rights which it may have in the premises,
whether in law, or in equity, or otherwise, upon the occurrence of
any one or more of the following events (herein called
"defaults"):
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(i) If any governmental agency finds that the Licensed
Product(s) are defective in any way, manner or form;
(ii) If LICENSEE distributes, sells or offers to sell any
Licensed Products not made in complete conformity to the
provisions of Paragraph 7 of this License Agreement, or
distributes, sells or offers to sell any merchandise bearing
a copy or simulation of any NHL Mark or other NHL Indicia
other than the Products;
(iii) If LICENSEE shall be unable to pay its debts when due, or
shall make any assignment for the benefit of creditors, or
shall file any petition under the bankruptcy or insolvency
laws of any nation, jurisdiction, county or place, or shall
have or suffer a receiver or trustee to be appointed for its
business or property, or be adjudicated a bankrupt or an
insolvent;
(iv) In the event that LICENSEE does not commence in good faith
to manufacture, distribute and sell each Licensed Product
throughout the Territory within sixty (60) days of the
commencement of the Term hereof and fails to maintain an
inventory of Licensed Products sufficient to supply the
market demand therefor;
(v) If there is a change in more than fifty percent (50%)
ownership or controlling interest of LICENSEE or a change in
any members of the senior management of LICENSEE or their
respective responsibilities which would, in NHLEC's
reasonable judgment, adversely affect the LICENSEE's
business to a material extent, except as may be otherwise
consented to by NHLEC pursuant to paragraph 3(g) above; or
(vi) If Maska U.S., Inc. violates, breaches or defaults in
performing any of the provisions of Retail License Agreement
No. 1015BA of even date herewith and does not fully cure
such violation, breach or default within the applicable cure
period (if any).
(b) In the event LICENSEE violates, breaches or defaults in performing
any of the provisions of this License Agreement other than those
identified in provision 11(a) above, and does not fully cure such
violation, breach or default within ten (10) days notice from
NHLEC, this License Agreement shall automatically terminate. In
the event of any termination pursuant to paragraph 11(a) or (b),
LICENSEE shall pay NHLEC within thirty (30) days without further
demand all amounts then due NHLEC and also shall pay therewith as
liquidated damages all amounts still due NHLEC as Guaranteed
Minimum Payment for the remainder of the Term. If such payments
are not remitted when due, LICENSEE consents to the entry of
judgment for such amount by a court having jurisdiction over
LICENSEE or any of its assets. In addition, NHLEC shall be
entitled to sue for injunctive relief and other consequential
damages, including reasonable attorneys' fees incurred by NHLEC,
NHL and/or its Member Teams as a result of any such violation,
breach or default by LICENSEE.
(c) It is agreed and recognized that the nature of the business of
NHLEC, NHL and its Member Teams requires great public respect for
and trust in the reputation and integrity of NHL and its Member
Teams. Accordingly, it is agreed that in the event of some
unanticipated factor, development or event which, in NHLEC's
reasonable opinion, causes continued association of NHL and/or its
Member Teams with LICENSEE or the Licensed Products to have a
materially adverse reflection upon NHL or its Member Teams, NHLEC
may terminate this License unilaterally by written notice to
LICENSEE. In the event of such termination, LICENSEE shall be
excused from all further (but not past due or subsequently earned)
royalty obligations; the pro-rated amount of any minimum guarantee
paid in advance will be refunded to LICENSEE; and NHLEC will, in
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<PAGE> 17
the event it cannot approve distribution of the remainder of
LICENSEE's inventory and work in process, reimburse LICENSEE for
its expenses of salvage, or for unsalvageable products, for
LICENSEE'S cost of manufacturing or acquiring the same.
(d) In the event of termination of this License Agreement, LICENSEE
will refrain from further use of the Designation, the NHL Marks
and the other NHL Indicia (or any further reference to all or
each of them, direct or indirect, or any simulation of the NHL
Marks or other NHL Indicia). LICENSEE agrees that the
Designation, the NHL Marks and the other NHL Indicia possess a
special, unique and extraordinary character which makes
difficult the assessment of the monetary damage sustained by
unauthorized use. LICENSEE recognizes that irreparable injury
would be caused by unauthorized use and agrees that injunctive
and other equitable relief would be appropriate in the event of
a breach of this License Agreement, provided, however, that such
remedy shall not be exclusive of other legal remedies otherwise
available to NHLEC, NHL and/or its Member Teams.
12. FINAL STATEMENT.
LICENSEE shall deliver, as soon as practicable, to NHLEC, following
expiration or termination of this License Agreement, a statement indicating the
number and description of Licensed Product(s) on hand. Following expiration of
this License Agreement, LICENSEE may manufacture no more Licensed Product(s) in
association with the NHL Marks and/or other NHL Indicia but may continue to
distribute and sell its remaining inventory for a period not to exceed
sixty (60) days following such expiration, subject to payment of applicable
royalties thereto, provided, however, that LICENSEE shall have no such right if
this License Agreement is terminated pursuant to paragraph 11. Following
expiration or termination of this License Agreement for whatever reason,
LICENSEE agrees to make no use of the Designation, the NHL Marks and/or the
other NHL Indicia whatsoever, either in or on products or in advertising,
publicity, promotional or display materials. NHLEC shall have the right to
conduct a physical inventory in order to ascertain or verify such inventory
and/or statement. In the event LICENSEE refuses to permit NHLEC to conduct such
physical inventory, LICENSEE shall forfeit its right hereunder to dispose of
such inventory. In addition to such forfeiture, NHLEC shall have recourse to any
and all other legal remedies available to it. Notwithstanding the foregoing, in
the event that NHLEC terminates this License Agreement pursuant to any of the
provisions of this License Agreement, LICENSEE shall have no right to dispose of
its inventory beyond the effective date of such termination and shall be subject
to the payment of damages specified herein.
13. NOTICES.
All notices which either party hereto is required or may desire to
give to the other shall be given by addressing the same to the other at the
address above written, or at such other address as may be designated in writing
or by telefax message by any such party in a notice to the other given in the
manner prescribed in this paragraph. All such notices shall be sufficiently
given when the same shall be received by telefax message, or after such notice
is deposited so addressed, postage prepaid, in the United States or Canadian
mail, and/or when the same shall have been delivered, so addressed, to a
telegraph or cable company toll prepaid. The date of actual receipt of such
telefax message, mail or telegraphing shall be the date of the giving of such
notice.
14. NO PARTNERSHIP OR JOINT VENTURE ETC.
This License Agreement does not constitute and shall not be construed
as constituting a partnership, joint venture or agency between LICENSEE and
either the NHLEC, NHL and/or its Member Teams. Neither party shall have any
right to obligate or bind the other party in any manner whatsoever, and nothing
herein contained shall give, or is intended to give, any rights of any kind to
any third persons.
15. CONSTRUCTION.
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This License Agreement shall be construed in accordance with the laws
of the Province of Ontario, Canada.
16. WAIVER, MODIFICATION, ETC.
This License Agreement represents the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all previous representations, understandings or agreements
between the parties hereto. No waiver, modification or cancellation of any term
or condition of this License Agreement shall be effective unless executed in
writing by the party charged therewith. No written waiver shall excuse the
performance of any act other than those specifically referred to therein. NHLEC
makes no warranties to the LICENSEE except those specifically expressed on the
first page hereof.
17. NO ENDORSEMENT BY PLAYERS, ETC.
This License Agreement does not carry with it any right to use the
name, likeness, reputation, goodwill, persona, or any other aspect of the right
of privacy, personality or publicity of any individual or group, including any
individual, or group of, current or former NHL player(s). LICENSEE understands
and agrees that it is LICENSEE's responsibility to secure whatever rights may be
required for the use of any such name, likeness, reputation, goodwill, persona
or other aspect in connection with the licensed Products. LICENSEE further
understands and agrees that neither the execution hereof nor any grant of
approval hereunder nor any other act or omission by NHLEC shall operate or be
construed as a grant by NHLEC of any such rights or as approval by NHLEC of the
use of any such name, likeness, reputation, goodwill, persona or other aspect in
connection with the Licensed Products in the event LICENSEE shall not have
secured such rights. LICENSEE shall not exercise the rights granted hereunder in
any manner that will constitute an endorsement of a Licensed Product by any
current or former NHL player(s) without the specific consent of such player(s).
18. ARBITRATION.
(a) Any dispute or disagreement between the parties hereto seeking to
enjoin or restrain LICENSEE's sale or distribution of the Licensed
Products or of any other Products or merchandise bearing NHL Marks
or other NHL Indicia or any copy or simulation thereof or
otherwise use of the Designation, the NHL Marks or the other NHL
Indicia, may be determined in any forum of NHLEC's choosing, and
LICENSEE hereby consents to venue and personal jurisdiction in
the Ontario Court of Justice. In any such action, the forum may
retain jurisdiction to award damages, profits, attorneys' fees
or costs, as allowed by law in such matters.
(b) Any other dispute or disagreement between the parties hereto
arising out of or relating to this License Agreement shall be
submitted to the Private Court at Toronto, Ontario for resolution
in the English language. The parties agree:
(i) that the arbitration shall be commenced and conducted under
the Rules of The Private Court for binding dispute
resolution in force and the time of submission: including
the obligation to pay the Court fees;
(ii) that the other party may obtain an order under S.7 of The
Arbitration's Act, staying any legal proceeding other than a
submission to The Private Court.
19. ACCEPTANCE BY NHLEC.
This instrument, when signed by LICENSEE, shall be deemed an
application for a license and not a binding agreement unless and until accepted
by NHLEC by signature of a duly authorized officer and the
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delivery of such a signed copy to LICENSEE. The receipt and/or deposit by NHLEC
of any check or other consideration given by LICENSEE and/or the delivery of any
material by NHLEC to LICENSEE shall not be deemed an acceptance by NHL of this
application. The foregoing shall apply to any documents relating to renewals or
modifications hereof.
20. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
juridiction to be contrary to law, the remaining provisions of the Agreement
shall be considered to be severable and shall remain in full force and effect.
21. ENGLISH LANGUAGE
The parties hereto confirm that it is their wish that this Agreement
as well as any other documents relating thereto, including notices, have been
and shall be drawn up in the English language only.
Les parties aux presentes confirment leur volonte que cette convention
de meme que tous les documents, y compris tous avis, s'y rattachant, soient
rediges an langue anglaise seulement.
IN WITNESS WHEREOF, the parties hereto have signed this License
Agreement as of the day and year first above written.
NHL ENTERPRISES CANADA INC. LICENSEE:
By: /s/ Richard H. Zahnd By: /s/ Howard Zunenshine
------------------------ ------------------------
Name: Richard H. Zahnd Name: Howard Zunenshine
-------------------------
Title: Vice President Title: Chief Executive Officer
---------------------------
18
<PAGE> 1
Exhibit 10.33
<PAGE> 2
STATE OF VERMONT ORANGE SUPERIOR COURT
ORANGE COUNTY, SS. DOCKET NO. S118-92 OeC
T. COPELAND AND SONS, INC.; and )
COPELAND PROPERTIES, INC., )
)
Plaintiffs, )
)
v. )
)
MASKA U.S., INC.; and HOWARD J. )
ZUNENSHINE, )
)
Defendants, )
)
SETTLEMENT AGREEMENT
In consideration of the following terms and conditions, T. Copeland and
Sons, Inc., and Copeland Properties, Inc., (collectively "Plaintiffs") and
Howard J. Zunenshine and Maska U.S., Inc., (collectively "Defendants") hereby
agree to settle the litigation between them now pending in the Orange Superior
Court, Docket No. S118-92 OeC.
1. Judgment by stipulation shall enter against Maska U.S., Inc. on
Plaintiffs' claim for negligence, nuisance and trespass in the amount of 7
million dollars in compensatory damages.
2. Plaintiffs' other claims, including all claims that defendants acted
intentionally, knowingly, recklessly, wantonly or maliciously against both
Defendants shall be dismissed with prejudice against both Defendants.
1
<PAGE> 3
3. Maska U.S., Inc., shall pay one (1) million dollars to Plaintiffs in cash
as follows:
(a) Two hundred and fifty thousand ($250,000) on June 28, 1995;
(b) Two hundred and fifty thousand ($250,000) on July 7, 1995; and
(c) Five hundred thousand ($500,000) on July 14, 1995.
These payments will be wired directly to the Plaintiffs' bank account.
Plaintiffs agree to give Maska U.S., Inc. a two day grace period within
which to make the payments required by paragraphs 3 (b) and (c) before
Defendants are considered to be in default under their obligations under
those subparagraphs.
4. No later than July 5, 1995, Defendant Maska U.S., Inc. shall execute a
promissory note in substantially the form attached as Exhibit A in favor of
Plaintiffs in the amount of six million dollars at an interest rate of 10
percent per annum on a 20 year amortization schedule with a balloon payment of
all principal and interest due on the anniversary of the 5th year of this
Agreement. Payments of interest and principal shall be made quarterly commencing
on September 30, 1995. There shall be a 30-day grace period on defaults of the
quarterly payment obligation. Upon such default
(a) One half million dollars in principal will be added as a penalty to
the note obligation; and
(b) The interest rate shall increase to 12 percent commencing at the end
of the 30 day grace period until such default and accrued interest
payments have been satisfied in full.
Further, if Defendants or SLM International, Inc. ("SLM") recover any
money from their
2
<PAGE> 4
insurance carriers as a result of the litigation now pending in the United
States District Court for the District Court of Vermont, Docket No. 5:93-CV-309,
Defendants and SLM agree to immediately shall pay over to Plaintiffs any and all
monies recovered until the note obligation is fully satisfied.
Further, if Maska U.S., Inc., or SLM or substantially all of either of
their assets are sold or transferred before the note is fully satisfied, Maska
U.S., Inc. and SLM agree that the obligation to pay the note shall be
immediately accelerated. However, if Maska U.S., Inc. Or SLM wish to transfer or
sell substantially all of or either of their assets to an affiliated entity,
they shall obtain prior approval in writing from plaintiffs, and plaintiffs
agree to not unreasonably withhold such approval.
Further, if SLM or Maska refinance their $75 million in long term
financing obligations to their senior unsecured creditors a/k/a the insurance
company lenders, the obligation to pay the note shall be immediately accelerated
to the extent of any additional borrowing as set forth in the note.
5. Defendants agree to indemnify and hold harmless T. Copeland & Sons, Inc.,
Copeland Properties, Inc., Timothy Copeland, Sr., and Jenny Copeland
(collectively the "indemnitees") jointly, severally and individually for any
liability they may suffer or claims that may be asserted against them as a
result of claims by any entity arising from the presence of perchlorethylene on
or migration of perchlorethylene from the T. Copeland and Sons, Inc. property
in the Pierson Industrial Park, Bradford, Vermont. In the event of any payment
by Maska U.S., Inc. or on Maska U.S., Inc.'s behalf, under this paragraph,
Maska U.S., Inc. shall be subrogated to all of the indemnitee's rights of
recovery therefore against any person or organization and the indemnitees
3
<PAGE> 5
shall execute and deliver instruments and papers and do whatever else is
reasonably necessary to secure such rights. The indemnitees shall reasonably
cooperate with Maska U.S., Inc. in assisting in make its settlements, in the
conduct of suits and in enforcing any right of contribution or indemnity
against any person or organization who may be liable to the indemnitees for
damages covered by this paragraph 5. Maska will have the right to control the
defense of any action filed against the indemnitees covered by this paragraph,
including the right to choose legal counsel. Indemnitees shall give Maska
notice of any claim covered by this paragraph within 30 days of notice to the
indemnitees.
6. The parties agree cooperatively to resolve any outstanding costs or
obligations for compensation of experts or photocopying as previously agreed
upon or ordered by the Court. Under no circumstances shall Defendant's withhold
any monies owed under other paragraphs of this Agreement to secure any payments
under this paragraph.
7. Maska U.S., Inc. and SLM shall provide evidence by corporate seal by no
later than July 10, 1995 that the terms of this Agreement and the Note are duly
authorized by those corporations respective Boards of Directors.
8. Plaintiffs shall execute a release in Defendants' favor in substantially
the same form as in Exhibit B no later than July 10, 1995.
COPELAND PROPERTIES, INC.
6/28/95 /s/ Timothy Copeland, Sr.
-------------- ------------------------------------
4
<PAGE> 6
Date By: Timothy Copeland, Sr.
Its duly authorized President
T. COPELAND & SONS, INC.
6/28/95 /s/ Timothy Copeland, Sr.
-------------- ------------------------------------
Date By: Timothy Copeland, Sr.
Its duly authorized President
HOWARD J. ZUNENSHINE
June 28, 1995 /s/ Howard J. Zunenshine
-------------- ------------------------------------
Date
MASKA U.S., INC.
June 28, 1995 /s/ Howard J. Zunenshine
-------------- ------------------------------------
Date By:
Its duly authorized Chief
Executive Officer
SLM INTERNATIONAL, INC.
June 28, 1995 /s/ Howard J. Zunenshine
-------------- ------------------------------------
Date By:
Its duly authorized Chief
Executive Officer
5
<PAGE> 7
EXHIBIT A
TERM NOTE
$6,000,000 ___________ , Vermont
June __, 1995
On or before June , 2000, for value received, the undersigned, MASKA, U.S.,
Inc. ("Borrower"), promises to pay to T. Copeland & Sons, Inc. and Copeland
Properties, Inc. (collectively, "Lender"), or order, at ____________________,
Vermont, or such other place as the Lender may designate in a writing delivered
to Borrower, the principal sum of Six Million Dollars ($6,000,000.00) U.S.,
together with accrued interest at 10% per annum calculated on the basis of the
actual days elapsed and a 365-day year and a 366-day leap year, and other fees
and charges due or to become due hereunder.
1. Repayment. Principal and interest shall be payable as follows:
a. On the last day of each calendar quarter, beginning on September
30, 1995 and continuing until maturity, Borrower shall make a
combined monthly payment of principal and interest consisting of a
principal payment [of $75,000] [sufficient to amortize the
outstanding principal balance of this Note over a period of 20 years
from the date of this Note], plus accrued interest and charges.
b. In addition to the quarterly payments required under subparagraph
(a) above, Borrower shall immediately, and without demand, pay or
cause to be paid to Lender any and all cash, checks, money, personal
property, promissory notes, or other consideration of any kind
received or recovered by Borrower, SLM International, Inc. ("SLM")
or Howard J. Zunnenshine from any insurance company as a result of
litigation now pending in the U.S. District Court in the District of
Vermont, Document No. ; such payment shall be a mandatory
prepayment of principal hereunder.
c. The entire principal balance of this Note, plus accrued and unpaid
interest and any other charges due hereunder, shall be due and payable
on June , 2000, if not paid sooner.
2. Prepayment. This Note may be prepaid in whole or in part at any time
without prepayment penalty. Any partial prepayment shall be applied first
against the balloon payment due at maturity and then to principal installments
in inverse order of maturity. Partial prepayments shall not postpone the due
date of any subsequent quarterly installments or change the amount of such
installments, unless Lender shall otherwise agree in writing.
3. Waivers; Binding Effect. Presentment for payment, protest, notice of
protest, demand, and notice of non-payment are hereby waived by all makers,
sureties, guarantors and endorsers. This Note shall be the joint and several
obligation of all makers, sureties, guarantors and endorsers, and shall be
binding upon them and their successors and assigns.
<PAGE> 8
4. Representations and Warranties. Borrower represents and warrants that
this Note has been duly authorized, executed and delivered by Borrower, and is a
valid and binding obligation of Borrower, enforceable in accordance with its
terms.
5. Covenants. Borrower and SLM shall provide Lender with copies of any
information that it provides to the Securities and Exchange Commission or any
public information relating to its financial condition. Borrower and SLM shall
also provide Lender on a monthly basis copies of any interim financial
statements prepared by it or in its behalf. Borrower and SLM shall notify
Lender 30 days in advance of any sale or transfer of a substantial portion of
its business or assets to any person or entity, or any refinancing of all or a
substantial portion of its obligations to its covenant creditors.
6. Events of Default. Any one or more of the following shall constitute
an Event of Default under this Note: (a) if Borrower fails to make any regular
quarterly payment within thirty days of the date such payment is due; (b) if
Borrower, SLM International or Howard J. Zunnenshine recover any cash, checks,
money, personal property, promissory notes, or other consideration of any kind
from any insurance company as a result of litigation now pending in the U.S.
District Court in the District of Vermont, Docket No.___ and all such cash,
checks, money, personal property, promissory notes, or other consideration is
not immediately paid or transferred to Lender; (c) if Borrower or SLM sell or
transfer all or a substantial portion of their business or assets to any person
or entity; (d) if Borrower or SLM refinance all or a substantial portion of
their obligations to their long term creditors; or (e) Borrower breaches any of
the representations, warranties or covenants of this Note.
7. Remedies. Upon the occurrence of an Event of Default, subject to the
following provisions of this section 7, the outstanding principal balance of
this Note, plus accrued interest, fees and charges shall be immediately due and
payable, and Lender shall be entitled to exercise any and all rights and
remedies available under this Note or applicable law. Notwithstanding the
foregoing, upon an Event of Default under section 6(a), Borrower agrees to pay
Lender an additional Five Hundred Thousand Dollars ($500,000), which amount
shall be automatically added to the principal balance due under this Note. Upon
the occurrence of any Event of Default, and for so long as such Event of
Default continues uncured, amounts outstanding under this Note shall accrue
interest at the rate of 12% per annum.
8. Costs of Collection. Upon any Event of Default, Borrower promises to
pay all costs and expenses of collection in enforcement of this Note, including
reasonable attorneys' fees.
9. Miscellaneous. If any provision of this Note should conflict with
applicable law, such conflict shall not affect any other provision which can be
given effect without the conflicting provision, and to this end the provisions
of this Note are declared to be severable. All rights and obligations hereunder
shall be governed by the laws of the State of Vermont, and Borrower and
2
<PAGE> 9
SLM hereby submit to the jurisdiction of any court of competent jurisdiction in
Vermont. Borrower and SLM expressly waive trial by jury of any issue arising
out of Lender's enforcement of this Note.
IN WITNESS WHEREOF, the undersigned have executed this Note as of the date set
forth above.
MASKA, U.S., Inc.
By:
----------------------------
Duly Authorized Agent
Address for Notice:
-------------------------------
-------------------------------
SLM INTERNATIONAL, INC.
By:
----------------------------
Duly Authorized Agent
Address for Notice:
-------------------------------
-------------------------------
3
<PAGE> 10
RELEASE AND NON-DISCLOSURE AGREEMENT
In consideration of the sum of ($7,000,000) Seven Million Dollars paid
to T. Copeland & Sons, Inc. and Copeland Properties, Inc. ("Copeland") by Maska
U.S., Inc., ("Maska") and other good and valuable consideration received by
Copeland from Maska, the receipt of which is hereby acknowledged, Timothy E.
Copeland and Jenny L. Copeland, individually and on behalf of T. Copeland &
Sons, Inc. and Copeland Properties, Inc., their heirs, successors, assigns, and
any other representatives, including without limitation, co-owners, lessees and
mortgagees, hereby forever release, and discharge Howard J. Zunenshine, Maska
and its present and future parent and subsidiary corporations, divisions,
affiliates, partners, stockholders, predecessors, heirs, successors, assigns,
trustees, officers, directors, employees, former officers, former directors,
former employees, attorneys, agents, insurers and representatives, (the
"Settling Defendants") from any and all debts, demands, actions, causes of
action, suits, accounts, covenants, contracts, agreements, costs, damages,
judgments, executions, orders and any and all claims and liabilities whatsoever
of any kind, whether in law or in equity, which Plaintiffs have or may ever
have against the Settling Defendants arising from the Settling Defendants' past
operations that caused a release or threatened release of any hazardous
substances as defined in section 101(14) of the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601, et seq. as amended, and 40 CFR Part 302, including, but not
limited to, perchloroethylene or any of its breakdown products, diesel oil,
fuel oil, number 2 fuel oil, gasoline and gasoline constituents, or any other
material that may be identified as hazardous by any competent regulatory body
or agency (hereinafter collectively referred to
<PAGE> 11
as "Contaminants") at or from Maska's operations at the Pierson Industrial Park
in Bradford, Vermont (the "Site").
Without limiting the foregoing, this release includes any claims for
attorneys fees, expert fees, costs or expenses of assessment, containment,
removal and remediation incurred, or to be incurred in the future, as a result
of any past operations that caused a release or threat of release of
Contaminants, at or from the Site, and any claim for economic loss, loss of
business or diminution of property value, however described, arising from the
release or threat of release of Contaminants, at or from the Site, except as
follows:
(a) Maska agrees to indemnify and hold harmless T. Copeland & Sons,
Inc., Copeland Properties, Inc., Timothy Copeland, Sr., and Jenny Copeland
("Indemnitees") jointly, severally and individually for any liability they may
suffer or claims that may be asserted against them as a result of claims by any
entity arising from the presence of perchloroethylene on or migration of
perchloroethylene from the real estate now owned by Copeland Properties, Inc.
in the Pierson Industrial Park, Bradford, Vermont. In the event of any payment
by Maska, or on Maska's behalf, under this subparagraph, Maska shall be
subrogated to all of the Indemnitee's rights of recovery therefor against any
person or organization and the Indemnitees shall execute and deliver
instruments and papers and do whatever else is necessary to secure such rights.
The Indemnitees shall cooperate with Maska in assisting it in making
settlements, in the conduct of suits and in enforcing any right of contribution
or indemnity against any person or organization who may be liable to the
Indemnitees for damages covered by this subparagraph (a). Maska will have the
right to control the defense of any action filed against
-2-
<PAGE> 12
the Indemnitees covered by this subparagraph, including the right to choose
legal counsel. Indemnitees shall give Maska notice of any claim covered by this
subparagraph within 30 days of notice to the Indemnitees.
The undersigned declare that the terms of this release of all claims
have been carefully read and reviewed by them and explained to them by counsel
and are fully understood and voluntarily accepted with the purpose of making a
full and final compromise, adjustment and settlement.
The undersigned further agree not to disclose or publicize this
settlement and agreement other than what is necessary for usual business
practices, tax purposes or as required by a court action. The undersigned
further agrees to instruct their attorneys not to disclose or publicize this
settlement and agreement with the news media.
This Release is being executed in four duplicate originals.
Witness my hand and seal this _______ day of ________________, 1995
-------------------------- -------------------------------------------
Witness Timothy E. Copeland, Individually
and on behalf of T. Copeland & Sons, Inc. and
Copeland Properties, Inc.
-------------------------- -------------------------------------------
Witness Jenny L. Copeland, Individually and on behalf
of T. Copeland & Sons, Inc. and Copeland
Properties, Inc.
-3-
<PAGE> 1
EXHIBIT 10.34
<PAGE> 2
--------------------------------------------------------------------------------
LEASE
between
SECRETARIAT REALTY CORP.,
Landlord,
and
MASKA U.S., INC.,
Tenant,
DATED: JANUARY 18, 1994
PREMISES: VOSE FARM ROAD,
PETERBOROUGH, NEW HAMPSHIRE
--------------------------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
PREMISES......................................................... 1
TERM AND POSSESSION.............................................. 1
FIXED RENT AND ADDITIONAL RENT................................... 2
IMPOSITIONS...................................................... 3
USE OF PREMISES.................................................. 4
CONDITION OF PREMISES, ALTERATIONS AND REPAIRS................... 5
INSURANCE........................................................ 6
DAMAGE OR DESTRUCTION............................................ 8
CONDEMNATION..................................................... 9
ASSIGNMENT AND SUBLETTING........................................ 11
SUBORDINATION.................................................... 14
OBLIGATIONS OF TENANT............................................ 16
DEFAULT BY TENANT................................................ 18
REMEDIES OF LANDLORD............................................. 20
NO WAIVER........................................................ 21
ESTOPPEL CERTIFICATE............................................. 22
QUIET ENJOYMENT.................................................. 23
SURRENDER........................................................ 23
ACCESS........................................................... 23
MISCELLANEOUS PROVISIONS......................................... 24
Exhibits
Exhibit "A" -- Description of the Premises
</TABLE>
i
<PAGE> 4
LEASE
THIS LEASE, made as of the 18th day of January, 1994, between
SECRETARIAT REALTY CORP., a Delaware corporation having an office c/o Beller &
Keller, 415 Madison Avenue, New York, New York 10017 ("Landlord"), and MASKA
U.S., INC., a Vermont corporation having an address at P.O. Box 381, Bradford,
Vermont 05033 ("Tenant");
W I T N E S S E T H
The parties hereto, for themselves and their respective
successors and assigns, hereby agree as follows:
ARTICLE 1
PREMISES
Section 1.1. Landlord, in consideration of the rents herein
reserved and the terms, provisions, covenants and agreements on the part of
Tenant to be kept, ;observed and performed, does hereby lease and demise unto
Tenant, and Tenant does hereby hire and take from Landlord, all that certain
plot, piece or parcel of land, situated in the Town of Peterborough,
Hillsborough County, State of New Hampshire, as more particularly described in
Exhibit "A" annexed hereto and made a part hereof (the "Land"), together with
(a) the building, building equipment and improvements erected or to be erected
thereon (the "Building") and (b) all appurtenances, rights, interests, easements
(exclusive and non-exclusive) and privileges relating to the Land and Building
(the "Interests") (the Land, Building and Interests being hereinafter referred
to as the "Premises").
SUBJECT TO any and all existing encumbrances, conditions,
rights, covenants, easements and restrictions, whether recorded or unrecorded,
and all zoning matters, building laws, regulations and codes, and such matters
as may be disclosed by an accurate survey or inspection.
TO HAVE AND TO HOLD the Premises for the term, at the rent and
upon the conditions hereinafter provided.
ARTICLE 2
TERM AND POSSESSION
Section 2.1. The term (the "Term") of this Lease shall be
twenty (20) years, commencing January 18, 1994 (the "Commencement Date") and
expiring January 17, 2014 (the "Expiration Date"), unless sooner terminated as
hereinafter provided or pursuant to law.
<PAGE> 5
Section 2.2. Landlord and Tenant shall execute and deliver,
and cause to be recorded, a notice of this Lease in accordance with New
Hampshire law.
ARTICLE 3
FIXED RENT AND ADDITIONAL RENT
Section 3.1. (a) Tenant shall pay to Landlord as fixed rent
(the "Fixed Rent") for the Premises during the Term the following amounts:
(i) From the Commencement Date through and including
the day immediately preceding the tenth anniversary of the
Commencement Date (the "Tenth Anniversary Date"), at the rate
of Four Hundred Sixty Eight Thousand and no/100 Dollars
($468,000.00) per annum; and
(ii) From the Tenth Anniversary Date through and
including the Expiration Date, at the rate of Five Hundred
Forty Thousand and no/100 Dollars ($540,000.00) per annum:
(b) The Fixed Rent shall be payable in equal monthly
installments in advance on the first day of each and every month during the
Term, without demand therefor and without offset or deduction of any kind
whatsoever, except as herein specifically set forth. If the Commencement Date
occurs on other than the first day of a calendar month, the installment of Fixed
Rent for such first month shall be appropriately prorated.
Section 3.2. Tenant shall also pay and discharge as additional
rent (the "Additional Rent") all other amounts, liabilities and obligations of
whatsoever nature relating to the Premises, and all interest and penalties that
may accrue thereon in the event of Tenant's failure to pay such amounts when
due, and all damages, costs and expenses which Landlord may incur by reason of
any default of Tenant or failure on Tenant's part to comply with the terms of
this Lease, all of which Tenant hereby agrees to pay upon demand or as is
otherwise provided herein. Upon any failure on the part of Tenant to pay any of
the Additional Rent, Landlord shall have all rights, powers and remedies
provided either in this Lease or by statute or otherwise in the case of
non-payment of the Fixed Rent.
Section 3.3. All Fixed Rent and Additional Rent payable
hereunder (collectively, "Rent") shall be made payable to Landlord and sent to
Landlord c/o Yohalem, Gillman & Company, 477 Madison Avenue, New York, New York
10022; Attention, Richard Klass, CPA, or to such other person(s) or at such
other place(s)
2
<PAGE> 6
as may be designated by notice from Landlord to Tenant from time to time, and
shall be made in lawful money of the United States.
Section 3.4. This Lease shall be deemed to be a "net lease"
and Tenant shall pay to Landlord, absolutely net throughout the Term, the Rent,
free of any charges, assessments, impositions or deductions of any kind and
without abatement, deduction or set-off whatsoever and under no circumstances
or conditions, whether now existing or hereafter arising, shall Landlord be
expected or required to make any payment of any kind whatsoever or be under any
other obligation or liability hereunder except as expressly set forth herein.
ARTICLE 4
IMPOSITIONS
Section 4.1. From and after the Commencement Date and
throughout the Term, Tenant shall pay and discharge not later than twenty (20)
days before any fine, penalty, interest or cost may be added thereto for the
non-payment thereof, all taxes, assessments, water rents, sewer rents and
charges, duties, impositions, license and permit fees, charges for public
utilities of any kind, payments and other charges of every kind and nature
whatsoever, ordinary or extraordinary, foreseen or unforeseen, general or
special, together with any interest or penalties lawfully imposed upon the late
payment thereof, which, pursuant to law, shall be levied, charged, assessed,
imposed upon or become due and payable for or have become a lien on the Premises
or any part thereof, any improvements or personal property in or on the
Premises, the Rents and income payable by Tenant for the Premises or any use
thereof and such franchises as may be appurtenant to the use and occupation of
the Premises (all of the foregoing being hereinafter referred to as
"Impositions"). Tenant, upon request from Landlord or Landlord's mortgagee,
shall submit to Landlord or such mortgagee the proper and sufficient receipts or
other evidence of payment and discharge of the same. If any Impositions are not
paid when due, Landlord shall have the right but shall not be obligated to pay
the same, provided Tenant does not contest the same as herein provided. If
Landlord shall make such payment, it shall thereupon be entitled to repayment by
Tenant on demand.
Section 4.2. Tenant shall have the right to protest and
contest any Impositions imposed against the Premises or any part thereof,
provided the same is done at Tenant's sole cost and expense and further provided
that nonpayment will not subject the Premises or any part thereof to imminent
sale or other liability by reason of such nonpayment. Landlord agrees to execute
and deliver to Tenant any and all documents reasonably required for
3
<PAGE> 7
such purpose and to cooperate with Tenant in every respect in such contest, but
without any cost or expense to Landlord.
Section 4.3. To the extent permitted by law, Tenant shall have
the right to apply for the conversion of any Impositions to make the same
payable in installments, and upon such conversion Tenant shall pay and discharge
said installments as they shall become due and payable. Tenant shall pay all
such deferred installments prior to the expiration or sooner termination of the
Term, notwithstanding that such installments shall not then be due and payable;
provided, however, that any Impositions (other than one converted by Tenant so
as to be payable in installments as aforesaid) relating to a fiscal period of
the taxing authority, a part of which is included in a period of time before the
Commencement Date or after the Expiration Date, shall be adjusted between
Landlord and Tenant as of the Commencement Date or Expiration Date, as the case
may be, so that Landlord shall pay that portion of such Impositions which
relate to that part of such fiscal period included in the period of time before
the Commencement Date or after the Expiration Date, as the case may be, and
Tenant shall pay the remainder thereof.
Section 4.4. If at any time during the Term, a tax or excise
on Rents or other tax, however described, is levied or assessed against Landlord
as a substitute in whole or in part for any Impositions theretofore payable by
Tenant, Tenant shall pay and discharge such tax or excise on Rents or other tax
before it becomes delinquent, and the same shall be deemed to be an Imposition
levied against the Premises.
Section 4.5. Nothing in this Lease shall require or be
construed to obligate Tenant to pay any franchise, excise, corporate, estate,
inheritance or transfer tax of Landlord or any income or profits tax upon the
income of Landlord.
Section 4.6. In the event that Landlord is required, pursuant
to the terms of any mortgage encumbering all or any portion of the Premises, to
make monthly tax escrow payments to the holder of such mortgage, Tenant agrees
to pay on account of its obligations pursuant to this Article 4, together with
the installment of Fixed Rent due with respect to any particular month, an
amount equal to the tax escrow payment which Landlord is required to make for
the month immediately succeeding the month to which such Fixed Rent payment
relates.
ARTICLE 5
USE OF PREMISES
Section 5.1. The Premises may be used and occupied for
warehouse, office or retail use, to the extent permitted by law.
4
<PAGE> 8
Section 5.2. Tenant shall not conduct its business operation
in the Premises unless and until (and only during such time as) all necessary
certificates of occupancy, permits, licenses and consents from any or all
appropriate governmental authorities have been obtained by Tenant and are in
full force and effect.
Section 5.3. Landlord shall, if necessary, execute any
applications or documents which may be required by Tenant in connection with
the operation of the Premises.
ARTICLE 6
CONDITION OF PREMISES, ALTERATIONS AND REPAIRS
Section 6.1. Tenant has examined the Premises, is familiar
with the physical condition thereof and is leasing the same in "as is"
condition. Landlord has not made and does not make any representations or
warranties as to the physical condition, expenses, operation and maintenance, or
any other matter or thing affecting or related to the Premises.
Section 6.2. Tenant shall keep the Premises and the adjoining
sidewalks and curbs, if any, clean, and in good condition and repair, free of
accumulations of dirt, rubbish, snow and ice, and Tenant shall make all repairs
(including structural repairs) and replacements and perform all maintenance
necessary to maintain the Premises and any sidewalks and curbs in good condition
and repair. Landlord shall not be required to furnish any services or facilities
or to make any repairs or alterations to the Premises and Tenant hereby assumes
the full and sole responsibility for the condition, operation, repair,
replacement, maintenance and management of the Premises.
Section 6.3. Landlord shall not be responsible for the cost of
any alterations of or repairs to the Premises of any nature whatsoever,
structural or otherwise, whether or not now in the contemplation of the parties.
Section 6.4. (a) Tenant shall not make any structural changes,
alterations, installations, additions or improvements in or to the Premises, or
any other changes, alterations, installations, additions or improvements for
which the consent of a mortgagee of the Premises or any part thereof is
required, without Landlord's prior written consent in each instance, which
consent shall not be unreasonably withheld.
(b) Prior to making any changes, alterations, additions or
installations, Tenant, at its expense, shall (i) obtain all permits, approvals
and certificates required by any governmental authorities and (upon completion)
certificates of
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final approval thereof; and (ii) carry and cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and property damage and builder's risk insurance as Landlord may from
time to time require.
Section 6.5. All fixtures, structures and other improvements
installed in or upon the Premises at any time during the Term shall become the
property of Landlord and shall remain upon and be surrendered with the Premises
unless Landlord, by notice to Tenant no later than sixty (60) days prior to the
Expiration Date, elects to have the same removed or demolished by Tenant, in
which event the same shall be removed from the Premises by Tenant prior to the
Expiration Date, at Tenant's expense. Nothing in this Article shall be construed
to prevent the removal of trade fixtures by Tenant or Tenant's subtenants and
licensees, but upon removal of any such trade fixtures from the Premises or upon
removal of other installations as may be required by Landlord, Tenant or such
subtenants or licensees shall immediately and at its or their expense repair and
restore the Premises to the condition existing prior to such installation and
Tenant or such subtenants or licensees shall repair any damage to the Premises
caused by such removal. All property permitted or required to be removed by
Tenant or such subtenants or licensees at the end of the Term remaining in the
Premises after Tenant's removal shall be deemed abandoned and may, at the
election of Landlord, either be retained as Landlord's property or may be
removed from the Premises by Landlord at Tenant's expense. The provisions of
this Section 6.5 shall survive the expiration or earlier termination of this
Lease.
Section 6.6. In no event shall the Building or any other
structure subsequently erected on the Premises be demolished without Landlord's
prior written consent, which may be withheld in Landlord's sole discretion.
ARTICLE 7
INSURANCE
Section 7.1. Throughout the Term, Tenant shall, at its own
cost and expense, provide and keep in force, for the benefit of Landlord and
Tenant, (a) general or comprehensive public liability insurance protecting and
indemnifying Landlord and Tenant against all claims for damages to person or
property or for loss of life or of property occurring upon, in, or about the
Premises, the streets, gutters, sidewalks, curbs and other areas adjacent
thereto, if any, in limits of at least $1,000,000.00 combined single limit or
such greater limits as may be required from time to time by the holder of any
mortgage covering the Premises (or any part thereof), or as may be reasonably
required
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from time to time by Landlord, consistent with insurance coverage on properties
similarly constructed, occupied and maintained; (b) fire and casualty insurance
in respect of the Premises and all installations, additions and improvements
which may now or hereafter be erected thereon, insuring against loss or damage
by fire and such other risks as are now or hereafter included in "extended
coverage," in the amount of the full replacement value thereof as reasonably
determined by Landlord from time to time; and (C) such other or further
insurance, in such amounts and in such form, as is customarily obtained by
owners of properties similarly constructed, occupied and maintained.
Certificates of all such policies shall be delivered to Landlord promptly after
the execution hereof. Such policies shall also be maintained with proper
endorsements during any alterations, demolition or construction. All such
policies of insurance under this Section 7.1 shall name Landlord as an
additional insured.
Section 7.2. The insurance required by Section 7.1 above, at
the option of Tenant, may be effected by blanket policies issued to Tenant
covering the Premises and other properties owned or leased by Tenant, provided
that the policies otherwise comply with the provisions of this Article 7 and
allocate to the Premises the specified coverage, without possibility of
reduction or coinsurance by reason of, or damage to, any other premises named
therein, and if the insurance required by this Article 7 shall be effected by
any such blanket policies, Tenant shall furnish to Landlord certificates of
insurance satisfactory to Landlord, showing the insurance afforded by such
policies applicable to the Premises and naming Landlord as an additional
insured.
Section 7.3. Whenever under the terms of this Lease Tenant is
required to maintain insurance for the benefit of Landlord, such insurance
policies may be carried in favor of Landlord and Tenant, as their respective
interests may appear. In the event that the Premises shall be subject to any
mortgage, the insurance shall, if required by such mortgage, also be issued in
the name of such mortgagee. The original of such policies, if required by any
such mortgagee, shall be given to such mortgagee, and certificates thereof shall
be delivered to Landlord. All insurance shall contain endorsements to the effect
that such policies will not be modified, altered or cancelled without at least
fifteen (15) days' prior written notice to Landlord and any such mortgagee and
that the act or omission of Tenant will not invalidate the policy as to Landlord
or such mortgagee.
Section 7.4. All of the above-mentioned insurance policies
and/or certificates shall be obtained by Tenant and delivered to Landlord on or
prior to the date hereof, and thereafter as provided for herein, and shall be
written by insurance companies of recognized responsibility which are reasonably
satisfactory to Landlord and any mortgagee.
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Section 7.5. At least thirty (30) days prior to the expiration
of any policy or policies of such insurance, Tenant shall renew such insurance,
by delivering to Landlord, within such period of time, the original policies or
certificates of insurance, together with proof of payment of all premiums
therefor.
Section 7.6. Tenant shall not violate, or permit to be
violated, any of the conditions of any of such policies of insurance; and Tenant
shall perform and satisfy the requirements of the companies writing such
policies so that companies of good standing, reasonably satisfactory to
Landlord, shall be willing to write and/or continue such insurance.
Section 7.7. Each party, at its own cost, shall procure an
appropriate clause in, or endorsement to, any of its insurance policies covering
the Premises or any interest therein, pursuant to which the insurer waives its
right of subrogation against the other party, or, if such waiver should be
unobtainable or unenforceable, (a) an express agreement that such policy shall
not be invalidated if the insured waives the right of recovery against any party
responsible for a casualty covered by the policy prior to the casualty or (b)
any other form of permission for the release of the other party.
Section 7.8. Each party hereby releases the other party as to
any claim (including a claim for negligence) which it might otherwise have
against the other party for loss, damage or destruction to its property
(including rental value or business interruption) occurring during the Term to
the extent that it is insured under a policy containing a waiver of subrogation
or permission to release liability or naming the other party as an additional
insured, as provided in this Article 7.
Section 7.9. The waiver of subrogation or permission for
release referred to in this Article 7 shall extend to the agents of each party
and its and their employees and, in the case of Tenant, shall also extend to all
other persons using or visiting the Premises. Nothing contained in this Article
7 shall be deemed to relieve Tenant of any duty imposed elsewhere in this Lease
to repair, restore or rebuild or to nullify any provisions regarding the
non-abatement of Rent provided for elsewhere in this Lease.
ARTICLE 8
DAMAGE OR DESTRUCTION
Section 8.1. If the Premises or any part thereof shall be
damaged by fire or other casualty, this Lease shall be unaffected thereby and
shall continue in full force and effect.
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Tenant shall give immediate notice of any such damage to Landlord, and Tenant
shall, at Tenant's sole cost and expense, cause such damage to be remedied or
repaired by restoring the Premises to the condition existing immediately prior
to such damage or destruction.
Section 8.2. Landlord agrees to make the net proceeds of the
insurance required pursuant to Section 7.1 hereof available to Tenant for the
repair and restoration of the Premises pursuant to Section 8.1, provided that
this Lease shall not have been earlier terminated. The net proceeds of such
insurance shall be received in trust by Tenant to be held for the sole purpose
of paying the cost of repairing, replacing, restoring or rebuilding the Premises
or the installations, additions and improvements so damaged, and the cost of
making temporary repairs, or doing such work as may be necessary to protect the
Premises against further injury and remove any hazards to persons or property.
If the net insurance proceeds received by Tenant shall be insufficient to pay
the full cost of such repair, replacement, restoration or rebuilding, Tenant
shall complete the same and pay from its own monies any portion of such cost
which exceeds such net insurance proceeds. If the net insurance proceeds
received by Tenant shall exceed such costs, such excess shall belong to Tenant
and shall be retained by Tenant following the completion of and payment for such
work by Tenant.
Section 8.3. There shall be no abatement or reduction of Rent,
or other sums payable by Tenant hereunder, by reason of any damage or
destruction to the Building or any other improvements, or any part thereof, now
or hereafter on the Premises, or by reason of any restoration, replacement,
repairs or rebuilding.
ARTICLE 9
CONDEMNATION
Section 9.1. Whenever used in this Article, the following
words shall have the meanings set forth below:
(a) "Condemnation" or "Condemnation Proceedings": any
action or proceedings brought by competent authority for the purpose of any
taking of the Premises or any part thereof as a result of the exercise of the
power of eminent domain.
(b) "Taking": the event of vesting of title to the
Premises or any part thereof in the competent authority pursuant to
Condemnation.
(c) "Vesting Date": the date of the Taking.
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Section 9.2. In the event of a Taking of all or substantially
all of the Premises, this Lease shall terminate as of the Vesting Date and the
Rent shall be apportioned to the date of termination.
Section 9.3. In the event of a partial Taking of the Premises
(other than for a temporary use), this Lease shall continue in full force and
effect as to the remaining portion of the Premises without any reduction or
abatement of the Rent, subject to Tenant's obligation to complete the
Restoration (hereinafter defined) of the remaining portion of the premises as
nearly as practicable to its condition immediately prior to the Taking.
Section 9.4. In the event of any Taking, the proceeds of any
award or payment shall be apportioned and paid, to the extent available, as
follows:
(a) If applicable, Tenant first shall be entitled to an
amount equal to the cost of Restoration.
(b) The holders of all mortgages then a lien on the
Premises or any part thereof shall then be entitled to an amount equal to the
outstanding principal balance of such mortgages and accrued and unpaid interest
thereon.
(c) Landlord next shall be entitled to compensation
equal to the fair market value of the Land and the Building and other
improvements to the Premises or any part thereof made by Landlord or by any
prior owner or prior tenant of the Premises, less the principal amount of any
mortgage affecting Landlord's interest in the Premises received by any
mortgagees under clause (b) above. For valuation purposes, the Land taken shall
be considered as free and clear of all liens and encumbrances, including the
lien of this Lease, as of the Vesting Date, and Landlord shall also be entitled
to compensation equal to consequential damages to the Land and Building and
such other improvements not so taken, if any.
(d) Landlord and Tenant next shall be entitled to their
reasonable expenses, including, without limitation, reasonable attorneys' fees
and expenses incurred in connection with the Taking.
(e) Tenant next shall be entitled to receive such amount
as may be awarded for its loss of the value of the unexpired Term, the value of
the improvements or structures constructed by or paid for by Tenant, and its
moving and relocation expenses.
(f) The balance of the award, if any, shall be payable to
Landlord.
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Section 9.5. In the event of a Taking of all or any portion of
the Premises for a temporary use, the foregoing provisions of this Article shall
be inapplicable thereto, this Lease shall continue in full force and effect
without reduction or abatement of Rent and Tenant alone shall be entitled to
make claim for, recover and retain any award recoverable in respect of such
temporary use whether in the form of rental or otherwise. If the award is made
in a lump sum covering a period beyond the Expiration Date or date of earlier
termination of this Lease, Landlord also shall be entitled to make claim for and
participate in the award, which shall be apportioned between Landlord and Tenant
as of the Expiration Date or date of earlier termination of this Lease.
Section 9.6. In the event of a partial Taking of the Premises
(other than for temporary use) Tenant, at its expense, shall commence and
proceed with due diligence to repair or reconstruct the remaining portion of the
Building to a complete architectural unit including, without limitation,
temporary repairs, changes and installations required to accommodate subtenants
and all other work incidental to and in connection with all of the foregoing
(all such repair, reconstruction and work being referred to in this Article as
"Restoration"), and the total award in the Condemnation Proceedings shall be
apportioned and paid, to the extent available, as set forth in Section 9.4
hereof. If the portion of the award payable to Tenant pursuant to Section 9.4(a)
shall be less than the cost of Restoration, Tenant shall pay the balance of the
costs incurred in such Restoration as needed for the completion thereof.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
Section 10.1. (a) Tenant shall not, voluntarily, by operation
of law or otherwise, except with the prior consent of Landlord, which may be
given or withheld in Landlord's sole discretion, assign or otherwise transfer
this Lease, or mortgage, pledge, encumber or otherwise hypothecate this Lease.
(b) If and so long as Tenant is a corporation or a
partnership, the following shall be deemed to be an assignment of this Lease:
one or more sales or transfers of stock or partnership interests (voluntarily,
by operation of law or otherwise), or the issuance of new stock or partnership
interests, as a result of which an aggregate of 50% or more of Tenant's stock or
partnership interests shall be vested in a party or parties who are not
stockholders or partners as of the date hereof, provided, however, that the
foregoing shall not apply to transactions with a corporation or partnership into
or with which Tenant is merged or consolidated or to which substan-
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tially all of Tenant's assets are transferred or to any corporation or
partnership which controls Tenant or is under common control with Tenant. The
provisions of this subparagraph (b) shall not apply to any corporation in which
all the outstanding voting stock is listed on a national securities exchange or
is traded in the over-the-counter market.
(c) If this Lease is assigned, whether or not in violation of
the provisions of this Lease, Landlord may collect rent from the assignee. If
the Premises or any part thereof is sublet or occupied by any person other than
Tenant, Landlord may, after default by Tenant and expiration of Tenant's time to
cure such default, collect rent from the subtenant or occupant. In either event,
Landlord may apply the net amount collected to Fixed Rent and Additional Rent,
but no such assignment, subletting, occupancy or collection shall be deemed a
waiver of any of the provisions of this Article, or the acceptance of the
assignee, subtenant or occupant as tenant, or a release of Tenant from the
performance of Tenant's obligations under this Lease. The consent by Landlord to
any action described in subparagraph (a) of this Section 10.1 shall not relieve
Tenant of the obligation to obtain the consent of Landlord to any other or
further action described in subparagraph (a) of this section 10.1 not expressly
permitted by this Article.
(d) Any assignment or transfer, whether or not Landlord's
consent is required, shall be made only if and shall not be effective until the
assignee executes, acknowledges and delivers to Landlord an agreement in form
and substance reasonably satisfactory to Landlord whereby the assignee assumes
the obligations of Tenant under this Lease and whereby the assignee agrees that
the provisions of this Article shall, notwithstanding such assignment or
transfer, continue to be binding upon it in respect of all future assignments
and transfers. Notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance
of Fixed Rent or Additional Rent by Landlord from an assignee, transferee, or
any other person, the original Tenant herein named and any and all successors
in interest of the original Tenant herein named shall remain fully liable
(jointly and severally with any successor in interest, including the then
Tenant) for the payment of Fixed Rent and Additional Rent and for the other
obligations of Tenant under this Lease.
(e) The liability under this Lease of the original Tenant
herein named and any successor in interest of the original Tenant herein named
shall not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord with the then Tenant extending the time of, or
modifying any of the obligations under, this Lease, or by any waiver or failure
of
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Landlord to enforce any of the obligations of Tenant under this Lease.
(f) The acceptance by Landlord of any check drawn by a person
other than Tenant in payment of Fixed Rent or Additional Rent shall not operate
to vest in any person any right or interest in this Lease or in the Premises,
nor shall same be deemed to be the consent of Landlord to any assignment or
transfer of this Lease.
(g) Tenant may sublet portions of the Premises from time to
time (provided, however, that Tenant may not sublet all or substantially all of
the Premises or the Building without Landlord's prior written consent, which may
be withheld in Landlord's sole discretion). Such subletting shall be conditioned
upon the following:
(i) no sublease shall be for a term ending later
than the day before the Expiration Date,
(ii) no sublease shall be valid, and no subtenant
shall take possession of the Premises or any part thereof, until an
executed counterpart of such sublease has been delivered to Landlord,
and
(iii) each sublease shall provide that it is subject
and subordinate to this Lease and to the matters to which this Lease
is or shall be subordinate, and that in the event of termination,
reentry or dispossess by Landlord under this Lease, Landlord may, at
its option, take over all of the right, title and interest of Tenant,
as sublessor, under such sublease, and such subtenant shall, at
Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease and execute and deliver such instruments
as Landlord may reasonably request to evidence and confirm such
attornment, except that Landlord shall not be (1) liable for any
previous act or omission of Tenant under such sublease, (2) subject to
any offset which had accrued to such subtenant against Tenant, (3)
bound by any prepayment of more than one month's rent or additional
rent, (4) obligated to make any payment to or on behalf of such
subtenant or to perform any work in the subleased space or the
Building, or (5) required to account for any security deposit other
than any actually delivered to Landlord.
Section 10.2. Immediately after the execution and delivery of
this Lease, Tenant shall enter into a sublease with Brookstone Company, Inc.
Covering a portion of the Premises (the "Brookstone Sublease"). Tenant shall
comply in a timely manner with all of the obligations of the sublessor under the
Brookstone Sublease.
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ARTICLE 11
SUBORDINATION
Section 11.1. This Lease is subject and subordinate to all
ground or underlying leases of all or part of the Premises and to all mortgages
now in effect and to all renewals, modifications, consolidations, replacements
and extensions of any such underlying leases and mortgages. This clause shall be
self operative and no further instrument of subordination shall be required by
any ground or underlying lessee or by the holder of any mortgage affecting any
such lease or the Land. To confirm such subordination, Tenant shall execute
promptly any certificate or instrument that Landlord may reasonably request.
Section 11.2. The subordination of this Lease and Tenant's
rights hereunder pursuant to Section 11.1 shall not be effective unless and
until a ground or underlying lessee or the holder of a mortgage referred to in
such Section 11.1 enters into an agreement with Tenant which provides that in
the event of the acquisition of title by such lessee or holder, its designee or
purchaser, upon termination of the ground or underlying lease, in a foreclosure
proceeding or otherwise, and provided that Tenant is not in default hereunder
beyond all applicable notice and grace periods, the lessee or holder, or such
designee or purchaser will recognize the rights of Tenant under this Lease and
accept Tenant as the tenant of the Premises under the terms and conditions of
this Lease. Such agreement shall be in such form and contain such other
customary provisions as are reasonably satisfactory to Tenant.
Section 11.3. Upon the request of a ground or underlying
lessee or the holder of a mortgage to which this Lease is or becomes
subordinate, Tenant shall (i) execute, acknowledge and deliver to such lessee
or holder an agreement to attorn to such lessee or holder as landlord if such
lessee or holder becomes the landlord hereunder, and/or (ii) execute,
acknowledge and deliver to such lessee or holder an agreement that such lessee
or holder shall not be:
(a) subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord);
(b) bound by any Fixed Rent, Additional Rent or other charge
which Tenant might have paid for more than the current month to any prior
landlord (including Landlord);
(c) liable for any act or omission of any prior landlord
(including Landlord); or
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(d) bound by any modification of this Lease made without the
consent of such lessee or holder after Tenant shall have notice of such lessee
or holder.
Section 11.4. If the holder of any mortgage requires that
this Lease have priority over such mortgage, Tenant shall, upon request of such
holder, execute, acknowledge and deliver to such holder an agreement
acknowledging such priority.
Section 11.5. If, in connection with the financing of the
Premises, any lending institution shall request reasonable modifications of this
Lease that do not materially and adversely affect the rights and obligations of
Tenant, Tenant shall make such modifications as shall be requested by such
lending institution.
Section 11.6. No act or failure to act on the part of Landlord
which would entitle Tenant under the terms of this Lease, or by law, to be
relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of this
Lease unless (i) Tenant shall have first given written notice of Landlord's act
or failure to act to Landlord's mortgagees of which Tenant has been given prior
notice, specifying the act or failure to act on the part of Landlord which would
result in Tenant having such rights; and (ii) such mortgagees (or any of them),
after receipt of such notice, have failed or refused to correct or cure the
condition complained of within a reasonable time thereafter; but nothing
contained in this Section 11.6 shall be deemed to impose any obligation on any
such mortgagee to correct or cure any such condition. "Reasonable time" as used
above means a reasonable time to obtain possession of the Premises if necessary
for cure, if the mortgagee elects to do so, and a reasonable time, not less than
thirty (30) days thereafter, to correct or cure the condition if such
condition is determined to exist.
Section 11.7. No assignment of this Lease for which Landlord's
consent is required and no agreement to make or accept any surrender,
termination or cancellation of this Lease and no agreement to modify this Lease
so as to reduce the Fixed Rent or Additional Rent, change the Term, or otherwise
materially change the rights of Landlord under this Lease, or to relieve Tenant
of any obligations or liability under this Lease, shall be valid unless
consented to in writing by Landlord's mortgagees; provided that Landlord shall
have notified Tenant of the name and address of such mortgagees prior to the
execution and delivery of the agreement or document in question.
Section 11.8. Notice is hereby given to Tenant that Landlord's
mortgagees are (i) Peterborough Savings Bank, 35 Main
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Street, Peterborough, New Hampshire 03458 and (ii) Univalor, S.A., 6 Place
Chevelu, 1201 Geneva, Switzerland.
ARTICLE 12
OBLIGATIONS OF TENANT
Section 12.1. Tenant shall promptly comply with all laws,
ordinances, orders, rules, regulations, and requirements of all Federal, state,
municipal or other governmental or quasi-governmental authorities or bodies then
having jurisdiction over the Premises (or any part thereof) and/or the use and
occupation thereof by Tenant, of every nature and kind, whether any of the same
relate to or require (i) structural changes to or in and about the Premises, or
(ii) changes or requirements incident to or as the result of any use or
occupation thereof or otherwise, and Tenant shall so perform and comply, whether
or not such laws, ordinances, orders, rules, regulations or requirements shall
now exist or shall hereafter by enacted or promulgated, and whether or not the
same may be within the present contemplation of the parties hereto.
Section 12.2. Tenant shall indemnify Landlord against and save
harmless Landlord from (a) any and all liabilities, claims, causes of actions,
suits, damages and expenses (collectively, "Claims") arising from (i) the use,
occupancy, conduct of business in or management of the Premises, (ii) any work
or thing whatsoever done, or any condition created in or about the Premises
during the Term or (iii) any negligent or otherwise wrongful act or omission of
Tenant or any of its subtenants or licensees or its or their employees, agents,
or contractors; and (b) all costs, expenses and liabilities incurred, including
attorney's fees, in connection with any of such Claims. If any action or
proceeding shall be brought against Landlord by reason of any such Claims,
Tenant, upon notice from Landlord, shall resist and defend such action or
proceeding by counsel chosen by Tenant who shall be reasonably satisfactory to
Landlord. Tenant or its counsel shall keep Landlord fully apprised at all times
of the status of such defense. Counsel for Tenant's insurer shall be deemed
satisfactory to Landlord. The provisions of this Section 12.2 shall survive the
expiration or earlier termination of this Lease.
Section 12.3. (a) If at any time prior to, or during the Term
(or within the statutory period thereafter if attributable to Tenant or Tenant's
subtenants or licensees), any mechanic's or other lien or order for payment of
money, which shall have been either created by, caused (directly or indirectly)
by, or suffered against Tenant or Tenant's subtenants or licensees, shall be
filed against the Premises or any part thereof, Tenant, at its sole cost and
expense, shall cause the same to be
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discharged by payment, bonding or otherwise, as provided by law, within thirty
(30) days after notice to Tenant of the filing thereof, but nothing herein
contained shall in any wise prejudice the rights of Tenant to contest any such
lien to final judgment or decree. Tenant shall, upon notice and request in
writing by Landlord, defend for Landlord, at Tenant's sole cost and expense, any
action or proceeding which may be brought on or for the enforcement of any such
lien or order for payment of money, and will pay any damages and satisfy and
discharge any judgment entered in such action or proceeding and save harmless
Landlord from any liability, claim or damage resulting therefrom. In default of
Tenant's procuring the discharge of any such lien as aforesaid Landlord may,
without notice, and without prejudice to its other remedies hereunder, procure
the discharge thereof by bonding or payment or otherwise, and all cost and
expense which Landlord shall incur shall be paid by Tenant to Landlord as
Additional Rent forthwith. The provisions of this subparagraph (a) shall
survive the expiration or earlier termination of this Lease.
(b) Landlord shall not under any circumstances be liable to
pay for any work, labor or services rendered or materials furnished to or for
the account of Tenant upon or in connection with the Premises, and no
mechanic's or other lien for such work, labor or services or material furnished
shall, under any circumstances, attach to or affect the reversionary interest of
Landlord in and to the Premises or any alterations, repairs, or improvements to
be erected or made thereon. Nothing contained in this Lease shall be deemed or
construed in any way as constituting the request or consent of Landlord, either
express or implied, to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials for any
specific improvement, alteration to or repair of the Premises or any part
thereof, nor as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials on
behalf of Landlord that would give rise to the filing of any lien against the
Premises.
Section 12.4. Neither Landlord nor Landlord's agents, officers
or employees shall be liable for any loss of or damage to the property of Tenant
or others by reason of casualty, theft or otherwise, or for any injury or damage
to persons or property resulting from any cause.
Section 12.5. Landlord shall not be required to furnish to
Tenant any facilities or services of any kind whatsoever, including, but not
limited to, water, steam, heat, gas, oil, hot water or electricity, all of which
Tenant will obtain from the municipality or public utility supplying the same,
at Tenant's sole cost and expense.
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ARTICLE 13
DEFAULT BY TENANT
Section 13.1. Each of the following shall be deemed an event
of default (an "Event of Default") and a breach of this Lease by Tenant:
(a) If the Fixed Rent shall not be paid as and when
the same shall become due and payable and such default shall
continue for five (5) days after written notice by Landlord to
Tenant.
(b) If any Additional Rent shall not be paid as and
when the same shall become due and payable, and such default
shall continue for ten (10) days after written notice by
Landlord to Tenant.
(c) If Tenant shall default in the performance or
observance of any of the other agreements, conditions,
covenants or terms herein contained, and such default shall
continue for thirty (30) days after written notice by Landlord
to Tenant, or if such default is of such a nature that it
cannot be completely remedied with said thirty (30) day
period, if Tenant shall not commence within such thirty (30)
day period to remedy such default and/or thereafter diligently
prosecute the same to completion.
(d) If (i) Tenant shall commence any case, proceeding
or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to Tenant, or
seeking to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, liquidation,
dissolution, composition or other relief with respect to
Tenant or Tenant's debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for
Tenant or for all or any substantial part of Tenant's
property; or (ii) Tenant shall make a general assignment for
the benefit of Tenant's creditors; or (iii) there shall be
commenced against Tenant any case, proceeding or other action
of a nature referred to in clause (i) above or seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of
Tenant's property, which case, proceeding or other action (x)
results in the entry of an order for relief or (y) remains
undismissed, undischarged or unbonded for a period of sixty
(60) days; or (iv) Tenant shall take any action consenting to
or approving
18
<PAGE> 22
any of the acts set forth in clause (i), (ii) or (iii) above;
or (v) Tenant shall be unable to pay Tenant's debts as they
become due or shall admit in writing Tenant's inability to pay
its debt as they become due.
Section 13.2. Upon the occurrence of any one or more Events of
Default, Landlord shall have the right thereafter to terminate and end this
Lease and the Term hereby granted, as well as all of the right, title and
interest of Tenant hereunder, by giving to Tenant a written notice of the
termination of this Lease. Upon the expiration of the time fixed in such
termination notice, which shall not be less than three (3) days after the giving
thereof, this Lease and the Term hereby granted, as well as all of the right,
title and interest of Tenant hereunder, shall wholly cease and expire in the
same manner, and with the same force and effect (except as to Tenant's liability
as hereinafter provided) as if the expiration of time fixed in such notice were
the end of the Term herein originally demised; and Tenant shall then immediately
quit and surrender to Landlord the Premises, and Landlord may enter into or
repossess the Premises, whether by summary proceedings or otherwise; and Tenant
hereby waives any and all rights to recover or regain possession of the Premises
or to reinstate or to redeem this Lease, as permitted or provided by any
statute, law or decision now or hereafter in force; and Tenant hereby also
waives the service of any further notice demanding Rent, or of intention to
reenter, as provided by any present or future statute, law or decision. Tenant
further waives its right and agrees not to interpose any counterclaim in any
summary proceedings which may be brought by Landlord against Tenant.
Section 13.3. In the event of a cancellation or termination of
this Lease, either by operation of law, or by the issuance of a warrant of
dispossess, or by the service of a notice of termination as above provided, or
otherwise, for any cause or causes whatsoever, except by condemnation by public
or private authority as herein provided, Tenant shall, nevertheless, remain
liable to Landlord to pay a sum equal to the Fixed Rent and Additional Rent
herein reserved for the balance of the Term; and Landlord may, without notice,
repair or alter the Premises in such manner as Landlord may deem necessary or
advisable and/or let or relet the Premises, and any and all parts thereof, for
the whole, or any part, of the remainder of the original Term, or for any period
of time beyond the expiration of the original Term, in Landlord's name, or as
the agent of Tenant, and, out of any rent so collected and received, Landlord
first shall retain for Landlord's own account the costs and expenses of
retaking, repossessing, repairing and/or altering the premises, and the expense
of removing all persons and property therefrom, and second, retain for
Landlord's own account any cost or expense sustained in securing any new tenant
or tenants, and third, retain for Landlord's own account any balance remaining
on
19
<PAGE> 23
account of the liability of Tenant to Landlord for the sum equal to the Rent
reserved herein and unpaid by Tenant for the remainder of the Term.
Section 13.4. Should any rent so collected by Landlord after
the application of funds described above be insufficient fully to pay to
Landlord a sum equal to the Fixed Rent and Additional Rent stipulated for
herein, the balance or deficiency shall be paid by Tenant on the days above
specified for the payment of Rent; that is, upon each of such days, Tenant shall
pay to Landlord the amount of the deficiency then existing; and Tenant hereby
agrees to be and remain liable for any such deficiency. The right of Landlord to
recover from Tenant the amount thereof, or a sum equal to the amount of Fixed
Rent and Additional Rent herein reserved, if there shall be no reletting, shall
survive the issuance of any warrant of dispossess, or other termination of this
Lease; and Tenant hereby expressly waives any defense that might be predicated
upon the issuance of such warrant of dispossess, or other termination or
cancellation of the Term.
Section 13.5. A suit or suits for the recovery of such
deficiency or damages, or for a sum equal to any installment or installments of
Fixed Rent or Additional Rent due hereunder, may be brought by Landlord, from
time to time, at Landlord's election, and nothing herein contained shall be
deemed to require Landlord to await the date whereon this lease, or the Term,
would have expired by limitation, had there been no such default by the Tenant
or no such termination or cancellation.
ARTICLE 14
REMEDIES OF LANDLORD
Section 14.1. If Tenant shall default in the performance or
observance of any of the agreements, conditions or covenants herein contained,
which default remains uncured after the period for curing such default shall
have elapsed, Landlord may immediately, or at any time thereafter, perform the
same for the account of Tenant, and any amount paid, or any expense or liability
incurred, by Landlord in the performance of the same, shall be deemed to be
Additional Rent payable forthwith by Tenant; and Landlord shall have the right
to enter the Premises (by force or otherwise) for the purpose of correcting or
remedying such default and to remain therein until the same shall have been
corrected or remedied.
Section 14.2. In the event Tenant shall fail to pay any
Imposition or any insurance premium under Article 7 hereof, or any other sums
due pursuant to this Lease other than Fixed Rent, Landlord may, but shall not be
required to, pay any such items,
20
<PAGE> 24
MISSING PAGE 21 (notation in original file)
<PAGE> 25
deemed to waive or affect the right of Landlord or Tenant to enforce the same
agreement, condition, covenant or term in the event of a subsequent default or
breach.
Section 15.3. The receipt by Landlord of Rent with knowledge
of the breach of any of the terms, covenants or conditions of this Lease shall
not be deemed a waiver of such breach. The acceptance of any check or payment
bearing or accompanied by any endorsement, legend or statement shall not, of
itself, constitute any change in or termination of this Lease or be deemed an
accord and satisfaction. No surrender of the Premises by Tenant (prior to any
termination of this Lease) shall be valid unless consented to in writing by
Landlord.
ARTICLE 16
ESTOPPEL CERTIFICATE
Section 16.1. Tenant agrees that it shall, at any time and
from time to time upon not less than ten (10) days' prior notice by Landlord,
execute, acknowledge and deliver to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been any modifications, that the Lease is in full force and effect as modified
and stating the modifications), the dates to which the Fixed Rent and Additional
Rent have been paid, and stating whether or not Landlord is in default in
keeping, observing or performing any term, covenant, agreement, provision or
condition contained in this lease (and, if in default, specifying each such
default), the Commencement Date and Expiration Date for the Term and any other
matters reasonably requested by Landlord; it being intended that any such
statement delivered pursuant to this Article 16 may be relied upon by Landlord
or any prospective mortgagee or any assignee of any mortgage upon the Premises
or any prospective purchaser of Landlord's interest in the Premises.
Section 16.2. Landlord agrees that it shall, at any time and
from time to time upon not less than ten (10) days' prior notice by Tenant,
execute, acknowledge and deliver to Tenant a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been any modifications, that the Lease is in full force and effect as modified
and stating the modifications), the dates to which the Fixed Rent and Additional
Rent have been paid, whether or not Tenant is in default in keeping, observing
or performing any term, covenant, agreement, provision or condition contained in
this Lease (and, if in default, specifying each such default), the Commencement
Date and Expiration Date for the Term and any other matters reasonably requested
by Tenant; it being intended that any such statement delivered pursuant to this
Article 16 may
22
<PAGE> 26
be relied upon by Tenant or any prospective assignee of Tenant's interest under
this Lease which is approved by Landlord.
ARTICLE 17
QUIET ENJOYMENT
Section 17.1. Tenant, upon payment of the Rent herein reserved
and upon the due performance and observance of all the covenants, conditions and
agreements herein contained on Tenant's part to be performed and observed, shall
at all times during the Term peaceably and quietly have, hold and enjoy the
Premises, subject, nevertheless, to the terms and provisions of this Lease. No
failure by Landlord to comply with the foregoing covenant shall give Tenant any
right to cancel or terminate this Lease or to abate, reduce or make a deduction
from or offset against the Fixed Rent or any Additional Rent, or to fail to
perform any other obligation of Tenant hereunder, but nothing herein shall
prevent Tenant from obtaining such injunctive relief against Landlord as may be
appropriate.
ARTICLE 18
SURRENDER
Section 18.1. Tenant shall, on the last day of the Term, or
upon the earlier termination of this Lease, quit and surrender to Landlord the
Premises vacant, free of all equipment, furniture and other personal property,
and in good order and condition, reasonable wear and tear excepted, and Tenant
shall remove or demolish all of the fixtures, fences, railings, structures and
other improvements which Landlord shall elect pursuant to Section 6.5 hereof.
Tenant's obligation to observe and perform this covenant shall survive the
expiration or earlier termination of this Lease.
Section 18.2. Upon the expiration of the Term, all Fixed Rent
and Additional Rent and other items payable by Tenant under this Lease shall be
apportioned as of the date of termination.
ARTICLE 19
ACCESS
Section 19.1. Landlord shall at all times during the Term have
the right and privilege to enter the Premises at reasonable times during
business hours for the purpose of inspecting the same or for the purpose of
showing the same to prospective purchasers or mortgagees thereof. Landlord shall
also have the
23
<PAGE> 27
right and privilege during the last full year of the Term (i) to enter the
Premises at reasonable times during business hours for the purpose of exhibiting
the same to prospective new tenants and (ii) to display the customary "To Let"
and "For Sale" signs at the Premises. Such right of access shall not be
construed as obligating Landlord to make any repairs or replacements to the
Premises or as obligating Landlord to make any inspection or examination of the
Building.
ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 Landlord and Tenant hereby waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, Tenant's use or occupancy of the Premises, and/or any
claim of injury or damage, excluding any claim for personal injury or property
damage.
Section 20.2. (a) The term "Landlord" as used herein shall
mean only the owner or the mortgagee in possession for the time being of the
Premises, so that in the event of any sale, transfer or conveyance of the
Premises, so that in the event of any sale, transfer or conveyance of the
Premises Landlord shall be and hereby is entirely freed and relieved of all
agreements, covenants and obligations of Landlord hereunder, and it shall be
deemed and construed without further agreement between the parties or their
successors in interest or between the parties and the purchaser, transferee or
grantee at any such sale, transfer or conveyance that such purchaser, transferee
or grantee has assumed and agreed to carry out any and all agreements, covenants
and obligations of Landlord hereunder.
(b) The term "Tenant" as used herein shall mean the tenant
named herein, and from and after any valid assignment or transfer of Tenant's
interest under this Lease pursuant to the provisions of Article 10 shall mean
only the assignee or transferee thereof; but the foregoing shall not release the
assignor or transferor from liability under this Lease except if expressly so
agreed by Landlord in writing.
(c) The words "re-enter" and "re-entry" as used herein shall
not be restricted to their technical legal meaning.
(d) The use herein of the neuter pronoun in any reference to
Landlord or Tenant shall be deemed to include any individual Landlord or Tenant,
and the use herein of the words "successors and assigns" or "successors or
assigns" of Landlord or Tenant shall be deemed to include the heirs, executors,
administrators, and representatives of any individual Landlord or
24
<PAGE> 28
Tenant. All terms used herein shall include any number or gender, as the context
may require.
(e) If Landlord or any successor in interest is in breach or
default with respect to its obligations or otherwise under this Lease, Tenant
shall look for the satisfaction of Tenant's damages, rights and remedies solely
to the equity of Landlord or its successor in interest in the Premises, and
Landlord and its successors in interest shall have no personal liability
therefor.
Section 20.3. The headings herein are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope or intent of this Lease.
Section 20.4. This Lease shall be governed by and construed in
accordance with the laws of the State of New Hampshire.
Section 20.5. This Lease contains the entire agreement between
the parties and may not be extended, renewed, terminated or otherwise modified,
nor may any provision hereof be waived, in any manner except by an instrument in
writing executed by the party against whom enforcement of the same is sought.
Section 20.6. The agreements, terms, covenants and conditions
herein shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, personal representatives, successors and, except as is
otherwise provided herein, their assigns.
Section 20.7. Notice whenever provided for herein shall be in
writing and shall be given either by personal service with acknowledgment of
receipt or by certified or registered mail, return receipt requested, to the
persons and at the addresses hereinabove set forth, or to such other persons or
at such other addresses as may be designated from time to time by written
notice from either party to the other. Notices shall be deemed given on the date
of personal service thereof or two (2) business days after the mailing thereof
in accordance with this Section 20.7.
Section 20.8. If any provision of this Lease shall be invalid
or unenforceable, the remainder of the provisions of this Lease shall not be
affected thereby and each and every provision of this Lease shall be enforceable
to the fullest extent permitted by law.
Section 20.9. Landlord and Tenant each represents and warrants
to the other that it has not dealt with any real estate broker in connection
with this Lease.
25
<PAGE> 29
Section 20.10. Tenant is and shall be in exclusive control and
possession of the Premises, and Landlord shall not, in any event whatsoever, be
liable for any injury or damage to any property or to any person happening in,
on or about the Premises, nor for any injury or damage to any property of
Tenant, or of any other person contained therein.
Section 20.11. (a) Tenant covenants that (i) at all times
during the Term it shall cause the Premises to be free of contamination from any
substance or material presently identified to be toxic or hazardous according to
any applicable federal, state or local statute, rule, ordinance, code, guideline
or regulation (collectively, the "Environmental Law"), including, without
limitation, any asbestos, pcb, radioactive substance, methane, volatile
hydrocarbons, industrial solvents or any other material or substance which has
in the past or could presently or at any time in the future cause or constitute
a health, safety or other environmental hazard to any person or property; (ii)
it will not during the Term cause or suffer to occur a discharge, spillage,
uncontrolled loss, seepage or filtration of oil or petroleum or chemical liquids
or solids, liquid or gaseous products or hazardous waste (a "spill"), or
hazardous substance at, upon, under or within the Premises or any contiguous
real estate; (iii) it will not be involved in operations at or near the Premises
which could lead to the imposition on Landlord or Tenant of liability or the
creation of a lien on the Premises or any portion thereof under the
Environmental Law or under any similar applicable laws or regulations; and (iv)
it will not permit any subtenant or occupant of the Premises to engage in any
activity that could lead to the imposition of liability on such subtenant or
occupant, Tenant or Landlord, or the creation of a lien on the Premises or any
part thereof, under the Environmental Law or any similar applicable laws or
regulations. Notwithstanding the above, Tenant may maintain at the Premises or
permit its subtenants and licensees to maintain at the Premises such hazardous
substances as may be incidental to Tenant's agreed upon use of the Premises,
provided the ame are not used in any manner that would violate the Environmental
Law.
(b) Tenant shall comply strictly and in all respects with the
requirements of the Environmental Law and related regulations and with all
similar applicable laws and regulations and shall notify Landlord promptly in
the event of any spill or hazardous substance upon the Premises, and shall
promptly forward to Landlord copies of all orders, notices, permits,
applications or other communications and reports in connection with any such
spill or hazardous substance or any other matters relating to the Environmental
Law or related regulations or any similar applicable laws or regulations, as
they may affect the Premises.
(c) Tenant shall indemnify Landlord and hold Landlord harmless
from and against all loss, liability, damage and expense
26
<PAGE> 30
(including, without limitation, attorneys' fees and disbursements) suffered or
incurred by Landlord and attributable to Tenant or persons or entities acting
by, through or under Tenant (i) under or on account of the Environmental Law or
related regulations or any similar applicable laws or regulations, including the
assertion of any lien thereunder; (ii) with respect to any spill or hazardous
substance affecting the Premises or any part thereof, whether or not the same
originates or emanates from the Premises or any contiguous property, including
any loss of value of the Premises as a result of a spill or hazardous substance,
and (iii) with respect to any other matter affecting the Premises within the
jurisdiction of the Environmental Protection Agency, or the New Hampshire
Department of Environmental Services or their successors.
(d) In the event of any spill or hazardous substance affecting
the Premises, whether or not the same originates or emanates from the Premises
or any such contiguous real estate, and/or if Tenant shall fail to comply with
any of the requirements of the Environmental Law, Landlord may at its election,
but without the obligation to do so, give such notice and/or cause such work to
be performed at the Premises and/or take any and all other actions as Landlord
shall deem necessary or advisable in order to remedy said spill or hazardous
substance or cure said failure of compliance, and any amounts paid as a result
thereof which are attributable to Tenant's acts or omissions, or acts or
omissions of persons or entities by, through or under Tenant (together with
interest thereon at the rate set forth in Section 14.2 of this Lease), from the
date of payment by Landlord, shall be immediately due and payable by Tenant to
Landlord as Additonal Rent.
(e) The obligations and indemnitites contained in this Section
21.11 shall survive the expiration of this Lease.
LANDLORD
SECRETARIAL REALTY CORP.
By: /s/
__________________________
Title: President
TENANT
MASKA U.S., INC.
By: /s/
__________________________
Title: Secretary
27
<PAGE> 31
EXHIBIT A
DESCRIPTION OF LAND
Parcel 1 A certain tract of land located on Vose Farm Road in
Peterborough, New Hampshire, shown as containing 21.180 acres on a plan
entitled, "Peterborough Industrial Development Corp., Vose-Starkweather
Land, Peterborough, N.H.," by Thomas F. Moran, dated Dec. 23, 1971,
last revised July 18, 1974, recorded in the Hillsborough County
Registry of Deeds as Plan No. 7652.
Parcel 2 A certain tract of land, with any improvements thereon, located
off Vose Farm Road in Peterborough, New Hampshire, shown as Parcel 4,
having an area of 1.879 acres, on a plan entitled, "Subdivision Plan of
Land, Peterborough Industrial Development Corp., Vose-Starkweather
Land, Peterborough, N.H.," by Thomas F. Moran, dated September 6, 1977,
recorded in the Hillsborough County Registry of Deeds as Plan No.
10804, together with a fifty foot easement for access and utilities
between the above described premises and Vose Farm Road as shown on
said plan insofar as said easement may be appurtenant to said premises.
<PAGE> 1
Exhibit 10.35
<PAGE> 2
D E E D OF L E A S E
BETWEEN
ZMD SPORTS INVESTMENTS INC.
(the "Landlord")
AND
SPORT MASKA INC.
(the "Tenant")
<PAGE> 3
TABLE OF CONTENTS
ZMD SPORTS INVESTMENTS INC.
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
1. CERTAIN BASIC LEASE PROVISIONS....................................................................... 1
2. DEFINITIONS.......................................................................................... 1
3. TERM................................................................................................. 5
4. OCCUPANCY............................................................................................ 6
5. MINIMUM NET NET RENTAL............................................................................... 6
6. RENTAL ON NET NET RETURN BASIS....................................................................... 6
7. ADDITIONAL RENTAL.................................................................................... 7
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE.............................................................. 7
9. CONTESTATION OF TAXES................................................................................ 8
10. UTILITIES AND EQUIPMENT.............................................................................. 8
11. USE OF PREMISES...................................................................................... 8
12. PLATE GLASS AND DOOR SIGNS........................................................................... 8
13. PROHIBITED ACTIVITIES................................................................................ 8
14. CONDITION OF PREMISES................................................................................ 9
15. RELOCATION........................................................................................... 9
16. MAINTENANCE AND REPAIRS.............................................................................. 10
17. INSPECTION AND REPAIR................................................................................ 10
18. ODOURS, DUST OR NOISE................................................................................ 10
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION............................................................ 11
20. ACCESS............................................................................................... 11
21. PARKING.............................................................................................. 11
22. SIGNS OF LANDLORD.................................................................................... 12
23. SIGNS OF TENANT...................................................................................... 12
24. LANDLORD'S WORK...................................................................................... 12
25. IMPROVEMENTS AND ALTERATIONS......................................................................... 13
26. CSST................................................................................................. 16
27. INSURANCE REQUIREMENTS............................................................................... 16
28. CANCELLATION OF INSURANCE............................................................................ 16
29. DAMAGE OR DESTRUCTION................................................................................ 17
30. TRANSFER CONSENT REQUIRED............................................................................ 19
31. PRIVILEGE OF LANDLORD................................................................................ 21
32. ASSIGNMENT BY LANDLORD............................................................................... 21
33. EXPROPRIATION........................................................................................ 22
34. EXTENSIONS........................................................................................... 22
35. DEFAULT.............................................................................................. 23
36. FAILURE OF TENANT TO PERFORM......................................................................... 24
37. BANKRUPTCY AND INSOLVENCY............................................................................ 24
38. INDEMNIFICATION...................................................................................... 24
39. DISTURBANCE.......................................................................................... 25
40. NONWAIVER............................................................................................ 25
41. WAIVER OF COMPENSATION............................................................................... 25
42. IMPUTATION OF PAYMENTS............................................................................... 26
43. CUMULATIVE REMEDIES.................................................................................. 26
44. UNAVOIDABLE DELAY.................................................................................... 26
45. MANAGEMENT OF THE PROPERTY........................................................................... 26
46. RULES AND REGULATIONS................................................................................ 27
47. COMPLIANCE WITH LAWS AND REGULATIONS................................................................. 27
48. WINDOW COVERINGS..................................................................................... 27
49. PERMITS AND LICENSES................................................................................. 27
50. EXPIRATION OF LEASE.................................................................................. 28
51. CONSTITUT OR TENURE SYSTEM ACT....................................................................... 28
52. DOMICILE AND NOTICES................................................................................. 28
53. SUCCESSORS AND ASSIGNS............................................................................... 28
54. DESCRIPTIVE HEADINGS................................................................................. 29
55. GOVERNING LAW/SEVERABILITY........................................................................... 29
56. COST OF PREPARATION, REGISTRATION AND RADIATION...................................................... 29
57. BROKERAGE COMMISSION................................................................................. 29
58. SCHEDULES............................................................................................ 29
59. CERTIFICATE OF INCORPORATION......................................................................... 30
60. ENTIRE AGREEMENT..................................................................................... 30
61. LANGUAGE............................................................................................. 30
</TABLE>
<PAGE> 4
DEED OF LEASE
BETWEEN: ZMD SPORTS INVESTMENTS INC., a body politic and corporate
duly incorporated, having its head office and principal place
of business Montreal, Quebec herein acting and represented by
JEAN-PIERRE CARETTE its duly authorized representative.
(hereinafter the "Landlord")
PARTY OF THE FIRST PART
AND: SPORT MASKA INC., a body politic and corporate duly
incorporated, having its head office and principal place of
business in Montreal, Quebec, herein acting through and
represented by DAVID ZUNENSHINE its Chairman of the Board
hereunto duly authorized as he so declares.
(hereinafter the "Tenant")
PARTY OF THE SECOND PART
1. CERTAIN BASIC LEASE PROVISIONS
The following are certain basic Lease provisions of this Lease.
1.1 Addresses for purposes of notice:
Landlord: 7405 Trans Canada Highway
St. Laurent, Quebec
H4T 1Z2
Tenant: 600 Industrial Boulevard
St-Jean-sur-Richelieu, Quebec
1.2 Location of Premises: Leased Premises comprising of the Building and
the property found on the land described in Schedule "B" annexed
hereto.
1.3 Property: 600 Industrial Boulevard
St. Jean-sur-Richelieu, Quebec
1.4 Area: Approximately one hundred thirty-eight thousand
(138,000) square feet.
1.5 Term: Ten (10) years
1.6 Commencement Date: December 1, 1994
1.7 Termination Date: November 30, 2004
1.8 Minimum Net Net Rental: An amount equal to $434,700.00 per annum for
the first five (5) years of the Term, and $483,000.00 per annum for the
last five (5) years of the Term payable pursuant to the Article
entitled "Minimum Net Net Rental".
1.9 Schedules
"B" - Cadastral Description
"E" - Rules and Regulations
2. DEFINITIONS
2.1 Additional Rental means: Any and all amounts due or becoming
<PAGE> 5
Montreal Industrial Lease
Page 2
2.1 Additional Rental means: Any and all amounts due or becoming payable to
the Landlord pursuant to this Lease other than the Minimum Net Net
Rental, whether such amounts are specifically referred to as Additional
Rental or not, the whole payable pursuant to the Article entitled
"Additional Rental".
2.2 Architect means: The independent architect, engineer, or land surveyor
named by Landlord from time to time.
2.3 Area means: The area of the Leased Premises as calculated in the manner
stipulated in Schedule "D".
2.4 Building means: The building or buildings, as these may be added or
modified from time to time, found on the parcel of land described in
Schedule "B".
2.5 Capital Tax means: For the purpose of this lease, "Capital Tax" means
the capital tax liability of the Landlord for each of the Landlord's
fiscal years during the Term or any renewal thereof as per the
Landlord's tax returns multiplied by the proportion that the net book
value of the Property is of the net book value of the total assets of
the Landlord, as determined in accordance with the Landlord's audited
financial statements.
2.6 Commencement Date means: The first day of the Term.
2.7 Common Areas and Facilities means:
(a) Those areas,, facilities, utilities, improvements, equipment
and installations in the Property which, from time to time,
are not designated or intended by the Landlord to be used
exclusively for the benefit of any individual tenant of the
Property; and
(b) Those areas, facilities, utilities, improvements, equipment
and installations which serve or are for the benefit of the
Property, whether or not located within, adjacent to, or near
the Property and which are designated from time to time by the
Landlord as part of the Common Areas and Facilities of the
Property. Common Areas and Facilities include, without
limitation, all areas, facilities, utilities, improvements,
equipment and installations which are provided or designated
(and which may be changed from time to time) by the Landlord
for the use or benefit of the tenants, their employees,
customers and other Persons for whom Landlord shall permit the
use or benefit thereof, in the manner and for the purposes
permitted by the Lease.
(c) Without limiting the generality of (a) and (b) above. Common
Areas and Facilities include the roof, exterior wall
assemblies including weather walls, exterior and interior
structural elements and bearing walls in the buildings and
improvements comprising the Property; parking areas and
parking garages, all entrances and exits thereto and all
structural elements thereof, employee parking areas, truck
courts, access roads, driveways, truckways, delivery passages,
package pick-up stations; loading docks and related areas;
pedestrian sidewalks, covered walkways and sidewalks;
roadways; landscaped and planted areas; courts and arcades;
public seating and service areas; corridors; bus kiosk, if
any; roadways and stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways; ramps, moving
sidewalks; and other transportation equipment and systems;
electrical, telephone, meter, valve, mechanical, mall,
storage, service and janitor rooms and galleries;
communications, security and fire prevention and protection
systems; general signs; columns, pipes, electrical,
<PAGE> 6
Montreal Industrial Lease
Page 3
plumbing, drainage, mechanical and all other installations,
equipment or services located therein or related thereto, as
well as the structures housing the same.
2.8 CPI means: The Consumer Price Index, all items Montreal, established by
Statistics Canada or any index in substitution and/or replacement
thereof, published by Statistics Canada or any other federal or
provincial governmental agency. In the case of any required
substitution, Landlord shall be entitled to make all necessary
conversions for comparison purposes.
2.9 Date of Occupancy means: The date on which Landlord is ready to give
possession of the Leased Premises to the Tenant, subject to the terms
stipulated in the Article entitled "Occupancy".
2.10 Deposit means: The amount(s) stipulated in the Article entitled
"Deposit".
2.11 Landlord means: The party first hereinafter described or its successors
and assigns.
2.12 Landlord's Work means: The work to be executed by Landlord as
stipulated in the Articles entitled "Landlord's Work" and "Landlord's
Work at Tenant's Expense".
2.13 Lease means: This agreement and all attached Schedules.
2.14 Leased Premises means: The premises described in paragraph 1.2, the
location of which is outlined in red on Schedule "A".
2.15 Lease Year means: In the case of the first Lease Year, a period
commencing on the Commencement Date and terminating on the last day of
the twelfth month thereafter and shall also refer to any succeeding
twelve (12) month period thereafter.
2.16 Minimum Net Rental means: The amount stipulated in the Article entitled
"Minimum Net Rental".
2.17 Operating Costs means: The aggregate of Landlord's annual costs and
expenses incurred in insuring, operating, administering and if
applicable, maintaining the Property and shall include, without
duplication or limitation, the cost of:
(i) all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of real estate taxes, the whole subject
to the Article of this Lease entitled "Contestation of Taxes";
(ii) the cost of insuring the Property (including such insurance as
the Landlord shall effect or shall be required to effect by
any secured creditor) against fire and any other perils which
presently are or hereafter may be, from time to time, embraced
by or defined in a standard fire insurance policy with
extensive coverage, comprehensive general liability
<PAGE> 7
Montreal Industrial Lease
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insurance, boiler and pressure vessel insurance, business
interruption and/or loss of rentals insurance and such other
insurance as the Landlord, acting reasonably, may deem
necessary or advisable.
(iii) Capital Tax as defined herein.
(iv) Debt Service in accordance with the Article entitled "Rental
on Net Return Basis".
2.18 Person means: depending on context: Any person, firm, company,
corporation, partnership, association, or any group or combination
thereof.
2.19 Property means: the lands and buildings found on the lots described in
Schedule "B" as these may be varied, from time to time, by adding or
subtracting land or Buildings or by any other means as Landlord
considers necessary or advisable, even if parts of the said lands or
Buildings may be separated from others by lanes, streets, highways or
any other means of passage in or upon which others may have rights. The
said lands or Buildings shall include all buildings, construction and
Common Areas and Facilities on the lands and/or Buildings as each of
the foregoing exists from time to time.
2.20 Proportionate Share means: 100% of the Operating Costs and Taxes of the
property and of the Leased Premises.
2.21 Sales Tax means: Any goods and services tax, business transfer tax,
value-added tax, multi-stage sales tax, sales tax or any other tax
imposed with respect to Minimum Net Net Rental and Additional Rental
payable under this Lease, whatever name such tax may bear and whether
such tax is in force at the date hereof or whether it is adopted
subsequently. The amount of the Sales Tax so payable by Tenant shall be
calculated by Landlord in accordance with the applicable legislation
and shall be paid to Landlord at the same time as the amounts to which
such Sales Tax apply or at such other time as Landlord may from time to
time determine. Landlord shall have the same remedies for and rights of
recovery of such amounts as it has for the recovery of Additional
Rental.
2.22 Security means: Any hypothec, trust deed, debenture or other security
to be placed from time to time on the Property or any part thereof for
the purpose of securing any indebtedness of Landlord.
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2.23 Taxes means: All taxes, whether special or general, including, without
limitation, property taxes, municipal taxes, school taxes, levies,
charges, rates including local improvement rates, duties and
assessments that may now or in the future be levied, rated, charged or
assessed against the Property, and/or all equipment and facilities
thereof or therein, and/or the land described in Schedule "B" attached
hereto, and/or any property on or in the Building owned or brought
thereon or therein by the Landlord and/or against Landlord or Tenant
and/or its Transferees in respect thereof, whether such taxes, rates,
duties or assessments are charged by a municipal, parliamentary, school
or any other body of competent jurisdiction. If the system of real
estate taxation shall be altered or varied and any new tax shall be
levied or imposed on the Property and/or the revenues therefrom and/or
the Landlord in substitution for and/or in addition to real estate
taxes presently levied or imposed on immovables in the City, Region,
Province or Country in which the Property is situated, then any such
new tax or levy shall be included within the present definition of
Taxes. However, Tenant shall not be responsible for any income tax or
corporation taxes of the Landlord, save and except for its
Proportionate Share of Capital Tax and Tenant shall be solely
responsible for any Sales Tax.
2.24 Tenant means: The person executing this Lease as Tenant. Tenant also
includes all employees, mandatories and contractors of Tenant, as well
as any Person under Tenant's control or for whom Tenant is responsible.
2.25 Tenant Security means: Any trust deed, bond, debenture, pledge,
commercial pledge, warehouse receipt, conditional sales contract,
privilege, hypothec, charge or any other form of encumbrance of
security granted by or agreed to by Tenant or any other Person (other
than Landlord) with respect to its rights in this Lease, the Leased
Premises, or any property, whether movable or immovable, located in or
forming part of the Leased Premises, to secure, in whole or in part,
any loan, indebtedness, credit line, or other obligation.
2.26 Tenant's Work means: The work to be executed by Tenant as stipulated in
the Article entitled "Tenant's Work".
2.27 Term means: The period specified in the Article entitled "Term" and
includes all renewals or extensions agreed to in writing by the
Landlord.
2.28 Termination Date means: The last day of the Term as herein defined or
any renewal thereof, or the last day of the Term or renewal thereof
which is terminated prior to the Termination Date.
2.29 Transfer means: Any assignment or transfer of this Lease (other than as
Tenant Security), any sublease or permitted occupation of all or any
part of the Leased Premises to any Person (hereinafter the
"Transferee") and any amalgamation or change in the effective control
of the voting shares of Tenant if Tenant is a corporation, or any
change in the partners constituting the partnership or any change in
the interest of the partners in the partnership if Tenant is a
partnership, from conditions existing on the date the corporation or
the partnership first incurs any obligations to Landlord pursuant to
this Lease, the whole whether affected by sale, by assignment, by
operation of law or otherwise.
3. TERM
Landlord hereby leases the Leased Premises to Tenant for a Term of ten
(10) years, commencing on the first day of December 1994 and terminating on the
last day of November 2004 unless sooner terminated under the provisions hereof.
<PAGE> 9
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Should the Tenant continue to occupy the Leased Premises after the
expiry of the Term, without a written agreement there shall be no tacit renewal
and the tenant shall pay to the Landlord, as liquidated damages, the highest
Minimum Net Net Rental payable during the Term and Additional Rental for the
period of occupancy plus fifty percent (50%) thereof, without prejudice to any
of Landlord's other rights and recourses including Landlord's right to obtain
vacant possession of the Leased Premises. Tenant acknowledges that it is not to
have the right to occupy the Leased Premises beyond the expiry of the Term.
4. OCCUPANCY
Tenant shall be allowed to occupy the Leased Premises on December 1,
1994 (hereinafter referred to as the "Date of Occupancy").
If the Landlord is unable to give possession of the Leased Premises to
the Tenant on the Commencement Date, the Lease shall not be void or voidable nor
shall the Landlord be liable for any loss or damage resulting therefrom.
However, any postponement of the Date of Occupancy by Landlord shall have the
effect of delaying the Commencement Date and the Termination Date for a number
of days equal to the number of days of such postponement, the whole without any
liability on the part of the Landlord.
5. MINIMUM NET NET RENTAL
Tenant covenants and agrees to pay to Landlord in lawful money of
Canada without deduction, abatement or setoff, a Minimum Net Net Rental of
$434,700.00 per annum for the first five (5) years of Term, and $483,000.00 per
annum for the last five years of the Term, net, net, payable in equal
consecutive monthly installments, each in advance, on the first day of each
month during the entire Term, the first installment becoming due and payable on
the Commencement Date. Any Minimum Net Net Rental due for any period of time
during the Term which is less than a month shall be paid for on a pro-rated
basis.
The Minimum Net Net Rental shall be considered as annual and accruing
from day to day and where it becomes necessary for any reason to calculate such
rental for an irregular period of less than one (1) Lease Year, an appropriate
apportionment and adjustment shall be made.
The Minimum Net Net Rental as herein provided shall be paid to Landlord
and/or its nominee at the Head Office of the Landlord, at 7405 Trans Canada
Highway, St. Laurent, Quebec, H4T 1Z2, or at such other place in Canada as shall
be designated by Landlord in writing to Tenant.
6. RENTAL ON NET NET RETURN BASIS
It is agreed and understood between the parties that the Minimum Net
Net Rental herein shall be a revenue absolutely net, net to the Landlord, free
of any and all costs and expenses of any nature whatsoever. Tenant shall pay on
its own account, to the complete exoneration of Landlord, all taxes and expenses
of whatsoever nature, its Proportionate Share of Operating Costs and Taxes and
any Additional Rental with respect to the Leased Premises unless otherwise
stipulated in this Lease. It is understood that Tenant shall be responsible for
the payment of any increase in the interest and capital repayments of Landlord
with respect to mortgages or other security that Landlord may be subjected to
after the Commencement Date of the Term of this Lease (hereinafter "Debt
Service"). The Landlord shall be responsible for any income tax or corporation
taxes due by Landlord. Tenant shall pay its Proportionate Share of Capital Tax
and Tenant shall be solely responsible for any Sales Tax.
Without limiting the generality of the foregoing, Tenant shall, in each
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Montreal Industrial Lease
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and every Lease Year, pay and discharge or cause to be paid and discharged all
license fees, public utility charges, water rates, sewer rates and other like
fees, charges, rates and assessments that may be levied, charged, rated or
assessed against the Leased Premises and/or all equipment and facilities thereon
or therein and/or any property on the Leased Premises owned or brought thereon
by Tenant, and any and every of its Transferees or visitors and/or against
Landlord or Tenant in respect thereof, and every tax and license fee in respect
of any and every business carried on therein, or with respect to the occupancy
of the Leased Premises by Tenant (and any and every of its Transferees), whether
such license fees, charges, rates, assessments and taxes are charged by
municipal, parliamentary, school or any other body of competent jurisdiction,
and all charges for public utilities including electric current, gas, water,
steam or hot water used upon or in respect of the Leased Premises and for
fittings, machines, apparatus, meters or other things leased in respect thereof
and for all work or services performed by a corporation or commission in
connection with such public utilities. Tenant shall indemnify and hold the
Landlord harmless from and against payment of all losses, costs, charges and
expenses occasioned by and arising from any and every such duty, license fee,
charge, rate, assessment and tax. If such tax, rate, charge, assessment, duty or
license fee should be assessed or charged to Landlord for all or a substantial
number of the tenants of the Property, Tenant shall, at Landlord's discretion
and upon demand in the manner determined by Landlord, pay its Proportionate
Share of such duty, license fee, charge, rate, assessment and tax.
It is further agreed and understood that any amount and any obligation
which is not expressly declared in this Lease to be that of the Landlord shall
be deemed to be the obligation of the Tenant. Without limiting the generality of
the foregoing, should at any time the taxation authorities directly attribute
any part of the Taxes to the Leased Premises or the improvements therein, Tenant
shall pay for same in addition to Tenant's Proportionate Share of the remainder
of the Taxes.
Tenant shall furnish to Landlord, immediately upon Landlord's request,
a receipt or other appropriate evidence satisfactory to Landlord as to the
payment of any amounts payable by Tenant pursuant to the present Article.
7. ADDITIONAL RENTAL
It is agreed and understood that Additional Rental other than Tenant's
Proportionate Share, shall be payable on the first day of the month immediately
following the date the said amount is claimed, or on such date as the Landlord
may designate. Where the calculation of any Additional Rental is not made until
after the Termination Date, the obligation of the Tenant to pay such Additional
Rental shall survive the termination of this Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE
On the first day of each and every month, Tenant shall pay to the
Landlord throughout the Term or any renewals, its Proportionate Share of the
Operating Costs and Taxes, as well as an administration fee equal to three
percent (3%) of the said Operating Costs and Taxes and of the Minimum Net Net
Rental as well as three percent (3%) of the total costs and expenses incurred by
the Tenant, for the month immediately preceding, in maintaining, repairing and
operating the Property, (the said costs and expenses incurred by Tenant being
hereinafter referred to as Tenant's Costs"). Upon Landlord's request, the Tenant
shall furnish the Landlord with a statement in writing showing in reasonable
detail and in such a form as Landlord may require the Tenant's Costs.
Furthermore, Tenant shall furnish to Landlord, immediately upon Landlord's
request, receipts or other appropriate evidence satisfactory to Landlord as to
the payment of Tenant's Costs and shall make available to Landlord for
Landlord's inspection and audit Tenant's books and records relating to Tenant's
Costs.
Notwithstanding anything to the contrary herein contained, the Landlord
may, prior to the commencement of each calendar year or as soon thereafter as is
reasonably possible, furnish to the Tenant an estimate of the Operating Costs
and Taxes for such calendar year, and the Tenant shall pay to the Landlord, in
advance, on the first day of each month during the year in question. Additional
Rental equal to one twelfth (1/12) of the Tenant's Proportionate Share of the
estimated Operating Costs and Taxes. Should the first Lease Year of the Term not
commence on the first
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Montreal Industrial Lease
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(1st) day of January or should the last Lease Year of the Term not terminate on
the thirty-first (31st) day of December, then prior to the Commencement Date of
the Term or prior to the anniversary of the Commencement Date in the last Lease
Year of the Term, as the case may be, or as soon thereafter as is reasonably
possible. Landlord shall furnish to Tenant an estimate of the Operating Costs
and Taxes for the part of the Lease Year in question, and the Tenant shall pay
to the Landlord, in advance, on the first day of each month during the part of
the Lease Year in question. Additional Rental equal to the Tenant's
Proportionate Share of the estimated Operating Costs and Taxes divided by the
number of months for that part of the Lease Year in question.
After the end of each calendar year, or after the end of the Term in
the case of the final Lease Year, the Landlord shall furnish the Tenant with
financial statements setting forth the actual Operating Costs and Taxes for such
calendar year (or part of the Lease Year, as the case may be) and the Tenant
shall pay to the Landlord forthwith an amount equal to its Proportionate Share
of the excess of the actual Operating Costs and Taxes over the estimated
Operating Costs and Taxes. Should the estimated Operating Costs and Taxes exceed
the actual Operating Costs and Taxes, the Tenant shall receive credit for its
Proportionate Share of the excess. The appropriate adjustments shall be made
between the parties hereto within thirty (30) days after the date on which the
Landlord has furnished the Tenant with such statement.
9. CONTESTATION OF TAXES
Landlord shall have no obligation to contest, appeal, object to or
litigate the levying or imposition of Taxes and/or any valuation imposed with
respect thereto, and Landlord may settle, compromise, consent to, waive or
otherwise determine, in its sole discretion, all matters and things relating
thereto. Tenant shall not itself contest, appeal, object to or litigate the
levying or imposition of real estate taxes.
In the event that Landlord should contest any Taxes and thereafter
receive a refund of any portion thereof, and provided Tenant shall have paid its
Proportionate Share of said Taxes, the Landlord shall reimburse to the Tenant
the Tenant's Proportionate Share of such refund.
10. UTILITIES AND EQUIPMENT
The Tenant shall pay for its electricity (including without limitation
any electricity used for heating and/or air conditioning the Leased Premises),
for the cost of operating, repairing, maintaining, ,replacing and inspecting the
machinery and other facilities required for the heating, ventilating and air
conditioning of the Leased Premises and facilities and gas, water, sewer and
electric utility costs relating to same, telephone and all public utilities with
respect to the Leased Premises.
Throughout the Term of the Lease, the Tenant shall engage a qualified
air conditioning maintenance contractor to maintain and repair the heating,
ventilating and air conditioning system. The Tenant shall, within thirty (30)
days of signing these presents, provide the Landlord with a copy of a duly
executed heating, ventilating and air conditioning maintenance and repair
contract, as well as all renewals of the said contract.
11. USE OF PREMISES
The Leased Premises shall be used by the Tenant only for offices,
warehousing, manufacturing and distribution of sports related goods, and for no
other purpose.
12. PLATE GLASS AND DOOR SIGNS
<PAGE> 12
Montreal Industrial Lease
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Any breakage of glass or plate glass in or about the Leased Premises
and any damage to signs on Tenant's doors, except for breakage or damage caused
by the negligence or fault of the Landlord or its employees or mandatories shall
be charged to and payable by the Tenant.
13. PROHIBITED ACTIVITIES
Subject to the other terms and conditions of the Lease and in addition
to any other prohibitions stipulated in the Lease, the Tenant undertakes:
(i) not to use any part of the exterior parking and
loading areas or any other areas outside the Leased
Premises, reasonably designated by the Landlord, for
any purpose other than parking, shipping or
receiving;
(ii) not to obstruct or use any part of the Common Areas
and Facilities except as permitted by the Landlord;
(iii) not to do or suffer or permit to be done any act in
or about the Common Areas and Facilities which, in
the Landlord's opinion, hinders or interrupts the
flow of traffic to, in or from the Property and shall
not do, nor suffer or permit anything to be done,
which in the Landlord's opinion, in any way obstructs
the free movement of people doing business in the
Property;
(iv) not to bring upon the Leased Premises or any part
thereof any machinery, equipment, article or thing
that by reason of its weight, function or size might
damage the Leased Premises and not to overload the
floors of the Leased Premises at any time and if any
damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by
overloading or by any act, neglect or misuse on the
part of Tenant, Tenant will forthwith pay to Landlord
the cost of restoring the Leased Premises to their
original condition;
(v) not to obstruct the sidewalks, entries, passage
corridors and stairways, or use same for purposes
other than for ingress and egress to or from the
Leased Premises, and the Tenant shall save the
Landlord harmless from damages to persons or property
because of any articles thrown by the Tenant out of
the windows or doors or down the passages of the
Building.
14. CONDITION OF PREMISES
The Tenant represents that the Leased Premises have been examined by
the Tenant and that the Tenant accepts the same, in the condition or state in
which they are at the Date of Occupancy by Tenant, without representation or
warranty, expressed or implied, oral or written, in fact or in law, by the
Landlord, and without recourse to the Landlord as to the nature, condition or
usability thereof or as to the use or uses to which the Leased Premises or any
part thereof may be put.
15. RELOCATION
Landlord shall have the right at any time either during the Term or
prior to the Commencement Date thereof, to change the location of the Leased
Premises as set forth in Article 1.2 hereof to comparable premises in the
Building or in any of Landlord's other buildings or in any other building in
which Landlord has an interest. Should Landlord desire to move Tenant after the
Commencement Date, Landlord shall pay all reasonable transporta-
<PAGE> 13
Montreal Industrial Lease
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tion, telephone installation and reasonable printing costs relating to
letterheads and business cards in stock, as well as reasonable printing costs of
notice of change of address to Tenant's customers, provided Tenant submits proof
of payment of said costs.
16. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1604(2), 1605 and 1627 of
the Civil Code of Lower Canada, the Tenant shall, at its own expense, operate,
maintain and keep the Leased Premises including all facilities, equipment and
services, both inside and outside, available to the Tenant exclusively, in such
good order and condition as they would be kept by a prudent owner and Tenant
shall promptly make all needed repairs and replacements to the Leased Premises
(save and except for those structural repairs and replacements that are
exceptional, nonrecurring and result from latent defects) which a careful owner
would make, including without limitation, the water, gas, drain and sewer
connections, pipes and mains, electrical wiring, water closets, sinks and
accessories thereof, and all equipment belonging to or connected with the Leased
Premises or used in its operation.
17. INSPECTION AND REPAIR
Landlord and its representatives shall have the right, during all
reasonable business hours during the Term, to enter the Leased Premises to
examine the condition thereof and to ascertain whether Tenant is performing its
obligations hereunder, and Tenant shall make any repairs which Tenant is obliged
to make pursuant to the terms of this Lease. If Tenant fails to make any such
repairs within thirty (30) days after written notice from Landlord requesting
Tenant to do so, provided that such repairs may reasonably be made within the
said period. Landlord may, without prejudice to any other rights or remedies it
may have, make such repairs and charge the cost thereof to Tenant. Nothing in
this Lease shall be construed to obligate or require Landlord to make any
repairs for which the Tenant is responsible hereunder but Landlord shall have
the right at any time to make emergency or urgent repairs without prior notice
to Tenant and charge the cost thereof to Tenant. Any costs chargeable to Tenant
hereinabove shall be payable forthwith on demand as Additional Rental and shall
bear interest from the date of such demand at the prime lending rate as
determined by the Royal Bank of Canada on a daily basis plus four percent (4%)
until paid to Landlord in full.
18. ODOURS, DUST OR NOISE
The Tenant warrants that no noxious/obnoxious odours, dust or noise
will emanate from the leased Premises as a result of the operations conducted by
the Tenant therein and Tenant further covenants that it will not cause or
maintain any nuisance in, at or on the Leased Premises and/or the Property and
Tenant further warrants that it will not use the Leased Premises for any purpose
or in any manner notwithstanding anything stated in this Lease which may cause
noise, disturbance or noxious/obnoxious odours to the discomfort of other
tenants, neighbours or to the public in general. Accordingly, the Tenant agrees
that should such noxious/obnoxious odour, dust or noise conditions exist, or
should Landlord receive any complaint of odours, dust, noise or any other
nuisance, Tenant will, at its own cost and expense, take such steps as may be
necessary to rectify the same, including any expertise Landlord may require,
which expertise must be acceptable to Landlord, provided further that if the
Tenant shall fail to commence to do so within forty-eight (48) hours and
complete the same within a reasonable time after notice is received by the
Tenant from the Landlord, then the Landlord may at its option and without
prejudice to its other rights and recourses:
(a) notify Tenant that it must shut down all its operations in the
Leased Premises; and
(b) Landlord may proceed forthwith to take reasonable
<PAGE> 14
Montreal Industrial Lease
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measures to correct the same at Tenant's cost as Additional
Rental.
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION
The Tenant shall not place or leave or permit to be placed or left in
or upon any part of the Property outside of the Leased Premises any debris or
refuse except as allowed by the Landlord at specific times and deposited in
areas indicated by the Landlord in proper receptacles provided and placed for
that purpose by the Tenant and Tenant shall furthermore comply with any of
Landlord's rules and regulations with respect to garbage containers. The Tenant
shall arrange and pay for the cost of those services required to remove
diligently and efficiently all of Tenant's garbage and refuse of any nature
whatsoever.
Tenant, at its sole cost shall keep, the Leased Premises shall be kept
in a clean and sanitary condition and in accordance with the laws of the
municipality in which the Property is located and in accordance with all other
regulations of any agency having jurisdiction over the Property and in
accordance with the instructions, policies and recommendations of Landlord's
insurers. If any such laws, instructions, policies and recommendations by
Landlord's insurers require any changes whatsoever to the Leased Premises, the
Tenant shall effect such changes at its own expense but subject to the approval
of the Landlord. The Tenant agrees to provide strict measures for rat prevention
and pest control and shall, if the Landlord deems the same to be necessary,
enter into a regular contract with a firm of exterminators acceptable to
Landlord. In the event that the Tenant fails to comply with the foregoing
provisions, then Landlord, without prejudice to all of its other rights and
recourses, shall have the right, without prior notice to the Tenant, to engage a
firm of exterminators and to enter the Leased Premises with representatives of
said firm in order to rectify the situation, the whole at Tenant's cost as
Additional Rental.
20. ACCESS
The Landlord shall have the right of access to the Leased Premises only
during reasonable business hours (except in the case of an emergency when
Landlord shall have access at all times), and the right to perform such work as
it chooses to do upon the Leased Premises, the Tenant renouncing any claim to
any indemnity or reduction in rental provided such work be carried out with
reasonable diligence.
21. PARKING
Parking shall be regulated by the Landlord in a reasonable manner and
the Tenant and its customers shall abide by such regulations as may from time to
time be established by the Landlord. If requested by the Landlord, the Tenant
shall supply its employees' automobile licence numbers to the Landlord. Tenant
shall indemnify and hold Landlord harmless from any claims should Landlord find
it necessary to tow away from a restricted area any vehicle belonging to Tenant
or to its customers.
The Tenant acknowledges that the parking of its vehicle(s) and those of
its customers in the parking facilities shall be at the risk and peril of Tenant
and/or its customers, and that the Landlord shall not be responsible for any
damages or loss whatsoever, whether caused by theft, fire or any other cause, to
the Tenant's vehicle(s) or to those of its customers or to any property found in
Tenant's vehicle(s) or those of its customers or for any injury to Tenant or
other Persons on or in the immediate vicinity of the parking facilities and
Tenant hereby releases Landlord of all liabilities of whatsoever nature with
respect to the above.
Notwithstanding anything contained herein. Tenant agrees to participate
in a ticket validation system if one is established by the Landlord for the
parking facilities of the Property, and to pay forthwith on demand as Additional
Rental, all attributable parking charges.
<PAGE> 15
Montreal Industrial Lease
Page 12
22. SIGNS OF LANDLORD
Landlord shall have the right, at all times, to place upon the Property
a notice of reasonable dimensions and reasonably placed in order not to
interfere with the business of Tenant, stating that the Property is for sale
and/or rent, and Landlord shall have the right, during the last six (6) months
prior to the Termination Date, to place upon the Leased Premises a notice of
reasonable dimensions and reasonably placed stating that the Leased Premises are
for rent and Tenant will not remove any such notice or knowingly permit either
of them to be removed.
Landlord shall have the right to exhibit the Leased Premises from time
to time to any prospective tenant or hypothecary creditor during all business
hours of the Tenant and Tenant hereby renounces to Article 1645 of the Civil
Code of Lower Canada.
23. SIGNS OF TENANT
The Tenant shall be entitled, at its expense, to install on the Leased
Premises such signs as are normally installed in connection with its business,
as well as to identify itself on the exterior front of the Building provided
such signs comply with municipal by-laws and with the Rules and Regulations as
established from time to time by Landlord in accordance with the Article
entitled "Rules and Regulations", and provided further that the Tenant obtains
Landlord's consent for both the sign and its location. Furthermore, the
authorization to install a sign will be issued in exchange for a deposit
equivalent to the estimated cost of the repair of the supporting Building
surface following the removal of the sign and Landlord shall not pay any
interest to Tenant on said deposit. The installed sign must be subject to
inspection by the Landlord who will proceed to the inspection upon receipt of
proof of municipal permit and, in the case of electrified signs, of proof of
approval by the Canadian Standards Association or other governing body.
Except as provided above and unless specifically provided for in this
Lease. Tenant shall not be entitled to install or put up any signs or posters of
whatsoever nature on the windows of the Leased Premises and/or the Building
and/or the Property.
All civic numbers are supplied and installed at Tenant's expense by the
Landlord according to its standards. The Tenant's identification at the rear of
the Building is also supplied and installed by the Landlord at Tenant's expense
according to Belcourt's standard # 20.11.87 attached to the Rules and
Regulations in Schedule E.
In the event that Tenant installs any sign without satisfying the
requirements of this Article, Tenant shall remove such sign upon receipt of
Landlord's notice. If Tenant fails to remove such sign within twenty-four (24)
hours of receipt of Landlord's notice, then Landlord shall have the right,
without further notice or any form of legal process, to remove same at Tenant's
expense and to repair any damages caused by such removal. Landlord shall not be
responsible for damages to Tenant's property or sign resulting from such
removal. Tenant expressly waives its recourse in damages against the Landlord
and shall hold Landlord harmless of any claim by any third party with respect to
the said sign. Tenant shall immediately pay Landlord for all costs described
hereinabove, upon demand, as Additional Rental.
24. LANDLORD'S WORK
The Leased Premises shall be delivered in an "as is" basis and Tenant
accepts same in the condition in which they are at the signing of these
presents.
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25. IMPROVEMENTS AND ALTERATIONS
(a) The Tenant shall not have the right to execute any changes,
alterations, additions, erections, leasehold improvements, repairs and
installations to the Leased Premises (hereinafter the "Work"), unless
it has obtained Landlord's prior written consent. In the event Landlord
consents to such Work, then Tenant undertakes to conform to the
conditions stipulated hereunder.
(i) All Work shall be carried out with reasonable
dispatch and in a good workmanlike manner and in
compliance with all applicable permits,
authorizations, building and zoning by-laws and with
all regulations and requirements of all competent
authorities having jurisdiction over the Leased
Premises:
(ii) The Property shall at all times be free of all
pledges, registered privileges and any other
encumbrances.
(iii) If the cost of any Work shall be in excess of five
thousand dollars ($5,000.00) as reasonably estimated
by Landlord, Landlord may require Tenant to furnish
security satisfactory to Landlord guaranteeing the
completion of the Work, the payment of the cost
thereof and that the Property is free and clear of
all pledges, registered privileges and any other
encumbrances;
(iv) Tenant shall maintain workmen's compensation
insurance covering all persons employed in connection
with the Work and shall produce evidence of such
insurance to Landlord and Tenant shall also maintain
such general liability insurance for the protection
of Landlord and Tenant upon the terms Landlord may
reasonably require, as well as contractor's
protective liability insurance. Tenant shall further
comply with all of the stipulations of the Article
entitled "CSST" (Commission de la Sante et de la
Securite au Travail du Quebec);
(v) The Tenant shall promptly pay for all materials
supplied and work done in respect of the Leased
Premises in order to ensure that no privilege is
registered against any portion of the Property. If a
privilege is registered or filed, the Tenant shall
forthwith discharge it at its expense, failing which
the Landlord may, at its option, discharge the same
by paying the amount claimed to be due into court or
directly to any such privilege claimant and the
amount so paid and all expenses of the Landlord
including any judicial and extrajudicial costs and
attorney's fees incurred by the Landlord shall be
paid by the Tenant to the Landlord within five (5)
days after demand.
It is agreed and understood that no Work by or on
behalf of Tenant shall be permitted which, in Landlord's sole
judgement, may weaken or endanger the structure or adversely affect the
condition or operation of the Leased Premises and/or the Property or
diminish the value thereof or restrict or reduce Landlord's coverage
for insurance purposes.
(b) Notwithstanding the contents of (a) above, Landlord may, at its
sole option and discretion, execute itself or inspect any Work approved
by Landlord, in which event the Tenant shall pay for the costs of
either the Work or the inspection thereof, and, in the event that
Landlord executes the Work, Tenant shall pay an additional amount equal
to twenty per cent (20%) of the costs of said Work on account of
Landlord's overhead and administration costs. However, whether or not
Landlord carries out or inspects the Work, the Tenant
<PAGE> 17
Montreal Industrial Lease
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shall pay the fees of all architectural and engineering
consultants and/or the cost of all construction drawings
prepared to comply with the Tenant's requirements and for the
cost of entering the information of such drawings on the
original drawings of the Building, as well as twenty per cent
(20%) of such costs on account of administration and general
expenses of Landlord. Payment shall be effected by way of a
cash deposit and progress draws during the course of the Work,
the specifics of which shall be established by the Landlord,
acting reasonably, from time to time.
(c) Any Work by the Tenant made without the prior written
consent of the Landlord, or which is not made in accordance
with the design criteria and specifications approved by the
Landlord, shall be removed by the Tenant immediately upon
demand and the Leased Premises shall be restored to their
previous condition by Tenant, the whole at the Tenant's cost,
failing which Landlord shall have the right to remove said
Work at Tenant's entire cost and Landlord shall not be
responsible for damages to Tenant's property resulting from
such removal.
(d) Notwithstanding anything contained in this Article, Tenant
shall not have the right to do any structural, mechanical or
electrical Work in the Leased Premises.
In the event that Tenant requests any structural,
mechanical or electrical Work. Landlord, at its sole option
and discretion, shall be entitled to execute said Work. Said
Work shall be governed by the provisions of sub-paragraphs (b)
above.
In the event that Landlord does not choose to execute
said Work and consents to having Tenant execute same, then
Tenant shall furnish to Landlord plans and specifications
showing in reasonably complete detail the Work proposed to be
carried out and the estimated cost thereof. Landlord shall
approve or reject such plans and specifications within thirty
(30) days after receipt of the same. If such plans and
specifications are approved, all Work shall be carried out in
compliance with the same. Furthermore, in the case where
Tenant is authorized to carry out said Work, Tenant shall, at
its cost, provide Landlord with an engineer's certificate upon
completion of said Work. Any costs incurred by Landlord of any
nature whatsoever in order to permit Landlord to approve or
reject Tenant's plans and specifications shall be reimbursed
by Tenant immediately upon Landlord's request. In addition to
the above, Tenant shall comply with all the conditions
stipulated in (a) and (c) above.
It is agreed and understood that when completed, all Work
shall be comprised in and form part of the Leased Premises and be subject to all
the provisions of this Lease. Furthermore, any authorization given by Landlord
to Tenant to do any Work in accordance with this Article, shall not relieve
Tenant of its responsibility for the Work in question.
Subject to the terms and conditions of this Article, in the
event that the Tenant constructs a mezzanine in the Leased Premises, the Tenant
will pay the amount of any increase in Taxes on the whole of the Building of
which the Leased Premises form part, if such increase is caused by the
construction or occupancy of said mezzanine. Furthermore, the Tenant will pay
for any increase in Operating Costs resulting from the construction or occupancy
of the said mezzanine.
Tenant shall not make use or cause to be removed any part or
all of the calling system for any purposes, including that of storage.
Moreover, Tenant shall pay to Landlord the amount of any
increase for any Taxes to the extent that such increase in directly attributable
to any action by Tenant under this Article.
<PAGE> 18
Montreal Industrial Lease
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26. CSST (COMMISSION DE LA SANTE ET DE
LA SECURITE AU TRAVAIL DU QUEBEC)
Tenant shall ensure itself that its contractor and/or subcontractors
comply with all the requirements established by La Commission de la Sante et de
la Security au Travail du Quebec (hereinafter the "CSST") and more specifically.
Tenant shall ensure itself that its contractor and/or subcontractors have
instituted a safety program for its employees. Tenant shall provide proof to
Landlord, upon demand, that all requirements of the CSST have been met. It is
expressly understood that Tenant shall indemnify and hold Landlord harmless from
any proceedings, claim or demand which could be instituted against Landlord for
the failure of Tenant's contractor and/or subcontractors to comply with CSST's
requirements and the Tenant shall pay upon demand any judicial or extrajudicial
costs so incurred by Landlord.
27. INSURANCE REQUIREMENTS
Tenant shall not do or commit any act upon the Leased Premises or bring
into or keep upon the Leased Premises any article which will affect the fire
risk or increase the rate of fire insurance or other insurance on the Property.
Tenant shall not commit any act upon the Leased Premises or make any
use thereof which may make void or voidable any insurance on the Leased Premises
or on the Building or Property and should any act so committed or any use so
made by Tenant, including any unauthorized vacancy thereof, result in an
increased or extra premium payable for insurance on the Leased Premises,
Building or Property, then Landlord may, in addition to all other remedies,
elect to pay the amount of such increase or extra premium, the amount so paid
becoming immediately due and payable by Tenant and collectible as Additional
Rental.
Tenant shall comply with the rules and requirements of the
insurers' Advisory Organization of Canada or any successor body, and/or a loss
prevention firm or consultant chosen by Landlord' insurers, and with the
requirements of all insurance companies having policies of any kind whatsoever
in effect covering the Property, including policies insuring against
contractual liability.
In no event shall any inflammable material, except for kinds and
quantities permitted by the insurance policies covering the Property, or any
explosives or radioactive material whatsoever, be taken into the Leased
Premises or retained therein.
Tenant shall take out and keep in force the following insurance:
(a) comprehensive general liability insurance including blanket
contractual liability and broad form property damage coverage,
with respect to the business carried on in or from the Leased
Premises and the use and occupancy thereof, for bodily injury
and death and damage to property of others in an amount of at
least two million dollars ($2,000,000.00) for each occurrence
or such greater amount as Landlord may, from time to time,
reasonably require:
(b) an "all risks" insurance with extended coverage including the
perils of fire, leakage from sprinklers and other fire
protective devices, earthquake, collapse, flood and sewer
back-ups in respect to furniture, equipment, inventory and
stock in trade, fixtures (plate glass if appropriate) and
leasehold improvements located within the Leased Premises and
such other property located in or forming part of the Leased
Premises, including all mechanical or electrical systems (or
portions thereof) installed by Tenant in the Leased Premises,
the whole for the full replacement value
<PAGE> 19
Montreal Industrial Lease
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thereof (without depreciation) in each such instance;
(c) Tenant's legal liability insurance in an amount equal to the
replacement cost of the Leased Premises or such greater amount
as Landlord may, from time to time, reasonably require;
(d) an environmental liability policy of a coverage of at least
one million dollars ($1,000,000.00); and
(e) such additional insurance as Landlord or its insurers, acting
reasonably, may from time to time require.
All the above-mentioned policies of insurance shall (i) be in form
satisfactory to Landlord; (ii) be placed with insurers acceptable to Landlord
and (iii) provide that they will not be cancelled or permitted to lapse unless
the insurer notifies Landlord in writing at least sixty (60) days prior to the
date of cancellation or lapse. Each such policy shall name Landlord and any
other party required by Landlord, as an additional insured as their interest may
appear. Each liability policy will contain a provision of cross-liability and
severability of interest as between Landlord and Tenant. All other policies
referred to above shall contain a waiver of subrogation rights which Tenant's
insurers may have against Landlord, Landlord's insurers and any Persons for whom
Landlord is responsible. Notwithstanding anything to the contrary contained in
this Lease. Tenant hereby releases and waives any and all claims against
Landlord and any Persons for whom Landlord is responsible with respect to
occurrences which are or which are required to be insured against by Tenant
hereunder. Tenant shall provide Landlord with copies of each insurance policy
referred to above upon execution of said policy and at the latest fifteen (15)
days prior to the Tenant's occupation of the Leased Premises. It is understood
that no review or approval of any insurance certificate or policy by Landlord
shall derogate from or diminish Landlord's rights under this Lease.
Tenant agrees that if Tenant fails to take out or to keep in force such
insurance Landlord may, at its sole option and discretion, do so and pay the
premium therefor and in such event Tenant shall repay to Landlord the amount
paid as a premium, which repayment shall be collectible as Additional Rental.
28. CANCELLATION OF INSURANCE
If any insurance policy mentioned in the preceding Article and/or any
insurance contracted by Landlord or any part of it is cancelled and/or
threatened to be cancelled by the insurer, or if the coverage under it is
reduced in any way by the insurer because of the use or occupation of any part
of the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to the cancellation, threatened cancellation or reduction of coverage
within forty-eight (48) hours after notice from the Landlord, the Landlord may,
either:
(a) enter and take possession of the Leased Premises immediately
by leaving upon the Leased Premises a notice of its intention
to do so, upon which the Landlord will have the same rights
and remedies that are available to him under this Lease or in
virtue of the law; or
(b) enter upon the Leased Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or reduction
of coverage and the Tenant will immediately pay the costs to
the Landlord, together with a fee of fifteen percent (15%) of
such costs representing the Landlord's overhead, which costs
may be collected by the Landlord as Additional Rental, and the
Landlord will not be liable for any damage caused to any
property of the Tenant or others located on the Leased
Premises as a result of the entry.
<PAGE> 20
Montreal Industrial Lease
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29. DAMAGE OR DESTRUCTION
29.1 If the Leased Premises are at any time destroyed or damaged, the
following provisions will apply:
(I) if, in the opinion of the Landlord, the Leased Premises are
fit for tenancy in whole or in part, the Lease shall continue
in full force and effect without abatement or diminution of
any Minimum Net Net Rental or Operating Costs and Taxes:
(ii) if, in the opinion of the Landlord, the Leased Premises are
rendered partly unfit for tenancy, this Lease shall continue
in full force and effect, except that Minimum Net Net Rental
and Operating Costs and Taxes will abate to the extent
Landlord's Architect determines that the Leased Premises
cannot reasonably be used for their intended purposes.
(iii) if Landlord determines that the Leased Premises are rendered
wholly unfit for tenancy, this Lease shall continue in full
force and effect, except that Minimum Net Net Rental and
Operating Costs and Taxes will fully abate;
(iv) all abatements will occur from the date of the damage or
destruction until the earlier of the date that the Leased
Premises are delivered to Tenant or the date of termination of
the period of indemnity under Landlord's insurance policy for
business interruption and/or loss of rentals:
(v) Landlord will commence and proceed diligently to reconstruct,
rebuild or repair any damage to the Leased Premises to meet
Landlord's base building criteria for that Property which
Landlord may modify to be consistent with the plans,
specifications and design criteria for the rebuilding of the
Building and/or the Leased Premises, chosen by Landlord acting
reasonably;
(vi) to restore the Leased Premises. Landlord will be under no
obligation to perform work other than that stipulated in
sub-paragraph (v) above;
(vii) whether or not the damage to the Leased Premises may have been
caused by Tenant's negligence or fault. Tenant shall commence
to repair, rebuild or reconstruct, at its own cost, all
leasehold improvements, fixturing and equipment in the Leased
Premises within fifteen (15) days from Landlord's notice that
Landlord has completed its work and Tenant shall complete said
work within thirty (30) days from Landlord's notice;
(viii) Tenant shall not be entitled to any allowances, inducement,
payment or other consideration from Landlord in connection
with Tenant's work described in sub-paragraph (vii) above,
even if sucy allowance, inducement, payment or other
consideration was made at the time of original construction of
the Leased Premises.
29.2 Despite any provision to the contrary contained in this Lease and,
specifically but without limitation, anything contained in the present Article,
if the Property is totally or partially damaged or destroyed (whether the Leased
Premises are affected or not), and:
(I) in the Landlord's opinion, the damaged or destroyed portions
cannot reasonably be repaired, restored or rebuilt within one
(1) year following the occurrence without overtime or other
special arrangements; or
<PAGE> 21
Montreal Industrial Lease
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(ii) the cost, as estimated by the Landlord, of repairing,
restoring or rebuilding the damaged or destroyed portions will
exceed the proceeds of insurance available to Landlord for
such purposes or the damages or destruction was caused by a
peril which is not covered by Landlord's insurance; or
(iii) less than two (2) years remain during the Term.
then in any of the above cases, Landlord may, at its option (to be
exercised by written notice to Tenant within ninety (90) days following
any such occurrence) elect to terminate this Lease.
If Landlord elects to terminate this Lease, then the following will apply:
(iv) if the Leased Premises have been rendered wholly unfit for
tenancy, the termination will take effect from the date of the
damage or destruction and all Minimum Net Net Rental and
Operating Costs and Taxes will be adjusted to that date;
(v) if the Leases Premises have been rendered only partly unfit
for tenancy and Tenant has occupied or has been reasonably
capable of occupying any part of the Leases Premises from the
date of the damage or destruction, the Lease will terminate
ten (10) days from Landlord's notice. All unabated Minimum Net
Net Rental and Operating Costs and Taxes will be adjusted to
the date of termination. Minimum Net Net Rental and Operating
Costs and Taxes will abate from the date of the damage and
destruction until the date of termination to the extent the
Leased Premises cannot reasonably be used for their intended
purposes;
(vi) if the Leased Premises were not rendered wholly or partly
unfit for tenancy, the Lease will terminate ten (10) days from
Landlord's notice and all Minimum Net Net Rental and Operating
Costs and Taxes will be adjusted to that date;
Landlord may, at its sole option, rather than elect to terminate this
Lease, relocate Tenant to premises reasonably similar to the Leased Premises
within the same general vicinity of the Leased Premises for a period
corresponding to the unexpired Term of this Lease or until such time as Landlord
has reconstructed the Leased Premises.
If the Property is totally or partially damaged or destroyed and
Landlord does not elect to terminate this Lease, subject to paragraph (viii)
below, Landlord shall commence and proceed diligently to reconstruct, rebuild or
repair, as necessary, those portions of the Property which have been so damaged
or destroyed in accordance with Landlord's base building criteria for said
Property, exclusive of obligations of tenants in respect of the Property
pursuant to any Lease. Furthermore, if the Leased Premises are being repaired,
rebuilt or reconstructed, the provisions of the present Article relating to the
Leased Premises shall apply.
(vii) Tenant acknowledges and agrees that if Landlord does any
reconstruction, rebuilding or repairing of the Property,
Landlord may do any one or more of the following:
(a) use plans, specifications and working drawings which
differ from those applicable to the Property in
existing prior to the damage or destruction;
<PAGE> 22
Montreal Industrial Lease
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(b) change the configuration, design and/or size of the
Property or any of its component parts to suit
Landlord's needs at the time, including, without
limitation, the location and size of any court,
entrance, parking facility or any other Common Area
or Facility;
(c) redesign the tenant mix to suit Landlord's needs at
the time of reconstruction, with respect to the kinds
of uses which will be included in the tenant mix and
rearrange the locations in Property in which various
types of uses shall be permitted.
In the present Article, the Landlord's opinion shall be final and
binding on the parties. It is further understood and agreed that nothing herein
shall oblige Landlord, under any circumstances and in any manner whatsoever, to
spend an amount greater than the proceeds of insurance received by Landlord as a
result of the damage or destruction described in the present Article for any
reconstruction contemplated herein.
Tenant agrees that none of the foregoing shall constitute a change of
form or destination, nor shall the validity or enforceability of this Lease be
affected in any manner by any of the foregoing.
30. TRANSFER CONSENT REQUIRED
No Transfer of this Lease shall be effected by Tenant without the prior
written consent of the Landlord in each instance, which consent may not be
unreasonably withheld.
Landlord's refusal of consent shall be deemed reasonable (without in
any way restricting Landlord's right to refuse its consent on other reasonable
grounds) under the following circumstances.
(a) where the Transferee proposed by Tenant is then a tenant of
the Property and Landlord has or will have during the next six
(6) months suitable space for rent in the Property;
(b) where Tenant is in default under any provisions of this Lease;
(c) where the Landlord has reasonable grounds to believe that the
proposed Transferee does not possess the financial means
necessary to fulfill all its financial obligations herein;
(d) where the Transfer applies to part of the Leased Premises
only;
(e) where the proposed Transferee's use of the Leased Premises
violates any laws or rights granted to other tenants or
retained by Landlord, or where such use may be disruptive or
objectionable to other tenants or to the Landlord, or where
such use shall detract from the dignity or character of the
Property;
(f) where the Landlord has not obtained the consent of a secured
creditor or any Person who may have the right to approve the
Transfer;
(g) where a previous Transferor or guarantor does not approve the
Transfer and/or refuses to remain jointly and severally liable
towards Landlord for the execution of Tenant's obligations
under this Lease and/or refuses to sign a Transfer document to
that effect.
<PAGE> 23
Montreal Industrial Lease
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If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, with Landlord's consent, of this Lease or of any interest
hereunder, then the Tenant undertakes not to print, publish, post, display or
broadcast any notice or advertisement or otherwise advertise the whole or any
part of the Leased Premises for purposes of a Transfer, and shall not permit any
broker or other Person to do any of the foregoing, unless the complete text and
format of any such notice, advertisement, or offer is first approved in writing
by the Landlord. Without in any way restricting or limiting the Landlord's right
to refuse any text or format on other grounds, any text or format proposed by
the Tenant shall not contain any reference to the rental rate of the Leased
Premises. Notwithstanding anything contained herein, no sign shall be posted,
affixed, displayed or inscribed in any manner whatsoever on the Leased Premises
or the Property advertising that the Leased Premises are for rent.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, of this Leases or of any interest hereunder, then, and as often
as such event shall occur, the Tenant shall give prior written notice to the
Landlord of such intent, specifying therein the proposed Transferee, providing
such information with respect thereto, including without limitation, information
concerning the principals thereof and as to any credit, financial or business
information relating to the proposed Transferee as the Landlord or the
hypothecary creditor requires, and shall pay Landlord in advance for the cost of
Landlord's inquires as well as its processing fee for the examination of
Tenant's request, and the Landlord shall, within thirty (30) days following the
completion of Landlord's study of Tenant's request, notify the Tenant in writing
that:
(a) it consents or does not consent to the Transfer in accordance
with the provisions and qualifications of this Article;
(b) it elects to cancel this Lease in preference to giving such a
consent.
The mere occupation of all or part of the Leased Premises or Landlord's
tolerance thereof, the payment of any amount by the proposed Transferee to
Landlord, or the consent to any previous Transfer shall not constitute a waiver
of Tenant's obligation to obtain Landlord's consent to any Transfer, nor will
any of the foregoing be construed to constitute a consent by Landlord to the
proposed Transfer. Nevertheless, whether or not Landlord consents to any
Transfer, it may collect rent or other amounts from any proposed Transferee and
apply the said amount to the amounts payable under this Lease, without in any
manner prejudicing any of its rights. This prohibition against a Transfer is
construed in a manner to include a prohibition against any Transfer by operation
of law, and no Transfer shall take place by reason of a failure by the Landlord
to reply to a request by the Tenant for consent to a Transfer.
Notwithstanding any such Transfer consented to by the Landlord, no
acceptance by the landlord of any payments by a Transferee shall be deemed a
waiver of the requirements contained herein or a release of the Tenant from the
further performance by the Tenant of the obligations on the part of the Tenant
herein contained and the Tenant shall be jointly and severally liable with the
Transferee for all of the Tenant's obligations stipulated in the Lease and shall
not be released from performing any of the obligations under the Lease during
the Term.
In addition to any of the requirements stipulated herein, Landlord's
consent to the Transfer is conditional upon Tenant and Transferee signing with
Landlord a document prepared by Landlord evidencing such Transfer, and Tenant
undertakes to cause the Transferee to promptly sign said document in which
Transferee shall agree to be bound directly with Landlord to all of the
obligations contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. The above-mentioned document shall further
<PAGE> 24
Montreal Industrial Lease
Page 21
provide that the Tenant transfers to the Transferee any rights it may have with
respect to the Deposit retained by Landlord pursuant to this Lease and Tenant
renounces all of its rights thereto. In addition thereto, the Transferee may be
required by Landlord to supplement any security deposit given in this Lease.
Should the Minimum Net Rental per square foot to be paid by a
Transferee, whether in cash, goods, services or other consideration, exceed the
Minimum Net Net Rental per square foot payable hereunder, then Tenant shall pay
to Landlord monthly, as Additional Rent, the amount of or an amount equivalent
to such excess.
Notwithstanding anything contained in this Article, the Tenant may
sublet the Leased Premises or assign the Lease to a parent, subsidiary or
affiliate company without seeking the consent of the Landlord provided, however,
that such sub-tenant or assignee shall remain bound jointly and severally with
the Tenant for all the terms and covenants of this Lease, and provided further
that Tenant shall notify Landlord in writing prior to such sublet or assignment.
Upon the execution of this Lease and each succeeding anniversary date
or at any sooner time requested by the Landlord, the Tenant shall deliver to the
Landlord a statement, certified as being true and correct and verified by the
corporate secretary, showing the names of all existing shareholders of record
and their respective ownership interests as at that date. The Tenant shall, at
the request of the Landlord, make available to the Landlord for inspection or
copying or both, all books and records of the Tenant which, alone or with other
data, show the applicability or inapplicability of this Article. If any
shareholder of the Tenant shall, after the request of the Landlord to do so,
fail or refuse to furnish forthwith to the Landlord any data verified by the
affidavit of such shareholder or other credible person, which data, alone or
with other data show the applicability or inapplicability of this paragraph, the
Landlord may terminate this Lease by giving the Tenant prior written notice of
thirty (30) days of such termination.
31. PRIVILEGE OF LANDLORD
Tenant covenants to furnish the Leased Premises with and to maintain at
all times thereon, a sufficient quantity of furniture, fixtures and other
effects to secure the payment of at least six (6) months of Minimum Net Net
Rental and Additional Rental which shall at all times be free and clear of all
Tenant Security and shall be subject to a privilege in favour of the Landlord
for the payment of Minimum Net Net Rental and Additional Rental and the
fulfillment of all other covenants and agreements herein contained.
32. ASSIGNMENT BY LANDLORD
Landlord declares that it may assign its rights under this Lease to a
lending institution or to any Person as collateral security for a loan to
Landlord and, in the event that such an assignment is given and executed by
Landlord and notification thereof is given to Tenant by or on behalf of
Landlord, it is expressly agreed that this Lease shall not be cancelled or
modified for any reason whatsoever without consent in writing of such lending
institution or Person if such consent is required.
This Lease and all rights of the Tenant under the Lease shall be
subject to and subordinate to any Security. Tenant hereby covenants and agrees
that it will, whenever reasonably required by landlord and at Landlord's
expense, consent to and become a party to any instrument subordinating the Lease
to any Security. However, no subordination by the Tenant shall have the effect
of permitting the holder of any Security to disturb the Tenant's enjoyment of
the Leased Premises as long as the Tenant shall comply with the covenants to be
kept and performed by it under this Lease.
<PAGE> 25
Montreal Industrial Lease
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The Tenant will, upon request of the Landlord or the Person holding the
Security or any Person having an interest in the project, execute and deliver
promptly those instruments referred to herein. However, if ten (10) days after
the date of request, the Tenant has not executed and delivered them, the Tenant
hereby irrevocably appoints the Landlord as the Tenant's attorney with full
power and authority to execute and deliver in the name of the Tenant said
instruments or the Landlord may, at its sole option and discretion, terminate
this Lease upon giving Tenant forty-eight-hour (48) notice of its intention to
do so, the whole without incurring any liability whatsoever and without
prejudice to all of its other rights and recourses.
It is agreed and understood that in the event of any sale of the
Property by Landlord, then Landlord shall automatically be relieved of any and
all obligations and liabilities under this Lease accruing from and after the
date of such date.
33. EXPROPRIATION
If the whole or any part of the Leased Premises and/or the Property
shall be condemned, expropriated or taken in any manner for any public or
quasi-public use or purpose, Landlord may, at its option, terminate this Lease
by giving public notice in writing to Tenant that the Term hereof shall expire
upon the day when possession is required for such purpose and in the event of
such expiration Landlord shall have no liability of any nature to Tenant
resulting from said expiration.
34. EXTENSIONS
The Landlord shall have the right, at its option and from time to time,
to make extensions and/or additions and/or to add one or more additional floors
or storeys onto all or part of the building comprising the Leased Premises, or
on to any other buildings of the Property, or to add one or more buildings to
the Property. In the event that any such extensions and/or additions be made to
the building comprising the Leased Premises or to any other buildings of the
Property and/or in the event any such additional building or buildings shall be
erected on the Property, the Landlord may, at its sole option and discretion,
include in the denominator for the purpose of calculating Tenant's Proportionate
Share of Operating Costs and Taxes, the total leasable area of all or part of
the buildings erected on the Property.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which
<PAGE> 26
Montreal Industrial Lease
Page 23
may be caused to the Tenant, provided always that the required work is carried
out within a reasonable delay and that this Article shall not absolve or release
the Landlord from liability in respect of any damage or loss caused to the
Tenant as a consequence of any negligence or fault of the Landlord, its
employees or representatives. If the Tenant loses the use of any part of the
Leased Premises during the making of such additions and/or extensions, the
Tenant shall be granted a proportionate reduction in Minimum Net Net Rental as
compensation for loss of use (during the period and for the area of loss of use
only); all of the foregoing without any other claims by the Tenant against the
Landlord for damage and loss of use.
Without limiting the generality of the foregoing, the Landlord hereby
reserves the right, at any time and from time to time, to make changes in,
additions to, subtractions from or rearrangements of the Building including,
without limitation, all improvements at any time thereon, all entrances and
exits thereto, and to grant, modify and terminate any servitudes or other
agreements pertaining to the use and maintenance of all or parts of the Building
and to make changes or additions to the pipes, conduits, wires, ducts, utilities
and other necessary building services in the Leased Premises which serve other
premises. The Landlord agrees that in performing such alterations, it shall do
so in such manner as to minimize any material interference with the Tenant's use
and enjoyment of the Leased Premises. The Landlord shall not, however, be
responsible for any damages of whatsoever nature to Tenant except for physical
damages to the Leased Premises.
The Landlord shall further have the right from time to time to sever
any part or parts of the Property or any Building or improvements thereon for
purposes of sale, lease, hypothec, privilege, charge or otherwise, including the
creation of rights-of-way, servitudes and parking arrangements which the
Landlord deems necessary and the Tenant hereby consents to any such severance
and agrees to execute any documents or consents which the Landlord may request
for these purposes. If any part or parts of the Property or the Building or
improvements on the Property are so severed and are deemed by the Landlord to no
longer form part of the Property, such part or parts shall be excluded from the
Property for the purposes of this Lease at the time designated by the Landlord
and the Tenant shall, when requested by the Landlord, execute a release of any
interest in the Property so executed.
35. DEFAULT
The following shall be considered a default under the terms of this
Lease:
(a) In the event that Tenant shall be in default under any
provision of this Lease providing for the payment of Minimum
Net Net Rental and/or Additional Rental;
(b) In the event Tenant does not take possession of the Leased
Premises or abandons or attempts to abandon the Leased
Premises before the Termination Date, with or without
Landlord's knowledge; or in the event the Leased Premises are
used by any Person other than the Person entitled to use them
hereunder; or any procedure in execution is issued pursuant to
a judgment rendered against Tenant; or if an agent, receiver
or trustee acting under a trust deed or other security, takes
possession of the Tenant's assets and/or any equipment,
fixtures, furniture or movable effects in the Leased Premises;
or if the Tenant shall make a bulk sale of its goods; or if
the Tenant should attempt to move its belongings out of the
Leased Premises;
<PAGE> 27
Montreal Industrial Lease
Page 24
(c) In the event that Tenant shall be in default in observing any
covenant herein contained and/or performing any of its
obligations contained in this Lease (other than a default
stipulated sub-paragraphs (a) and (b) above) and such default
shall continue for fifteen (15) days after written notice
specifying such default shall have been given by Landlord to
Tenant, unless it is impossible for Tenant to cure such
default within the said delay of fifteen (15) days, in which
case Tenant shall, upon written request to Landlord, be
entitled to such reasonable extension of time to enable such
default to be remedied.
In the event of any default on the part of the Tenant under the terms
of this Lease, Landlord shall have the right, at its sole and absolute
discretion, to terminate this Lease and in addition, Landlord may, without
notice or any form of legal process, forthwith enter upon and take possession of
the Leased Premises and operate the business and/or assume absolute ownership of
Tenant's movable effects and/or remove the Tenant's effects therefrom, any
statute or law to the contrary notwithstanding, the whole without prejudice to
and under reserve of all other rights and recourses of Landlord to claim any and
all losses and damages of any nature whatsoever sustained by the Landlord by
reason of or arising from any default of the Tenant including, without
limitation, the expenses of reletting the Leased Premises (including the costs
of any repairs, decorating, alterations or improvements necessitated thereby),
as well as attorney's fees of fifteen percent (15%) of any amount granted by
judgement. Where Landlord shall have instituted proceedings to cancel, terminate
or confirm its cancellation or termination of this Lease, notwithstanding any
law or custom to the contrary, Tenant shall not have any right to prevent such
cancellation or termination by remedying its default or defaults subsequent to
the institution of such legal proceedings.
36. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay when due any taxes, rates, insurance premiums,
charges, debts or any other amounts which it owes or has herein covenanted to
pay, all such amounts shall be deemed to be and be treated as Additional Rental
and payable and recoverable as Additional Rental. Landlord may pay the same and
shall be entitled to charge the sums so paid to Tenant who shall pay them
forthwith on demand as Additional Rental.
All arrears of Minimum Net Net Rental and Additional Rental shall bear
interest at the prime lending rate as determined by the Royal Bank of Canada on
a daily basis plus four percent (4%) from the time such arrears become due until
paid to Landlord.
37. BANKRUPTCY AND INSOLVENCY
In the event that Tenant shall be adjudicated bankrupt or make any
general assignment for the benefit of its creditors, or make a proposal to its
creditors, or take or attempt to take the benefit of any insolvency or
bankruptcy law, or if a receiver or trustee be appointed for the property of the
Tenant or any part thereof, the present Lease shall automatically terminate on
the occurrence of any of the aforesaid events without further notice or delay,
and Landlord shall be entitled to recover all arrears of Minimum Net Net Rental
and Additional Rental as well as six (6) months of future Minimum Net Net Rental
and Additional Rental or such other accelerated amount that the law may at any
time provide.
<PAGE> 28
Montreal Industrial Lease
Page 25
38. INDEMNIFICATION
Except if caused directly by the gross negligence or fault of the
Landlord, its mandatories, employees, or representatives, or by any breach or
nonperformance by the Landlord of any covenant undertaken by virtue hereof, the
Landlord shall not be liable nor responsible in any way for any injury of any
nature whatsoever that may be suffered or sustained by the Tenant or any other
Person who may be upon the Leased Premises or for any loss or damage to any
property belonging to the Tenant or to any other Person while such property is
on the Leased Premises and in particular (but without limiting the generality of
the foregoing), the Landlord shall not be liable for any damage or damages of
any nature whatsoever to any such property caused by the failure, by reason of a
breakdown or other cause, to supply adequate drainage, or by reason of the
interruption of any public utility or service or in the event of steam, water,
rain or snow which may leak into, issue or flow from any part of the Property or
from the water, steam, sprinkler, or drainage pipes or plumbing works of the
same, or from any other place or quarter or for any damage caused by anything
done or omitted by any tenant. The Landlord, however, shall use all reasonable
diligence to remedy such condition, failure or interruption of service when not
attributable to the Tenant, after notice of same, when it is within its power
and obligations to do so. The Tenant shall not be entitled to any abatement of
Minimum Net Net Rental and Tenant's Proportionate Share of Operating Costs and
Taxes in respect of any such condition, failure or interruption of service.
The Tenant will indemnify and hold Landlord harmless from and against
all fines, liability, damage suits, claims, demands and actions of any kind or
nature for which the Landlord shall or may become liable for or suffer by reason
of:
(a) any breach or nonperformance by the Tenant of any provision
hereof; and/or
(b) any injury (including death resulting at any time therefrom)
or damage to property occasioned to or suffered by any Person
including the parties hereto by reason of any such breach or
nonperformance or of any wrongful act, neglect, or fault on
the part of the Tenant; and/or
(c) any damage to the Property caused by the Tenant's use and
occupancy of the Leased Premises; and/or
(d) any injury to any Person including death, sickness and
diseases resulting at any time therefrom, whether caused by a
virus, bacteria or any substance brought upon the Leased
Premises and manipulated by Tenant and/or located on or about
the Leased Premises; and/or
(e) any injuries, damages or costs relating to any environmental
impairment arising out of the occupancy of the Leased
Premises.
Such indemnification by the Tenant for any of the above items shall
survive the termination of this Lease, anything in this Lease to the contrary
notwithstanding.
39. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present
Lease, the Tenant will not hold Landlord in any way responsible for any damages
or annoyance which the Tenant may sustain through the fault of any tenant who
occupies any premises adjacent to, near, above or under the Leased Premises, and
renounces any claims it may have against the Landlord pursuant to Article 1636
of the Civil Code of Lower Canada.
<PAGE> 29
Montreal Industrial Lease
Page 26
40. NONWAIVER
The failure of Landlord to insist upon a strict performance of any of
the terms hereof shall not be deemed a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent default by
Tenant of any such terms.
41. WAIVER OF COMPENSATION
The Tenant hereby waives and renounces any and all existing and future
claims, offsets and compensation against any Minimum Net Net Rental or
Additional Rental due hereunder and agrees to pay such Minimum Net Net Rental
and Additional Rental on their respective due dates, regardless of any claim,
offset or compensation which may be asserted by the Tenant or on its behalf,
except to the extent permitted hereunder.
42. IMPUTATION OF PAYMENTS
No payments by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Net Net Rental and Additional Rental shall
be deemed to be payments on account of the earliest stipulated Minimum Net Net
Rental and Additional Rental, nor is any endorsement or statement on any cheque
or any letter or any letter accompanying any cheque or payment as rent deemed as
acknowledgement of full payment or an agreement or acquiescence of or to the
terms thereof, and the Landlord may accept and cash such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rental
or pursue any other remedy provided in this Lease. The Landlord may, at its
option, apply sums received from the Tenant against any amounts due and payable
by the Tenant under this Lease in such manner as the Landlord sees fit.
43. CUMULATIVE REMEDIES
No reference to or exercise of any specific right or remedy by the
Landlord shall preclude the Landlord from or prejudice the Landlord in
exercising any other right under this Lease or pursuing any other remedy or
maintaining any action to which it may otherwise be entitled at law.
44. UNAVOIDABLE DELAY
Save and except for any monetary obligation under this Lease, Landlord
and Tenant shall not be liable for failure or delays in performing any of their
obligations hereunder should such failure or delay be caused by any event
(excluding the financial conditions of either party) which is beyond the
reasonable control of either party including, without limitation, cas fortuit,
force majeure, strikes, lockouts, labour troubles, inability to procure
materials, restrictive governmental rules, regulations, orders or bankruptcy of
contractors.
Without limiting the generality of the foregoing and in particular, it
is understood and agreed that whenever and to the extent that the Landlord shall
be unable to fulfill, or shall be delayed or restricted in the fulfillment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfill such obligation, or by reason of any statute,
law or order in council or any regulation or order passed or made pursuant
thereto or by reason of the order or directive of any competent authority having
jurisdiction over the Property, or inability to obtain any required
authorization therefrom, or by reason of any other cause beyond its control, the
Landlord shall be entitled to extend the time for fulfillment of such obligation
by a time equal to the duration of such delay or restriction, and the Tenant
shall not be entitled to compensation for any damages of whatsoever
<PAGE> 30
Montreal Industrial Lease
Page 27
nature arising therefrom.
45. MANAGEMENT OF THE PROPERTY
The Tenant hereby acknowledges to the Landlord that the Property may be
managed by any party other than the Landlord, as the Landlord from time to time
may in writing designate and, to all intents and purposes, any manager so
designated shall be the party at the Property authorized to deal with the
Tenant. All payments to Landlord in virtue of this Lease shall be made by cheque
payable to the Landlord in full unless otherwise specified in writing by
Landlord to Tenant.
<PAGE> 31
Montreal Industrial Lease
Page 28
46. RULES AND REGULATIONS
There is a schedule of rules and regulations annexed hereto as Schedule
"E" and the Tenant binds and obliges itself to abide by the said rules and
regulations.
The Landlord shall have the right to amend and/or rescind the rules and
regulations in Schedule "E" from time to time and to make any other reasonable
rules and regulations not contrary to the spirit and intent of this Lease as, in
its discretion, may from time to time be needful for the safety, care,
cleanliness and proper administration of the Property including the Leased
Premises, and for the preservation of good order therein, and the same shall be
observed and performed by the Tenant and by its customers, and all such rules
and regulations now or hereafter to be established by the Landlord as herein
provided shall form part of this Lease as if recited at length herein and any
such new rules and regulations shall be binding upon Tenant upon written
notification from Landlord.
Furthermore, in the event that Tenant does not comply with the rules
and regulations, Landlord shall have the right, without notice, to enter the
Leased Premises and execute any work necessary to rectify Tenant's
noncompliance, the cost of which shall immediately, upon Landlord's request, be
payable by Tenant as Additional Rental. It is agreed and understood that the
terms and conditions of this Lease shall prevail over any of the terms of the
rules and regulations.
47. COMPLIANCE WITH LAWS AND REGULATIONS
The Tenant shall, at its own expense, promptly comply with the
requirements of every applicable statute, law and ordinance and with every
applicable lawful regulation or order with respect to the removal of any
encroachment placed by the Tenant, or to the condition, equipment, furniture,
fixtures, maintenance, or use, or occupation of the Leased Premises, including
the making of any alteration, addition in or to any structure upon, connected
with or appurtenant to the Leased Premises, whether or not such alteration be
structural or be required on account of any particular use to which the Leased
Premises or part thereof may be put and whether or not such requirement,
regulation or order be of a kind now existing or within the contemplation of the
parties hereto; and shall comply with any applicable regulation, recommendation
or order of the Insurers' Advisory Organization of Canada, or any body having
similar functions or of any liability or fire insurance company by which the
Landlord and/or the Tenant may be insured.
48. WINDOW COVERINGS
In order to preserve a more uniform and attractive appearance of the
Property for the benefit of all the tenants, the Tenant herein binds and obliges
itself to place vertical blinds for air porosity, over all windows which are
located in the front of the Building or on any side of the Building which faces
a public street and where such windows are for other than office areas, such
vertical blinds shall remain drawn at all times.
49. PERMITS AND LICENSES
The Tenant shall obtain all necessary permits and licenses required for
the occupancy and carrying on of its business, the Landlord making no
representations or warranties whatsoever as to whether said permits and licenses
may be obtained by Tenant. Should the Tenant fail to obtain any required permit
and/or license, it shall nevertheless remain bound to perform all of its
obligations pursuant to the present Lease including, without limitation, payment
of Minimum Net Net Rental and Additional Rental.
<PAGE> 32
Montreal Industrial Lease
Page 29
50. EXPIRATION OF LEASE
Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto Landlord, who shall become absolute owner
thereof, the Leased Premises together with all buildings, alterations,
additions, erections, leasehold improvements, repairs and installations,
including the air-conditioning and heating system, done or made by the Tenant,
both movable and immovable, except the equipment and furniture belonging to
Tenant which must be removed at Tenant's expense on or before the expiration of
the Lease. Tenant shall repair any and all damages caused to the Leased Premises
and/or to the Building as a result of such removal, using materials equal in
quality to that of the damaged materials, failing which Landlord may do so at
Tenant's expense.
Notwithstanding the above, Landlord may at its option advise Tenant in
writing that he does not wish the ownership of all or any part of the above
described property, in which case Tenant shall remain owner of such property
refused by Landlord and shall, at its own expense, immediately remove such
property and repair any damage to the Leased Premises and/or the Building caused
by the original installation and/or removal, using materials equal in quality to
that of the damaged materials, failing which Landlord may do so at Tenant's
expense.
If Tenant leaves any equipment or furniture in the Leased Premises
following the expiration of the Term, it is understood that Landlord may then,
at its option, either accept full and absolute ownership of same and may use it
or dispose of it as Landlord determines, without compensation payable to Tenant
and without incurring liability to Tenant, or Landlord may dispose of same as it
sees fit, at Tenant's expense, without incurring any liability to Tenant.
If the Tenant has failed to fulfill its obligations under this lease
with respect to the maintenance, repair and alteration of the Leased Premises
and removal of improvements and fixtures from the Leased Premises during or at
the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration or
sooner termination of the Term.
51. CONSTITUT OR TENURE SYSTEM ACT
The Tenant hereby renounces any rights which it may have or acquire
under the Constitut or Tenure System Act, R.S.Q., 1977, c. C-64, to purchase or
acquire the Leased Premises of the Property.
52. DOMICILE AND NOTICES
The Tenant hereby elects domicile at the Leased Premises for the
purpose of service of any writs of summons or other legal document in any action
or proceeding whatsoever by the Landlord against the Tenant.
Any notice or demand given by Landlord to Tenant or by Tenant to
Landlord pursuant to the present Lease shall be deemed to be duly given if
served upon the Tenant or Landlord personally, if delivered or mailed by prepaid
certified or registered mail to:
(a) LANDLORD: 7405 Trans Canada Highway
St. Laurent, Quebec
(b) TENANT: At the Leased Premises
Landlord may, by notice in writing to the Tenant, change the address to
which any notice or demand intended for the Landlord shall be addressed. Tenant
may, by notice in writing, require that a copy of any writ of summons or other
legal document or proceeding and a notice or demand served on the Leased
Premises be mailed by regular mail to an additional address.
<PAGE> 33
Montreal Industrial Lease
Page 30
53. SUCCESSORS AND ASSIGNS
This Lease shall enure to the benefit of Landlord's or Tenant's
respective heirs, executors, administrators, successors and assigns.
54. DESCRIPTIVE HEADINGS
Any descriptive headings appearing in this Lease have been inserted as
a matter of convenience and reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provisions hereof.
55. GOVERNING LAW / SEVERABILITY
The present Lease shall be construed and governed by the laws of the
Province of Quebec. Should any provision of this lease be or become illegal or
not enforceable, it shall be considered separate and severable from the present
Lease and the remaining provisions shall continue in full force and effect and
be binding upon the parties hereto as though said provisions had never been
included. In this Lease, singular words shall be interpreted as including the
plural and vice versa and the words of masculine gender shall be interpreted as
including the feminine gender. Where more than one landlord or tenant is
referred to or when Tenant shall be of feminine gender or a corporation, all the
proper grammatical changes shall be inferred.
56. COST OF PREPARATION, REGISTRATION AND RADIATION
Tenant shall be permitted at its own cost to register the lease by
memorial only, upon obtaining Landlord's prior written consent as to the form
and content of the memorial.
In addition, Tenant shall, at its own cost, at the expiration of the
Term, radiate the registration of the Lease from the Index of Immovables.
In the event the said registration is not radiated within thirty (30)
days from the expiration of the Term, Tenant hereby irrevocably appoints the
Landlord as the Tenant's attorney with full power and authority to execute in
the name of the Tenant any documents and instruments required to effect the said
radiation of the registration of the Lease from the Index of Immovables and
Tenant further authorizes Landlord to deliver the said instruments and documents
to the appropriate Registry Office for the purpose of effecting all the
appropriate registrations and radiations. The cost of the preparation of said
documents and instruments as well as the cost of registering said documents and
instruments shall be borne by Tenant.
57. BROKERAGE COMMISSION
The Landlord and Tenant hereby guarantee that no brokerage commission
or charges are owing to any broker or brokerage company with respect to the
present transaction.
Tenant shall indemnify and hold Landlord harmless from any and all
brokerage claims as described above.
58. SCHEDULES
Schedules "B" and "E", hereto form an integral part of this Lease.
<PAGE> 34
Montreal Industrial Lease
Page 31
59. CERTIFICATE OF INCORPORATION
Where Tenant is a corporation, Tenant undertakes to remit to Landlord
upon the signing of the Lease, a copy of its Certificate of Incorporation.
60. ENTIRE AGREEMENT
Tenant acknowledges that there are no convenants, representations,
agreements, warranties or conditions in any way relating to the subject matter
of this Lease, whether expressed or implied, collateral or otherwise, either
oral or written, including promotional material, except those set forth in this
Lease, the Tenant agrees that he has not relied upon any represenation in any
brochures, and the Tenant expressly declares that this Lease constitutes the
entire agreement between the Landlord and the Tenant. Except as otherwise
provided herein, no subsequent alteration, amendment, change or addition to this
Lease shall be binding upon the Landlord or the Tenant unless agreed to in
writing by the parties.
61. LANGUAGE
Each of the parties does hereby confirm that it has expressly required
that this contract, as well as any document related hereto, be drawn up in the
English language. Chacune des parties confirme par les presentes avoir
expressement demande que le present contrat, ainsi que tous les documents y
afferent, soient rediges en anglais.
IN WITNESS WHEREOF THE LANDLORD HAS SIGNED AT ST. LAURENT,
QUEBEC, THIS 1ST DAY OF NOVEMBER, 1994.
ZMD SPORTS INVESTMENTS INC.
Per: /s/
------------------------------------
/s/
-----------------------------------
Witness
/s/
-----------------------------------
Witness
IN WITNESS WHEREOF THE TENANT HAS SIGNED AT ST. JEAN, THIS 1ST DAY OF
NOVEMBER, 1994.
SPORT MASKA INC.
Per: /s/
------------------------------------
/s/
-----------------------------------
Witness
/s/
-----------------------------------
Witness
<PAGE> 35
Montreal Industrial Lease
Schedule "E"
Page 2
15. The Tenant shall follow such instructions, if any, as Tenant may from
time to time receive from Landlord relating to the maintenance and care
of the heating, ventilating and air-conditioning equipment installed
within the Leased Premises.
16. Front Signage
The Tenant may identify his business with a front sign, the whole
provided Tenant complies with the conditions stipulated hereunder:
(a) Letter: individual to the Tenant's style.
(b) Height: 24"
(c) Permitted materials - plastic, composite or solid
- rustproof metal, composite or solid
(d) Lighting (optional) - integrated
- halo-lit (back-lighting)
(e) Lighting control - dedicated circuit
photo-cell switch, timer switch or
manual switch
Before the fabrication of any signage, the Tenant must obtain the
written approval of the Landlord. A request for approval must be accompanied by
the following information:
(a) Elevation plan indicating the proposed sign
-- (Scale: 3/8" = 1').
(b) Sign dimensions: height, length, thickness, and distance from
wall.
(c) Construction and installation details.
(d) Material and finish specifications (use of Styrofoam is
prohibited).
(e) Colour specifications.
(f) Lighting specifications: number of amperes, volts and
circuits.
(g) Name of designer and of fabrication and installation
contractors.
(h) Request for Municipal permit.
(i) Any other additional information that the Landlord may require
to study a particular sign request.
Furthermore, Tenant shall only be entitled to purchase any signage
approved from the following suppliers which may be changed by Landlord from time
to time:
Enseignes Trans Canada Signs Inc.
9310 Parkway
Ville d'Anjou, Quebec
H1J 1W7
Claude Neon Limitee
1855 Hymus Boulevard
Dorval, Quebec
H9P 1J8
Enseicom Inc.
1700 Claire Crescent
Lachine, Quebec
H8S 1A2
17. Facade and secondary windows
(a) All front windows must have off-white vertical blinds.
(b) Adjustment of vertical blinds of front windows of storage
space must be half closed
(c) All windows, including secondary windows, must be washed by
Tenant at its cost, at least twice a year on both the interior
and exterior faces.
<PAGE> 36
Montreal Industrial Lease
Schedule "E"
Page 3
18. Miscellaneous signage
Miscellaneous traffic and "no parking" signs are supplied and installed
by the Landlord.
19. Garbage container
(a) The Tenant must provide the garbage container which best
satisfies its business activity so that the size and water
tightness retain all garbage without affecting the
environment.
(b) The Tenant must assure that the container is neatly located on
the designated area and that the lids are kept closed.
20. Exterior storage
(a) It is strictly forbidden to store anything outside the
Building, even on a temporary basis.
(b) Used boxes, pallets must be kept inside the Building until
collected for disposal.
21. Special installations
Tenant must obtain Landlord's approval prior to the installation of any
equipment, machinery, fixtures and furniture which have to be attached
to, mounted to or pierced through any element of the Leased Premises
and/or the Building. Furthermore, Tenant must obtain Landlord's
approval prior to the installation of any equipment, tank and any other
item that Tenant wants to install outside the Building (hereinafter the
"Special Installation").
Any request for the approval of a Special Installation must be
submitted in writing along with the technical drawings or pertinent
data which can easily identify the specific nature of the installation.
Furthermore, Special Installation must conform to terms and conditions
stipulated in the lease.
Following completion of a Special Installation which conforms to
preceding authorization, the Landlord will proceed, at Tenant's cost,
with the inspection of the installation for final acceptance.
<PAGE> 1
Exhibit 10.36
<PAGE> 2
DEED OF LEASE
BETWEEN
DOULKA INVESTMENTS INC.
(the "Landlord")
AND
BUDDY L CANADA INC.
(the "Tenant")
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<C> <C>
1. CERTAIN BASIC LEASE PROVISIONS..................................................................... 1
2. DEFINITIONS........................................................................................ 1
3. TERM............................................................................................... 5
4. OCCUPANCY.......................................................................................... 6
5. MINIMUM NET NET RENTAL............................................................................. 6
6. RENTAL ON NET NET RETURN BASIS..................................................................... 6
7. ADDITIONAL RENTAL.................................................................................. 7
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE............................................................ 7
9. CONTESTATION OF TAXES.............................................................................. 8
10. UTILITIES AND EQUIPMENT............................................................................ 8
11. USE OF PREMISES.................................................................................... 8
12. PLATE GLASS AND DOOR SIGNS......................................................................... 8
13. PROHIBITED ACTIVITIES.............................................................................. 8
14. CONDITION OF PREMISES.............................................................................. 9
15. RELOCATION......................................................................................... 9
16. MAINTENANCE AND REPAIRS............................................................................ 9
17. INSPECTION AND REPAIR.............................................................................. 10
18. ODOURS, DUST OR NOISE.............................................................................. 10
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION.......................................................... 10
20. ACCESS............................................................................................. 11
21. PARKING............................................................................................ 11
22. SIGNS OF LANDLORD.................................................................................. 11
23. SIGNS OF TENANT.................................................................................... 12
24. LANDLORD'S WORK.................................................................................... 12
25. IMPROVEMENTS AND ALTERATIONS....................................................................... 12
26. CSST............................................................................................... 14
27. INSURANCE REQUIREMENTS............................................................................. 15
28. CANCELLATION OF INSURANCE.......................................................................... 16
29. DAMAGE OR DESTRUCTION.............................................................................. 16
30. TRANSFER CONSENT REQUIRED.......................................................................... 19
31. PRIVILEGE OF LANDLORD.............................................................................. 21
32. ASSIGNMENT BY LANDLORD............................................................................. 21
33. EXPROPRIATION...................................................................................... 21
34. EXTENSIONS......................................................................................... 22
35. DEFAULT............................................................................................ 23
36. FAILURE OF TENANT TO PERFORM....................................................................... 24
37. BANKRUPTCY AND INSOLVENCY.......................................................................... 24
38. INDEMNIFICATION.................................................................................... 24
39. DISTURBANCE........................................................................................ 25
40. NONWAIVER.......................................................................................... 25
41. WAIVER OF COMPENSATION............................................................................. 25
42. IMPUTATION OF PAYMENTS............................................................................. 25
43. CUMULATIVE REMEDIES................................................................................ 26
44. UNAVOIDABLE DELAY.................................................................................. 26
45. MANAGEMENT OF THE PROPERTY......................................................................... 26
46. RULES AND REGULATIONS.............................................................................. 26
47. COMPLIANCE WITH LAWS AND REGULATIONS............................................................... 27
48. WINDOW COVERINGS................................................................................... 27
49. PERMITS AND LICENSES............................................................................... 27
50. EXPIRATION OF LEASE................................................................................ 27
51. CONSTITUT OR TENURE SYSTEM ACT..................................................................... 28
52. DOMICILE AND NOTICES............................................................................... 28
53. SUCCESSORS AND ASSIGNS............................................................................. 28
54. DESCRIPTIVE HEADINGS............................................................................... 28
55. GOVERNING LAW / SEVERABILITY....................................................................... 29
56. COST OF PREPARATION, REGISTRATION AND RADIATION.................................................... 29
57. BROKERAGE COMMISSION............................................................................... 29
58. SCHEDULES.......................................................................................... 29
59. CERTIFICATE OF INCORPORATION....................................................................... 29
60. ENTIRE AGREEMENT................................................................................... 29
61. LANGUAGE........................................................................................... 30
</TABLE>
<PAGE> 4
Montreal Industrial Lease
Page 1
DEED OF LEASE
BETWEEN: DOULKA INVESTMENTS INC., a body
politic and corporate, duly incorporated,
having its head office and principal place of
business in Beauport, Quebec herein acting
and represented by JEAN-PIERRE CARETTE its duly
authorized representative,
(hereinafter the "Landlord")
PARTY OF THE FIRST PART
AND: BUDDY L CANADA INC., a body politic
and corporate, duly incorporated, having its
head office and principal place of business in
Montreal, Quebec, herein acting through and
represented by Richard J. Levy its Assistant
Secretary hereunto duly authorized as he so
declares,
(hereinafter the "Tenant")
PARTY OF THE SECOND PART
1. CERTAIN BASIC LEASE PROVISIONS
The following are certain basic Lease provisions of this Lease.
1.1 Addresses for purposes of notice:
Landlord: 7405 Trans Canada Highway
St. Laurent, Quebec H4T 1Z2
Tenant: 3030 Ste-Anne Boulevard,
Beauport, Quebec
1.2 Location of Premises: Leased Premises comprising of the Building and
the property found on the land described in Schedule "B" annexed
hereto.
1.3 Property: 3030 Ste-Anne Boulevard,
Beauport, Quebec
1.4 Area: Approximately one hundred fifty-five
thousand (155,000) square feet.
1.5 Term: ten (10) years
1.6 Commencement Date: February 1, 1995
1.7 Termination Date: January 31, 2005
1.8 Minimum Net Net Rental: An amount equal to $503,750.04 per annum during
the period from February 1, 1995 to January 31, 2000 and an amount
equal to $554,900.04 per annum during the period from February 1, 2000
to January 31, 2005 the whole payable pursuant to the Article entitled
"Minimum Net Net Rental".
1.9 Schedules:
"B" - Cadastral Description
"E" - Rules and Regulations
2. DEFINITIONS
<PAGE> 5
Montreal Industrial Lease
Page 2
2.1 Additional Rental means: Any and all amounts due or becoming payable to
the Landlord pursuant to this Lease other than the Minimum Net Net
Rental, whether such amounts are specifically referred to as Additional
Rental or not, the whole payable pursuant to the Article entitled
"Additional Rental".
2.2 Architect means: The independent architect, engineer, or land
surveyor named by Landlord from time to time.
2.3 Area means: The area of the Leased Premises as calculated
in the manner stipulated in Schedule "D".
2.4 Building means: The building or buildings, as these may be added or
modified from time to time, found on the parcel of land described in
Schedule "B".
2.5 Capital Tax means: For the purpose of this lease, "Capital
Tax" means the capital tax liability of the Landlord for each
of the Landlord's fiscal years during the Term or any renewal
thereof as per the Landlord's tax returns multiplied by the
proportion that the net book value of the Property is of the net
book value of the total assets of the Landlord, as determined
in accordance with the Landlord's audited financial
statements.
2.6 Commencement Date means: The first day of the Term.
2.7 Common Areas and Facilities means:
(a) Those areas, facilities, utilities, improvements, equipment
and installations in the Property which, from time to time,
are not designated or intended by the Landlord to be used
exclusively for the benefit of any individual tenant of the
Property; and
(b) Those areas, facilities, improvements, equipment and
installations which serve or are for the benefit of the
Property, whether or not located within, adjacent to,
or near the Property and which are designated from
time to time by the Landlord as part of the Common
Areas and Facilities of the Property. Common Areas
and Facilities include, without limitation, all areas,
facilities, utilities, improvements, equipment and
installations which are provided or designated (and
which may be changed from time to time) by the
Landlord for the use or benefit of the tenants, their
employees, customers and other Persons for whom
Landlord shall permit the use or benefit thereof, in the
manner and for the purposes permitted by the Lease.
(C) Without limiting the generality of (a) and (b) above, Common
Areas and Facilities include the roof, exterior wall
assemblies including weather walls, exterior and interior
structural elements and bearing walls in the buildings and
improvements comprising the Property; parking areas and
parking garages, all entrances and exits thereto and all
structural elements thereof, employee parking areas, truck
courts, access roads, driveways, truckways, delivery
passages, package pick-up stations, loading docks and related
areas; pedestrian sidewalks, covered walkways and sidewalks;
roadways; landscaped and planted areas; courts and arcades;
public seating and service areas; corridors; bus kiosk, if
any; roadways and stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways, ramps, moving
sidewalks, and other transportation equipment and systems;
electrical, telephone, meter, valve, mechanical, mail storage,
service and janitor rooms and galleries; communication,
security and fire prevention and protection systems; general
signs, columns, pipes, electrical, plumbing, drainage,
mechanical and all other
<PAGE> 6
Montreal Industrial Lease
Page 3
installations, equipment or services located therein or
related thereto, as well as the structures housing the same.
2.8 CPI means: The Consumer Price Index, all items Montreal, established by
Statistics Canada or any index in substitution and/or replacement
thereof, published by Statistics Canada or any other federal or
provincial governmental agency. In the case of any required
substitution, Landlord shall be entitled to make all necessary
conversions for comparison purposes.
2.9 Date of Occupancy means: The date on which Landlord is ready to give
possession of the Leased Premises to the Tenant, subject to the terms
stipulated in the Article entitled "Occupancy".
2.10 Deposit means: The amount(s) stipulated in the Article
entitled "Deposit".
2.11 Landlord means: The party first hereinabove described or its
successors and assigns.
2.12 Landlord's Work means: The work to be executed by Landlord as
stipulated in the Articles entitled "Landlord's Work" and "Landlord's
Work at Tenant's Expense".
2.13 Lease means: This agreement and all attached Schedules.
2.14 Leased Premises means: the premises described in
paragraph 1.2, the location of which is outlined in red on
Schedule "A".
2.15 Lease Year means: In the case of the first Lease Year, a period
commencing on the Commencement Date and terminating on the last day of
the twelfth month thereafter and shall also refer to any succeeding
twelve (12) month period thereafter.
2.16 Minimum Net Net Rental means: The amount stipulated in
the Article entitled "Minimum Net Net Rental".
2.17 Operating Costs means: The aggregate of Landlord's annual costs and
expenses incurred in insuring, operating, administering and if
applicable, maintaining the Property and shall include, without
duplication or limitation, the cost of:
(i) all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of real estate taxes, the whole subject
to the Article of this Lease entitled "Contestation of Taxes";
(ii) the cost of insuring the Property (including such insurance as
the Landlord shall effect or shall be required to effect by
any secured creditor) against fire and any other perils which
presently are or hereafter may be, from time to time, embraced
by or defined in a standard fire insurance policy with
extensive coverage, comprehensive general liability insurance,
boiler and pressure vessel insurance, business interruption
and/or loss of rentals insurance and such other insurance as
the Landlord, acting reasonably, may deem necessary or
advisable.
<PAGE> 7
Montreal Industrial Lease
Page 4
(iii) Capital Tax as defined herein.
(iv) Debt Service in accordance with the Article entitled
"Rental on Net Net Return Basis".
2.18 Person means, depending on context: Any person, firm, company,
corporation, partnership, association, or any group or combination
thereof.
2.19 Property means: The lands and buildings found on the lots
described in Schedule "B" as these may be varied, from time
to time, by adding or subtracting land or Buildings or by any
other means as Landlord considers necessary or advisable,
even if parts of the said lands or Buildings may be separated
from others by lanes, streets, highways or any other means of
passage in or upon which others may have rights. The said
lands or Buildings shall include all buildings, construction
and Common Areas and Facilities on the lands and/or
Buildings as each of the foregoing exists from time to time.
2.20 Proportionate Share means: 100% of the Operating Costs and
Taxes of the Property and of the Leased Premises.
2.21 Sales Tax means: Any goods and services tax, business
transfer tax, value-added tax, multi-stage sales tax, sales tax
or any other tax imposed with respect to Minimum Net Net
Rental and Additional Rental payable under this Lease,
whatever name such tax may bear and whether such tax is in
force at the date hereof or whether it is adopted subsequently.
The amount of the Sales Tax so payable by Tenant shall be
calculated by Landlord in accordance with the applicable
legislation and shall be paid to Landlord at the same time as
the amounts to which such Sales Tax apply or at such other
time as Landlord may from time to time determine. Landlord
shall have the same remedies for and rights of recovery of
such amounts as it has for the recovery of Additional Rental.
2.22 Security means: Any hypothec, trust deed, debenture or other security
to be placed from time to time on the Property or any part thereof for
the purpose of securing any indebtedness of Landlord.
2.23 Taxes means: All taxes, whether special or general,
including, without limitation, property taxes, municipal taxes,
school taxes, levies, charges, rates including local
improvement rates, duties and assessments that may now or
in the future be levied, rated, charged or assessed against the
Property, and/or all equipment and facilities thereon or
therein, and/or the land described in Schedule "B" attached
hereto, and/or any property on or in the Building owned or
brought thereon or therein by the Landlord and/or against
Landlord or Tenant and/or its Transferees in respect thereof,
whether such taxes, rates, duties or assessments are charged
by a municipal, parliamentary, school or any other body of
competent jurisdiction. If the system of real estate taxation
shall be altered or varied and any new tax shall be levied or
imposed on the Property and/or the revenues therefrom and/or
the Landlord in substitution for and/or in addition to real
estate taxes presently levied or imposed on immovables in the
City, Region, Province or Country in which the Property is
situated,
<PAGE> 8
Montreal Industrial Lease
Page 5
then any such new tax or levy shall be included within the present
definition of Taxes. However, Tenant shall not be responsible for any
income tax or corporation taxes of the Landlord, save and except for
its Proportionate Share of Capital Tax and Tenant shall be solely
responsible for any Sales Tax.
2.24 Tenant means: The person executing this Lease as Tenant. Tenant also
includes all employees, mandatories and contractors of Tenant, as well
as any Person under Tenant's control or for whom Tenant is responsible.
2.25 Tenant Security means: Any trust deed, bond, debenture, pledge,
commercial pledge, warehouse receipt, conditional sales contract,
privilege, hypothec, charge or any other form of encumbrance or
security granted by or agreed to by Tenant or any other Person (other
than Landlord) with respect to its rights in this Lease, the Leased
Premises, or any property, whether movable or immovable, located in or
forming part of the Leased Premises, to secure, in whole or in part,
any loan, indebtedness, credit line, or other obligation.
2.26 Tenant's Work means: The work to be executed by Tenant as stipulated in
the Article entitled "Tenant's Work."
2.27 Term means: The period specified in the Article entitled "Term" and
includes all renewals or extensions agreed to in writing by the
Landlord.
2.28 Termination Date means: The last day of the Term as herein defined or
any renewal thereof, or the last day of the Term or renewal thereof
which is terminated prior to the Termination Date.
2.29 Transfer means: Any assignment or transfer of this Lease (other than as
Tenant Security), any sublease or permitted occupation of all or any
part of the Leased Premises to any Person (hereinafter the
"Transferee") and any amalgamation or change in the effective control
of the voting shares of Tenant if Tenant is a corporation, or any
change in the partners constituting the partnership or any change in
the interest of the partners in the partnership if Tenant is a
partnership, from conditions existing on the date the corporation or
the partnership first incurs any obligations to Landlord pursuant to
this Lease, the whole whether effected by sale, by assignment, by
operation of law or otherwise.
3. TERM
Landlord hereby leases the Leased Premises to Tenant for a Term of ten
(10) years, commencing on the first day of February 1995 and terminating on the
last day of January 2005 unless sooner terminated under the provisions hereof.
Should the Tenant continue to occupy the Leased Premises after the
expiry of the Term, without a written agreement there shall be no tacit renewal
and the Tenant shall pay to the Landlord, as liquidated damages, the highest
Minimum Net Net Rental payable during the Term and Additional Rental for the
period of occupancy plus fifty percent (50%) thereof, without prejudice to any
of Landlord's other rights and recourses including Landlord's right to obtain
vacant possession of the Leased Premises. Tenant acknowledges that it is not to
have the right to occupy the Leased Premises beyond the expiry of the Term.
4. OCCUPANCY
Tenant shall be allowed to occupy the Leased Premises on February 1st,
1995 (hereinafter referred to as the "Date of Occupancy").
If the Landlord is unable to give possession of the Leased Premises to
the Tenant on the Commencement Date, the Lease shall not be void or voidable
<PAGE> 9
Montreal Industrial Lease
Page 6
nor shall the Landlord be liable for any loss or damage resulting therefrom.
However, any postponement of the Date of Occupancy by Landlord shall have the
effect of delaying the Commencement Date and the Termination Date for a number
of days equal to the number of days of such postponement, the whole without any
liability on the part of the Landlord.
5. MINIMUM NET NET RENTAL
Tenant covenants and agrees to pay to Landlord in lawful money of
Canada without deduction, abatement or set-off, a Minimum Net Net Rental as
follows;
a) during the period from February 1, 1995 to January 31, 2000, five
hundred and three thousand seven hundred fifty dollars and four cents
($503,750.04) per annum, payable in equal consecutive monthly
installments, each in advance, on the first day of each month during
the said period of forty-one thousand nine hundred seventy-nine dollars
and seventeen cents ($41,979.17) each; and
b) during the period from February 1, 2000 to January 31, 2005, five
hundred fifty-four thousand nine hundred dollars and four cents
($554,900.04) per annum, payable in equal consecutive monthly
instalments, each in advance, on the first day of each month during the
said period of forty-six thousand two hundred forty-one dollars and
sixty-seven cents ($46,241.67) each.
Any Minimum Net Net Rental due for any period of time during the Term
which is less than a month shall be paid for on a pro-rated basis.
The Minimum Net Net Rental shall be considered as annual and accruing
from day to day and where it becomes necessary for any reason to calculate such
rental for an irregular period of less than one (1) Lease Year, an appropriate
apportionment and adjustment shall be made.
The Minimum Net Net Rental as herein provided shall be paid to Landlord
and/or its nominee at the Head Office of the Landlord, at 7405 Trans Canada
Highway, St. Laurent, Quebec, H4T 1Z2, or at such other place in Canada as shall
be designated by Landlord in writing to Tenant.
6. RENTAL ON NET NET RETURN BASIS
It is agreed and understood between the parties that the Minimum Net
Net Rental herein shall be a revenue absolutely net, net to the Landlord, free
of any and all costs and expenses of any nature whatsoever. Tenant shall pay on
its own account, to the complete exoneration of Landlord, all taxes and expenses
of whatsoever nature, its Proportionate Share of Operating Costs and Taxes and
any Additional Rental with respect to the Leased Premises unless otherwise
stipulated in this Lease. It is understood that Tenant shall be responsible for
the payment of any increase in the interest and capital repayments of Landlord
with respect to mortgages or other security that Landlord may be subjected to
after the Commencement Date of the Term of this Lease (hereinafter "Debt
Service"). The Landlord shall be responsible for any income tax or corporation
taxes due by Landlord. Tenant shall pay its Proportionate Share of Capital Tax
and Tenant shall be solely responsible for any Sales Tax.
Without limiting the generality of the foregoing, Tenant shall, in each
and every Lease Year, pay and discharge or cause to be paid and discharged all
license fees, public utility charges, water rates, sewer rates and other like
fees, charges, rates and assessments that may be levied, charged, rated or
assessed against the Leased Premises and/or all equipment and facilities thereon
or therein and/or any property on the Leased Premises owned or brought thereon
by Tenant, and any and every of its Transferees or visitors and/or against
Landlord or Tenant in respect thereof, and every tax and license fee in respect
of any and every business carried
<PAGE> 10
Montreal Industrial Lease
Page 7
on therein, or with respect to the occupancy of the Leased Premises by
Tenant (and any and every of its Transferees), whether such license fees,
charges, rates, assessments and taxes are charged by municipal, parliamentary,
school or any other body of competent jurisdiction, and all charges for public
utilities including electric current, gas, water, steam or hot water used upon
or in respect of the Leased Premises and for fittings, machines, apparatus,
meters or other things leased in respect thereof and for all work or services
performed by a corporation or commission in connection with such public
utilities. Tenant shall indemnify and hold the Landlord harmless from and
against payment of all losses, costs, charges and expenses occasioned by and
arising from any and every such duty, license fee, charge, rate, assessment and
tax. If such tax, rate, charge, assessment, duty or license fee should be
assessed or charged to Landlord for all or a substantial number of the tenants
of the Property, Tenant shall, at Landlord's discretion and upon demand in the
manner determined by Landlord, pay its Proportionate Share of such duty, license
fee, charge, rate, assessment and tax.
It is further agreed and understood that any amount and any obligation
which is not expressly declared in this Lease to be that of the Landlord shall
be deemed to be the obligation of the Tenant. Without limiting the generality of
the foregoing, should at any time the taxation authorities directly attribute
any part of the Taxes to the Leased Premises or the improvements therein, Tenant
shall pay for same in addition to Tenant's Proportionate Share of the remainder
of the Taxes.
Tenant shall furnish to Landlord, immediately upon Landlord's request,
a receipt or other appropriate evidence satisfactory to Landlord as to the
payment of any amounts payable by Tenant pursuant to the present Article.
7. ADDITIONAL RENTAL
It is agreed and understood that Additional Rental other than Tenant's
Proportionate Share, shall be payable on the first day of the month immediately
following the date the said amount is claimed, or on such date as the Landlord
may designate. Where the calculation of any Additional Rental is not made until
after the Termination Date, the obligation of the Tenant to pay such Additional
Rental shall survive the termination of this Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE
On the first day of each and every month, Tenant shall pay to the
Landlord throughout the Term or any renewals, its Proportionate Share of the
Operating Costs and Taxes, as well as an administration fee equal to three
percent (3%) of the said Operating Costs and Taxes and of the Minimum Net Net
Rental as well as three percent (3%) of the total costs and expenses incurred by
the Tenant, for the month immediately preceding, in maintaining, repairing and
operating the Property, (the said costs and expenses incurred by Tenant being
hereinafter referred to as "Tenant's Costs"). Upon Landlord's request, the
Tenant shall furnish the Landlord with a statement in writing showing the
reasonable detail and in such a form as Landlord may require the Tenant's Costs.
Furthermore, Tenant shall furnish to Landlord, immediately upon Landlord's
request, receipts or other appropriate evidence satisfactory to landlord as to
the payment of Tenant's Costs and shall make available to Landlord for
Landlord's inspection and audit Tenant's books and records relating to Tenant's
Costs.
Notwithstanding anything to the contrary herein contained, the Landlord
may, prior to the commencement of each calendar year or as soon thereafter as is
reasonably possible, furnish to the tenant an estimate of the Operating Costs
and Taxes for such calendar year, and the Tenant shall pay to the Landlord, in
advance, on the first day of each month during the year in question, Additional
Rental equal to one twelfth (1/12) of the Tenant's Proportionate Share of the
estimated Operating Costs and Taxes. Should the first Lease Year of the Term not
commence on the first (1st) day of January or should the last Lease Year of the
Term not terminate on the thirty-first (31st) day of December, then prior to the
Commencement Date of the Term or prior to the anniversary of the Commencement
Date in the last Lease Year of the Term, as the case may be, or as soon
thereafter as is reasonably possible, Landlord shall furnish to Tenant an
estimate of the Operating Costs and Taxes for the part of the Lease Year in
question, and the Tenant shall pay to the Landlord, in advance, on the first day
of each month during the part of the Lease Year in question, Additional Rental
equal to the Tenant's Proportionate Share of the estimated Operating Costs and
Taxes divided by the number of months for that part of the Lease Year in
question.
<PAGE> 11
Montreal Industrial Lease
Page 8
After the end of each calendar year, or after the end of the Term in
the case of the final Lease Year, the Landlord shall furnish the Tenant with
financial statements setting forth the actual Operating Costs and Taxes for such
calendar year (or part of the Lease Year, as the case may be) and the Tenant
shall pay to the Landlord forthwith an amount equal to its Proportionate Share
of the excess of the actual Operating Costs and Taxes over the estimated
Operating Costs and Taxes. Should the estimated Operating Costs and Taxes exceed
the actual Operating Costs and Taxes, the Tenant shall receive credit for its
Proportionate Share of the excess. The appropriate adjustments shall be made
between the parties hereto within thirty (30) days after the date on which the
Landlord has furnished the Tenant with such statement.
9. CONTESTATION OF TAXES
Landlord shall have no obligation to contest, appeal, object to or
litigate the levying or imposition of Taxes and/or any valuation imposed with
respect thereto, and Landlord may settle, compromise, consent to, waive or
otherwise determine, in its sole discretion, all matters and things relating
thereto. Tenant shall not itself contest, appeal, object to or litigate the
levying or imposition of real estate taxes.
In the event that Landlord should contest any Taxes and thereafter
receive a refund of any portion thereof, and provided Tenant shall have paid its
Proportionate Share of said Taxes, the Landlord shall reimburse to the Tenant
the Tenant's Proportionate Share of such refund.
10. UTILITIES AND EQUIPMENT
The Tenant shall pay for its electricity (including without limitation
any electricity used for heating and/or air conditioning the Leased Premises),
for the cost of operating, repairing, maintaining, replacing and inspecting the
machinery and other facilities required for the heating, ventilating and air
conditioning of the Leased Premises and facilities and gas, water, sewer and
electric utility costs relating to same, telephone and all public utilities with
respect to the Leased Premises.
Throughout the Term of the Lease, the Tenant shall engage a qualified
air conditioning maintenance contractor to maintain and repair the heating,
ventilating and air conditioning system. The Tenant shall, within thirty (30)
days of signing these presents, provide the Landlord with a copy of a duly
executed heating, ventilating and air conditioning maintenance and repair
contract, as well as all renewals of the said contract.
11. USE OF PREMISES
The Leased Premises shall be used by the Tenant only for offices,
warehousing, manufacturing and distribution of sports related goods, and for no
other purpose.
12. PLATE GLASS AND DOOR SIGNS
Any breakage of glass or plate glass in or about the Leased Premises
and any damage to signs on Tenant's doors, except for breakage or damage caused
by the negligence or fault of the Landlord or its employees or mandatories shall
be charged to and payable by the Tenant.
13. PROHIBITED ACTIVITIES
<PAGE> 12
Montreal Industrial Lease
Page 9
Subject to the other terms and conditions of the Lease and in addition
to any other prohibitions stipulated in the Lease, the Tenant undertakes:
(i) not to use any part of the exterior parking and loading
areas or any other areas outside the Leased Premises,
reasonably designated by the Landlord, for any
purpose other than parking, shipping or receiving;
(ii) not to obstruct or use any part of the Common Areas
and Facilities except as permitted by the Landlord;
(iii) not to do or suffer or permit to be done any act in or about
the Common Areas and Facilities which, in the Landlord's
opinion, hinders or interrupts the flow of traffic to, in or
from the Property and shall not do, nor suffer or permit
anything to be done, which in the Landlord's opinion, in any
way obstructs the free movement of people doing business in
the Property;
(iv) not to bring upon the Leased Premises or any part thereof any
machinery, equipment, article or thing that by reason of its
weight, function or size might damage the Leased Premises and
not to overload the floors of the Leased Premises at any time
and if any damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by overloading or by
any act, neglect or misuse on the part of Tenant, Tenant will
forthwith pay to Landlord the cost of restoring the Leased
Premises to their original condition;
(v) not to obstruct the sidewalks, entries, passage corridors and
stairways, or use same for purposes other than for ingress and
egress to or from the Leased Premises, and the Tenant shall
save the Landlord harmless from damages to persons or property
because of any articles thrown by the Tenant out of the
windows or doors or down the passages of the Building.
14. CONDITION OF PREMISES
The Tenant represents that the Leased Premises have been examined by
the Tenant and that the Tenant accepts the same, in the condition or state in
which they are at the Date of Occupancy by Tenant, without representation or
warranty, expressed or implied, oral or written, in fact or in law, by the
Landlord, and without recourse to the Landlord as to the nature, condition or
usability thereof or as to the use or uses to which the Leased Premises or any
part thereof may be put.
15. RELOCATION
Landlord shall have the right at any time either during the Term or
prior to the Commencement Date thereof, to change the location of the Leased
Premises as set forth in Article 1.2 hereof to comparable premises in the
Building or in any of Landlord's other buildings or in any other building in
which Landlord has an interest. Should Landlord desire to move Tenant after the
Commencement Date, Landlord shall pay all reasonable transportation, telephone
installation and reasonable printing costs relating to letterheads and business
cards in stock, as well as reasonable printing costs of notice of change of
address to Tenant's customers, provided Tenant submits proof of payment of said
costs.
16. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1604(2), 1605 and 1627 of
the Civil Code of Lower Canada, the Tenant shall, at its own expense, operate,
maintain and keep the Leased Premises including all facilities, equipment and
services, both
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inside and outside, available to the Tenant exclusively, in such good order and
condition as they would be kept by a prudent owner and Tenant shall promptly
make all needed repairs and replacements to the Leased Premises (save and except
for those structural repairs and replacements that are exceptional, nonrecurring
and result from latent defects) which a careful owner would make, including
without limitation, the water, gas, drain and sewer connections, pipes and
mains, electrical wiring, water closets, sinks and accessories thereof, and all
equipment belonging to or connected with the Leased Premises or used in its
operation.
17. INSPECTION AND REPAIR
Landlord and its representatives shall have the right, during all
reasonable business hours during the Term, to enter the Leased Premises to
examine the condition thereof and to ascertain whether Tenant is performing its
obligations hereunder, and Tenant shall make any repairs which Tenant is obliged
to make pursuant to the terms of this Lease. If Tenant fails to make any such
repairs within thirty (30) days after written notice from Landlord requesting
Tenant to do so, provided that such repairs may reasonably be made within the
said period, Landlord may, without prejudice to any other rights or remedies it
may have, make such repairs and charge the cost thereof to Tenant. Nothing in
this Lease shall be construed to obligate or require Landlord to make any
repairs for which the Tenant is responsible hereunder but Landlord shall have
the right at any time to make emergency or urgent repairs without prior notice
to Tenant and charge the cost thereof to Tenant. Any costs chargeable to Tenant
hereinabove shall be payable forthwith on demand as Additional Rental and shall
bear interest from the date of such demand at the prime lending rate as
determined by the Royal Bank of Canada on a daily basis plus four percent (4%)
until paid to Landlord in full.
18. ODOURS, DUST OR NOISE
The Tenant warrants that no noxious/obnoxious odours, dust or noise
will emanate from the Leased Premises as a result of the operations conducted by
the Tenant therein and Tenant further covenants that it will not cause or
maintain any nuisance in, at or on the Leased Premises and/or the Property and
Tenant further warrants that it will not use the Leased Premises for any purpose
or in any manner notwithstanding anything stated in this Lease which may cause
noise, disturbance or noxious/obnoxious odours to the discomfort of other
tenants, neighbours or to the public in general. Accordingly, the Tenant agrees
that should such noxious/obnoxious odour, dust or noise conditions exist, or
should Landlord receive any complaint of odours, dust, noise or any other
nuisance, Tenant will, at its own cost and expense, take such steps as may be
necessary to rectify the same, including any expertise Landlord may require,
which expertise must be acceptable to Landlord, provided further that if the
Tenant shall fail to commence to do so within forty-eight (48) hours and
complete the same within a reasonable time after notice is received by the
Tenant from the Landlord, then the Landlord may at its option and without
prejudice to its other rights and recourses:
(a) notify Tenant that it must shut down all its operations
in the Leased Premises; and
(b) Landlord may proceed forthwith to take reasonable
measures to correct the same, at Tenant's cost as
Additional Rental.
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION
The Tenant shall not place or leave or permit to be placed or left in
or upon any part of the Property outside of the Leased Premises any debris or
refuse except as allowed by the Landlord at specific times and deposited in
areas indicated by the Landlord in proper receptacles provided and placed for
that purpose by the Tenant and Tenant shall furthermore comply with any of
Landlord's rules and
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regulations with respect to garbage containers. The Tenant shall arrange and pay
for the cost of those services required to remove diligently and efficiently all
of Tenant's garbage and refuse of any nature whatsoever.
Tenant, at its sole cost shall keep, the leased Premises shall be kept
in a clean and sanitary condition and in accordance with the laws of the
municipality in which the Property is located and in accordance with all other
regulations of any agency having jurisdiction over the Property and in
accordance with the instructions, policies and recommendations of Landlord's
insurers. If any such laws, instructions, policies and recommendations by
Landlord's insurers require any changes whatsoever to the Leased Premises, the
Tenant shall effect such changes at its own expense but subject to the approval
of the Landlord. The Tenant agrees to provide strict measures for rat prevention
and pest control and shall, if the Landlord deems the same to be necessary,
enter into a regular contract with a firm of exterminators acceptable to
Landlord. In the event that the Tenant fails to comply with the foregoing
provisions, then Landlord, without prejudice to all of its other rights and
recourses, shall have the right, without prior notice to the Tenant, to engage a
firm of exterminators and to enter the Leased Premises with representatives of
said firm in order to rectify the situation, the whole at Tenant's cost as
Additional Rental.
20. ACCESS
The Landlord shall have the right of access to the Leased Premises only
during reasonable business hours (except in the case of an emergency when the
Landlord shall have access at all times), and the right to perform such work as
it chooses to do upon the Leased Premises, the Tenant renouncing any claim to
any indemnity or reduction in rental provided such work be carried out with
reasonable diligence.
21. PARKING
Parking shall be regulated by the Landlord in a reasonable manner and
the Tenant and its customers shall abide by such regulations as may from time to
time be established by the Landlord. If requested by the Landlord, the Tenant
shall supply its employees' automobile licence numbers to the Landlord. Tenant
shall indemnify and hold Landlord harmless from any claims should Landlord find
it necessary to tow away from a restricted area any vehicle belonging to Tenant
or to its customers.
The Tenant acknowledges that the parking of its vehicle(s) and those of
its customers in the parking facilities shall be at the risk and peril of Tenant
and/or its customers, and that the Landlord shall not be responsible for any
damages or loss whatsoever, whether caused by theft, fire or any other cause, to
the Tenant's vehicle(s) or to those of its customers or to any property found
in Tenant's vehicle(s) or those of its customers or for any injury to Tenant
or other Persons on or in the immediate vicinity of the parking facilities and
Tenant hereby releases Landlord of all liabilities of whatsoever nature with
respect to the above.
Notwithstanding anything contained herein, Tenant agrees to participate
in a ticket validation system if one is established by the Landlord for the
parking facilities of the Property, and to pay forthwith on demand as Additional
Rental, all attributable parking charges.
22. SIGNS OF LANDLORD
Landlord shall have the right, at all times, to place upon the Property
a notice of reasonable dimensions and reasonably placed in order not to
interfere with the business of Tenant, stating that the Property is for sale
and/or rent, and Landlord shall have the right, during the last six (6) months
prior to the Termination Date, to place upon the Leased Premises a notice of
reasonable dimensions and
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Montreal Industrial Lease
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reasonably placed stating that the Leased Premises are for rent and
Tenant will not remove any such notice or knowingly permit either of them to be
removed.
Landlord shall have the right to exhibit the Leased Premises from time
to time to any prospective tenant or hypothecary creditor during all business
hours of the Tenant and Tenant hereby renounces to Article 1645 of the Civil
Code of Lower Canada.
23. SIGNS OF TENANT
The Tenant shall be entitled, at its expense, to install on the Leased
Premises such signs as are normally installed in connection with its business,
as well as to identify itself on the exterior front of the Building provided
such signs comply with municipal by-laws with the Rules and Regulations as
established from time to time by Landlord in accordance with the Article
entitled "Rules and Regulations," and provided further that the Tenant obtains
Landlord's consent for both the sign and its location. Furthermore, the
authorization to install a sign will be issued in exchange for a deposit
equivalent to the estimated cost of the repair of the supporting Building
surface following the removal of the sign and Landlord shall not pay any
interest to Tenant on said deposit. The installed sign must be subject
to inspection by the Landlord who will proceed to the inspection upon
receipt of proof of municipal permit and, in the case of electrified signs,
of proof of approval by the Canadian Standards Association or other
governing body.
Except as provided above and unless specifically provided for in this
Lease, Tenant shall not be entitled to install or put up any signs or posters of
whatsoever nature on the windows of the Leased Premises and/or the Building
and/or the Property.
All civic numbers are supplied and installed at Tenant's expense by the
Landlord according to its standards. The Tenant's identification at the rear of
the Building is also supplied and installed by the Landlord at Tenant's expense
according to Belcourt's standard #20.11.87 attached to the Rules and Regulations
in Schedule E.
In the event that Tenant installs any sign without satisfying the
requirements of this Article, Tenant shall remove such sign upon receipt of
Landlord's notice. If Tenant fails to remove such sign within twenty-four (24)
hours of receipt of Landlord's notice, then Landlord shall have the right,
without further notice or any form of legal process, to remove same at Tenant's
expense and to repair any damages caused by such removal. Landlord shall
not be responsible for damages to Tenant's property or sign resulting from
such removal. Tenant expressly waives its recourse in damages against the
Landlord and shall hold Landlord harmless of any claim by any third party with
respect to the said sign. Tenant shall immediately pay Landlord for all costs
described hereinabove, upon demand, as Additional Rental.
24. LANDLORD'S WORK
The Leased Premises shall be delivered in an "as is" basis and Tenant
accepts same in the condition in which they are at the signing of these
presents.
25. IMPROVEMENTS AND ALTERATIONS
(a) The Tenant shall not have the right to execute any changes,
alterations, additions, erections, leasehold improvements, repairs and
installations to the Leased Premises (hereinafter the "Work"), unless
it has obtained Landlord's prior written consent. In the event Landlord
consents to such Work, then Tenant undertakes to conform in the
conditions stipulated hereunder.
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Montreal Industrial Lease
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(i) All Work shall be carried out with reasonable dispatch and in
a good workmanlike manner and in compliance with all
applicable permits, authorizations, building and zoning
by-laws and with all regulations, and requirements of all
competent authorities having jurisdiction over the
Leased Premises;
(ii) The Property shall at all times be free of all pledges,
registered privileges and any other encumbrances;
(iii) If the cost of any Work shall be in excess of five
thousand dollars ($5,000.00) as reasonably estimated
by Landlord, Landlord may require Tenant to furnish
security satisfactory to Landlord guaranteeing the
completion of the Work, the payment of the cost
thereof and that the Property is free and clear of all
pledges, registered privileges and any other
encumbrances;
(iv) Tenant shall maintain workmen's compensation
insurance covering all persons employed in
connection with the Work and shall produce evidence
of such insurance to Landlord and Tenant shall also
maintain such general liability insurance for the
protection of Landlord and Tenant upon the terms
Landlord may reasonably require, as well as
contractor's protective liability insurance. Tenant
shall further comply with all of the stipulations of the
Article entitled "CSST" (Commission de la Sante et
de la Securite au Travial du Quebec);
(v) The Tenant shall promptly pay for all material
supplied and work done in respect of the Leased
Premises in order to ensure that no privilege is
registered against any portion of the Property. If a
privilege is registered or filed, the Tenant shall
forthwith discharge it at its expense, failing which the
Landlord may, at its option, discharge the same by
paying the amount claimed to be due into court or
directly to any such privilege claimant and the amount
so paid and all expenses of the Landlord including
any judicial and extrajudicial costs and attorney's fees
incurred by the Landlord shall be paid by the Tenant
to the Landlord within five (5) days after demand.
It is agreed and understood that no Work by or on behalf of
Tenant shall be permitted which, in Landlord's sole judgment, may
weaken or endanger the structure or adversely affect the condition or
operation of the Leased Premises and/or the Property or diminish the
value thereof or restrict or reduce Landlord's coverage for insurance
purposes.
(b) Notwithstanding the contents of (a) above, Landlord may, at its
sole option and discretion, execute itself or inspect any Work approved
by Landlord, in which event the Tenant shall pay for the costs of
either the Work or the inspection thereof, and, in the event that
Landlord executes the Work, Tenant shall pay an additional amount equal
to twenty percent (20%) of the costs of said Work on account
Landlord's overhead and administration costs. However, whether or not
Landlord carries out or inspects the Work, the Tenant shall pay the
fees of all architectural and engineering consultants and/or the cost
of all construction drawings prepared to comply with the Tenant's
requirements and for the cost of entering the information of such
drawings on the original drawings of the Building, as well as twenty
percent (20%) of such costs on account of administration and general
expenses of Landlord. Payment shall be effected by way of a cash
deposit and progress draws during the course of the Work, the specifics
of which shall be established by the Landlord. acting reasonably, from
time to time.
(c) Any Work by the Tenant made without the prior written consent of
the Landlord), or which is not made in accordance with the design
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Montreal Industrial Lease
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criteria and specifications approved by the Landlord, shall be removed
by the Tenant immediately upon demand and the Leased Premises shall be
restored to their previous condition by Tenant, the whole at the
Tenant's cost, failing which Landlord shall have the right to remove
said Work at Tenant's entire cost and Landlord shall not be responsible
for damages to Tenant's property resulting from such removal.
(d) Notwithstanding anything contained in this Article, Tenant shall
not have the right to do any structural, mechanical or electrical Work
in the Leased Premises.
In the event that Tenant requests any structural, mechanical
or electrical Work, Landlord, at its sole option and discretion, shall
be entitled to execute said Work. Said Work shall be governed by the
provisions of sub-paragraph (b) above.
In the event that Landlord does not choose to execute said
Work and consents to having Tenant execute same, then Tenant shall
furnish to Landlord plans and specifications showing in reasonably
complete detail the Work proposed to be carried out and the estimated
cost thereof. Landlord shall approve or reject such plans and
specifications within thirty (30) days after receipt of the same. If
such plans and specifications are approved, all work shall be carried
out in compliance with the same. Furthermore, in the case where Tenant
is authorized to carry out said Work, Tenant shall, at its cost,
provide Landlord with an engineer's certificate upon completion of said
Work. Any costs incurred by Landlord of any nature whatsoever in order
to permit Landlord to approve or reject Tenant's plans and
specifications shall be reimbursed by Tenant immediately upon
Landlord's request. In addition to the above, Tenant shall comply with
all the conditions stipulated in (a) and (c) above.
It is agreed and understood that when completed, all work shall be
comprised in and form part of the Leased Premises and be subject to all the
provisions of this Lease. Furthermore, any authorization given by Landlord to
Tenant to do any Work in accordance with this Article, shall not relieve Tenant
of its responsibility for the Work in question.
Subject to the terms and conditions of this Article, in the event that
the Tenant constructs a mezzanine in the Leased Premises, the Tenant will pay
the amount of any increase in Taxes on the whole of the Building of which the
Leased Premises form part, if such increase is caused by the construction or
occupancy of said mezzanine. Furthermore, the Tenant will pay for any increase
in Operating Costs resulting from the construction or occupancy of the said
mezzanine.
Tenant shall not make use or cause to be removed any part or all of the
ceiling system for any purposes, including that of storage.
Moreover, Tenant shall pay to Landlord the amount of any increase for
any Taxes to the extent that such increase is directly attributable to any
action by Tenant under this Article.
26. CSST (COMMISSION DE LA SANTE ET DE
LA SECURITE AU TRAVIAL DU QUEBEC)
Tenant shall ensure itself that its contractor and/or subcontractors
comply with all the requirements established by La Commission de la Sante et de
la Securite au Travial du Quebec (hereinafter the "CSST") and more specifically,
Tenant shall ensure itself that its contractor and/or subcontractors have
instituted a safety program for its employees. Tenant shall provide proof to
Landlord, upon demand, that all requirements of the CSST have been met. It is
expressly understood that Tenant shall indemnify and hold Landlord harmless from
any proceedings, claim or demand which could not be instituted against Landlord
for the
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Montreal Industrial Lease
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failure of Tenant's contractor and/or subcontractors to comply with
CSST's requirements and the Tenant shall pay upon demand any judicial or
extrajudicial costs so incurred by Landlord.
27. INSURANCE REQUIREMENTS
Tenant shall not do or commit any act upon the Leased Premises or bring
into or keep upon the Leased Premises any article which will affect the fire
risk or increase the rate of fire insurance or other insurance on the Property.
Tenant shall not commit any act upon the Leased Premises or make any
use thereof which may make void or voidable any insurance on the Leased Premiss
or on the Building or Property and should any act so committed or any use so
made by Tenant, including any unauthorized vacancy thereof, result in an
increased or extra premium payable for insurance on the Leased Premises,
Building or Property, then Landlord may, in addition to all other remedies,
elect to pay the amount of such increase or extra premium, the amount so paid
becoming immediately due and payable by Tenant and collectible as Additional
Rental.
Tenant shall comply with the rules and requirements of the Insurers'
Advisory Organization of Canada or any successor body, and/or a loss prevention
firm or consultant chosen by Landlord's insurers, and with the requirements of
all insurance companies having policies of any kind whatsoever in effect
covering the Property, including policies insuring against actual liability.
In no event shall any inflammable material, except for kinds and
quantities permitted by the insurance policies covering the Property, or any
explosives or radioactive material whatsoever, be taken into the Leased
Premises or retained therein.
Tenant shall take out and keep in force the following insurance:
(a) comprehensive general liability insurance including blanket
contractual liability and broad form property damage coverage
with respect to the business carried on in or from the Leased
Premises and the use and occupancy thereof, for bodily injury
and death and damage to property of others in an amount of at
least two million ($2,000,000.00) for each occurrence or such
greater amount as Landlord may, from time to time, reasonably
require.
(b) an "all risks" insurance with extended coverage including the
perils of fire, leakage from sprinklers and other fire
protective devices, earthquake, collapse, flood and sewer
back-ups in respect to furniture, equipment, inventory and
stock in trade, fixtures (plate glass if appropriate), and
leasehold improvements located within the Leased Premises and
such other property located on or forming part of the Leased
Premises, including all mechanical or electrical systems (or
portions thereof) installed by Tenant in the Leased Premises,
the whole for the full replacement value thereof (without
depreciation) in each such instance.
(c) Tenant's legal liability insurance in an amount equal to the
replacement cost of the Leased Premises or such greater amount
as Landlord may, from time to time, reasonably require.
(d) an environmental liability policy of a coverage of at least
one million dollars ($1,000,000.00); and
(e) such additional insurance as Landlord or its insurers, acting
reasonably, may from time to time require.
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Montreal Industrial Lease
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All the above-mentioned policies of insurance shall (i) be in form
satisfactory to Landlord; (ii) be placed with insurers acceptable to Landlord
and (iii) provide that they will not be cancelled or permitted to lapse unless
the insurer notifies Landlord in writing at least sixty (60) days prior to the
date of cancellation or lapse. Each such policy shall name Landlord and any
other party required by Landlord, as an additional insured as their interest may
appear. Each liability policy will contain a provision of cross-liability and
severability of interest as between Landlord and Tenant. All other policies
referred to above shall contain a waiver of subrogation rights which Tenant's
insurers may have against Landlord, Landlord's insurers and any Persons for whom
Landlord is responsible. Notwithstanding anything to the contrary contained in
this Lease, Tenant hereby releases and waives any and all claims against
Landlord and any Persons for whom Landlord is responsible with respect to
occurrences which are or which are required to be insured against by Tenant
hereunder. Tenant shall provide Landlord with copies of each insurance policy
referred to above upon execution of said policy and at the latest fifteen (15)
days prior to the Tenant's occupation of the Leased Premises. It is understood
that no review or approval of any insurance certificate or policy by Landlord
shall derogate from or diminish Landlord's rights under this Lease.
Tenant agrees that if Tenant fails to take out or to keep in force such
insurance Landlord may, at its sole option and discretion, do so and pay the
premium therefor and in such event Tenant shall repay to Landlord the amount
paid as a premium, which repayment shall be collectible as Additional Rental.
28. CANCELLATION OF INSURANCE
If any insurance policy mentioned in the preceding Article and/or any
insurance contracted by Landlord or any part of it is cancelled and/or
threatened to be cancelled by the insurer, or if the coverage under it is
reduced in any way by the insurer because of the use or occupation of any part
of the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to the cancellation, threatened cancellation or reduction of coverage
within forty-eight (48) hours after notice from the Landlord, the Landlord may,
either:
(a) enter and take possession of the Leased Premises immediately
by leaving upon the Leased Premises a notice of its intention
to do so, upon which the Landlord will have the same rights
and remedies that are available to him under this Lease or in
virtue of the law; or,
(b) enter upon the Leased Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or reduction
of coverage and the Tenant will immediately pay the costs to
the Landlord, together with a fee of fifteen percent (15%) of
such costs representing the Landlord's overhead, which costs
may be collected by the Landlord as Additional Rental, and the
Landlord will not be liable for any damage caused to any
property of the Tenant or others located on the Leased
Premises as a result of the entry.
29. DAMAGE OR DESTRUCTION
29.1 If the Leased Premises are at any time destroyed or damaged,
the following provisions will apply:
(i) if, in the opinion of the Landlord, the Leased Premises are
fit for tenancy in whole or in part, the Lease shall continue
in full force and effect without abatement or diminution of
any Minimum Net Net Rental or Operating Costs and Taxes;
(ii) If, in the opinion of the Landlord, the Leased Premises are
rendered partly unfit for tenancy, this Lease shall continue
in full
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Montreal Industrial Lease
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force and effect, except that the Minimum Net Net
Rental and Operating Costs and Taxes will abate to the extent
Landlord's Architect determines that the Leased Premises
cannot reasonably be used for their intended purposes:
(iii) if Landlord determines that the Leased Premises are rendered
wholly unfit for tenancy, this Lease shall continue in full
force and effect, except that Minimum Net Net Rental and
Operating Costs and Taxes will fully abate:
(iv) all abatements will occur from the date of the damage or
destruction until the earlier of the date that the Leased
Premises are delivered to Tenant or the date of termination of
the period of indemnity under Landlord's insurance policy for
business interruption and/or loss of rentals;
(v) Landlord will commence and proceed diligently to reconstruct,
rebuild or repair any damage to the Leased Premises to meet
Landlord's base building criteria for that Property which
Landlord may modify to be consistent with the plans,
specifications and design criteria for the rebuilding of the
Building and/or the Leased Premises, chosen by Landlord acting
reasonably;
(vi) to restore the Leased Premises, Landlord will be under no
obligation to perform work other than that stipulated in
subparagraph (v) above;
(vii) whether or not the damage to the Leased Premises may have been
caused by Tenant's negligence or fault, Tenant shall commence
to repair, rebuild or reconstruct, at its own cost, all
leasehold improvements, fixturing and equipment in the Leased
Premises within fifteen (15) days from Landlord's notice that
Landlord has completed its work and Tenant shall complete said
work within thirty (30) days from Landlord's notice.
(viii) Tenant shall not be entitled to any allowance, inducement,
payment or other consideration from Landlord in connection
with Tenant's work described in sub-paragraph (vii) above,
even if such allowance, inducement, payment or other
consideration was made at the time of original construction of
the Leased Premises.
29.2 Despite any provision to the contrary contained in this Lease and,
specifically but without imitation, anything contained in the present Article,
if the Property is totally or partially damaged or destroyed (whether the Leased
Premises are affected or not), and:
(i) in the Landlord's opinion, the damaged or destroyed portions
cannot reasonably be repaired, restored or rebuilt within one
(1) year following the occurrence without overtime or other
special arrangements; or
(ii) the cost, as estimated by the Landlord, of repairing,
restoring or rebuilding the damaged or destroyed portions will
exceed the proceeds of insurance available to Landlord for
such purpose or the damage or destruction was caused by a
peril which is not covered by Landlord's insurance; or
(iii) less than two (2) years remain during the Term;
then in any of the above cases, Landlord may, at its option (to be exercised by
written notice to Tenant within ninety (90) days following any such occurrence)
elect to terminate this lease.
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Montreal Industrial Lease
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If Landlord elects to terminate Lease, then the following will apply:
(v) if the Leased Premises have been rendered wholly unfit for
tenancy, the termination will take effect from the date of the
damage or destruction and all Minimum Net Net Rental and
Operating Costs and Taxes be adjusted to that date:
(vi) if the Leased Premises have been rendered only partly unfit
for tenancy and Tenant has occupied or has been reasonably
capable of occupying any part of the Leased Premises from the
date of the damage or destruction, the Lease will terminate
(10) days from Landlord's notice. All unabated Minimum Net Net
Rental and Operating Costs and Taxes will be adjusted to the
date of termination. Minimum Net Net Rental and Operating
Costs and Taxes will abate from the date of the damage and
destruction until the date of termination to the extent the
Leased Premises cannot reasonably be used for their intended
purposes.
(vii) if the Leased Premises were not rendered wholly or partly
unfit for tenancy, the Lease will terminate ten (10) days from
Landlord's notice and all Minimum Net Net Rental and Operating
Costs and Taxes will be adjusted to that date;
Landlord may, at its sole option, rather than elect to terminate this
Lease, relocate Tenant to premises reasonably similar to the Leased Premises
within the same general vicinity of the Leased Premises for a period
corresponding to the unexpired Term of this Lease or until such time as Landlord
has reconstructed the Leased Premises.
If the Property is totally or partially damaged or destroyed and
Landlord does not elect to terminate this Lease, subject to paragraph (viii)
below, Landlord shall commence and proceed diligently to reconstruct, rebuild or
repair, as necessary, those portions of the Property which have been so damaged
or destroyed in accordance with Landlord's base building criteria for said
Property, exclusive of obligations of tenants in respect of the Property
pursuant to any lease. Furthermore, if the Leased Premises are being repaired,
rebuilt or reconstructed, the provisions of the present Article relating to the
Leased Premises shall apply.
(viii) Tenant acknowledges and agrees that if Landlord does any
reconstruction, rebuilding or repairing of the Property,
Landlord may do any one or more of the following:
(a) use plans, specifications and working drawings which
differ from those applicable to the Property in
existence prior to the damage or destruction;
(b) change the configuration, design and/or size of the
Property or any of its component parts to suit
Landlord's needs at the time, including, without
limitation, the location and size of any court,
entrance, parking facility or any other Common Area
or Facility;
(c) redesign the tenant mix to suit Landlord's needs at
the time of reconstruction, with respect to the kinds
of uses which will be included in the tenant mix and
rearrange the locations in the Property in which
various types of uses shall be permitted.
In the present Article, the Landlord's opinion shall be final and
binding on the parties. It is further understood and agreed that nothing herein
shall oblige Landlord, under any circumstances and in any manner whatsoever, to
spend an amount greater than the proceeds of insurance received by Landlord as a
result of
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the damage or destruction described in the present Article for any
reconstruction contemplated herein.
Tenant agrees that none of the foregoing shall constitute a change of
form or destination, nor shall the validity or enforceability of this Lease be
affected in any manner by any of the foregoing.
30. TRANSFER CONSENT REQUIRED
No Transfer of this Lease shall be effected by Tenant without the prior
written consent of the Landlord in each instance, which consent may not be
unreasonably withheld.
Landlord's refusal of consent shall be deemed reasonable (without in
any way restricting Landlord's right to refuse its consent on other reasonable
grounds) under the following circumstances:
(a) where the Transferee proposed by Tenant is then a tenant of
the Property and Landlord has or will have during the next six
(6) months suitable space for rent in the Property;
(b) where Tenant is in default under any provisions of this Lease:
(c) Where the Landlord has reasonable grounds to believe that the
proposed Transferee does not possess the financial means
necessary to fulfill all its financial obligations herein;
(d) where the Transfer applies to part of the Leased Premises
only;
(e) where the proposed Transferee's use of the Leased Premises
violates any laws or rights granted to other tenants or
retained by Landlord, or where such use may be disruptive or
objectionable to other tenants or to the Landlord, or where
such use shall detract from the dignity or character of the
Property;
(f) where the Landlord has not obtained the consent of a secured
creditor or any Person who may have the right to approve the
Transfer;
(g) where a previous Transferor or guarantor does not approve
the Transfer and/or refuses to remain jointly and severally
liable towards Landlord for the execution of Tenant's
obligations under this Lease and/or refuses to sign a Transfer
document to that effect.
If the Tenant intends to effect a Transfer of all or any part
of the Leased premises, with Landlord's consent, of this Lease or of any
interest hereunder, then the Tenant undertakes not to print, publish, post,
delay or broadcast any notice or advertisement or otherwise advertise the whole
or any part of the Leased Premises for purposes of a Transfer, and shall not
permit any broker or other Person to do any of the foregoing, unless the
complete text and format of any such notice, advertisement, or offer is first
approved in writing by the Landlord. Without in any way restricting or limiting
the Landlord's right to refuse any text or format on other grounds, any text or
format proposed by the Tenant shall not contain any reference to the rental rate
of the Leased Premises. Notwithstanding anything contained herein, no sign shall
be posted, affixed, displayed or inscribed in any manner whatsoever on the
Leased Premises or the Property advertising that the Leased Premises are for
rent.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, of this Lease or of any interest hereunder, then, and as often
as such event shall occur, the Tenant shall give prior written notice to the
Landlord of such intent, specifying therein the proposed Transferee, providing
such information with
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respect thereto, including without limitation, information
concerning the principals thereof and as to any credit, financial or business
information relating to the proposed Transferee as the Landlord or the
hypothecary creditor requires, and shall pay Landlord in advance for the cost of
Landlord's inquiries as well as its processing fee for the examination of
Tenant's request, and the Landlord shall, within thirty (30) days following the
completion of Landlord's study of Tenant's request, notify the Tenant in writing
that:
(a) It consents or does not consent to the Transfer in accordance
with the provisions and qualifications of this Article:
(b) it elects to cancel this Lease in preference to giving such a
consent.
The mere occupation of all or part of the Leased Premises or Landlord's
tolerance thereof, the payment of any amount by the proposed Transferee to
Landlord, or the consent to any previous Transfer shall not constitute a waiver
of Tenant's obligation to obtain Landlord's consent to any Transfer, nor will
any of the foregoing be construed to constitute a consent by Landlord to the
proposed Transfer. Nevertheless, whether or not Landlord consents to any
Transfer, it may collect rent or other amounts from any proposed Transferee and
apply the said amount to the amounts payable under this Lease, without in any
manner prejudicing any of its rights. This prohibition against a Transfer is
construed in a manner to include a prohibition against any Transfer by operation
of law, and no Transfer shall take place by reason of a failure by the Landlord
to reply to a request by the Tenant for consent to a Transfer.
Notwithstanding any such Transfer consented to by the Landlord, no
acceptance by the Landlord of any payments by a Transferee shall be deemed a
waiver of the requirements contained herein or a release of the Tenant from the
further performance by the Tenant of the obligations on the part of the Tenant
herein contained and the Tenant shall be jointly and severally liable with the
Transferee for all of the Tenant's obligations stipulated in the Lease and shall
not be released from performing any of the obligations under the Lease during
the Term.
In addition to any of the requirements stipulated herein, Landlord's
consent to the Transfer is conditional upon Tenant and Transferee signing with
Landlord a document prepared by Landlord evidencing such Transfer, and Tenant
undertakes to cause the Transferee to promptly sign and document in which
Transferee shall agree to be bound directly with Landlord to all of the
obligations contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. The above-mentioned document shall further
provide that the Tenant transfers to the Transferee any rights it may have with
respect to the Deposit retained by Landlord pursuant to this Lease and Tenant
renounces all of its rights thereto. In addition thereto, the Transferee may be
required by Landlord to supplement any security deposit given in this Lease.
Should the Minimum Net Net Rental per square foot to be paid by a
Transferee, whether in cash, goods, services or other consideration, exceed the
Minimum Net Net Rental per square foot payable hereunder, then Tenant shall pay
to Landlord monthly, as Additional Rental, the amount of or an amount equivalent
to such excess.
Notwithstanding anything contained in this Article, the Tenant may
sublet the Leased Premises or assign the Lease to a parent, subsidiary or
affiliate company without seeking the consent of the Landlord provided, however,
that such sub-tenant or assignee shall remain bound jointly and severally with
the Tenant for all the terms and covenants of this Lease, and provided further
that Tenant shall notify Landlord in writing prior to such sublet or assignment.
Upon the execution of this Lease and upon each succeeding anniversary
date or at any sooner time requested by the Landlord, the Tenant shall deliver
to the Landlord a statement, certified as being true and correct and verified by
the
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corporate secretary, showing the names of all existing shareholders of
record and their respective ownership interests as at that date. The Tenant
shall, at the request of the Landlord, make available to the Landlord for
inspection or copying or both, all books and records of the Tenant which, alone
or with other data, show the applicability or inapplicability of this Article.
If any shareholder of the Tenant shall, after the request of the Landlord to do
so, fall or refuse to furnish forthwith to the Landlord any data verified by the
affidavit of such shareholder or other credible person, which data, alone or
with other data show the applicability or inapplicability of this paragraph, the
Landlord may terminate this lease by giving the Tenant prior written notice of
thirty (30) days of such termination.
31. PRIVILEGE OF LANDLORD
Tenant covenants to furnish the Leased Premises with and to maintain at
all times thereon, a sufficient quantity of furniture, fixtures and other
effects to secure the payment of at least six (6) months of Minimum Net Net
Rental and Additional Rental which shall at all times be free and clear of all
Tenant Security and shall be subject to a privilege in favour of the Landlord
for the payment of Minimum Net Net Rental and Additional Rental and the
fulfillment of all other covenants and agreements herein contained.
32. ASSIGNMENT BY LANDLORD
Landlord declares that it may assign its rights under this Lease to a
lending institution or to any Person as collateral security for a loan to
Landlord and in the event that such an assignment is given and executed by
Landlord and notification thereof is given to Tenant by or on behalf of
Landlord, it is expressly agreed that this Lease shall not be cancelled or
modified for any reason whatsoever without the consent in writing of such
lending institution or Person if such consent is required.
This Lease and all rights of the Tenant under the Lease shall be
subject to and subordinate to any Security. Tenant hereby covenants and agrees
that it will, whenever reasonably required by Landlord and at Landlord's
expense, consent to and become a party to any instrument subordinating the Lease
to any Security. However, no subordination by the Tenant shall have the effect
of permitting the holder of any Security to disturb the Tenant's enjoyment of
the Leased Premises as long as the Tenant shall comply with the covenants to be
kept and performed by it under this Lease.
The Tenant will, upon request of the Landlord or the Person holding the
Security or any Person having an interest in the project, execute and deliver
promptly those instruments referred to herein. However, if ten (10) days after
the date of request, the Tenant has not executed and delivered them, the Tenant
hereby irrevocably appoints the Landlord as the Tenant's attorney with full
power and authority to execute and deliver in the name of the Tenant said
instruments or the Landlord may, at its sole option and discretion, terminate
this Lease upon giving Tenant a forty-eight hour (48) notice of its intention to
do so, the whole without incurring any liability whatsoever and without
prejudice to all of its other rights and recourses.
It is agreed and understood that in the event of any sale of the
Property by Landlord, then Landlord shall automatically be relieved of any and
all obligations and liabilities under this Lease accruing from and after the
date of such sale.
33. EXPROPRIATION
If the whole or any part of the Leased Premises and/or the Property
shall be condemned, expropriated or taken in any manner for any public or
quasi-public use or purpose, Landlord may, at its option, terminate this Lease
by giving notice in writing to Tenant that the Term hereof shall expire upon the
day when
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Montreal Industrial Lease
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possession is required for such purpose and in the event of such
expiration Landlord shall have no liability of any nature to Tenant resulting
from said expiration.
34. EXTENSIONS
The Landlord shall have the right, at its option and from time to time,
to make extensions and/or additions and/or to add one or more additional floors
or storeys onto all or part of the building comprising the Leased Premises, or
on to any other buildings of the Property, or to add one or more buildings to
the Property. In the event that any such extensions and/or additions be made to
the building comprising the Leased Premises or to any other buildings of the
Property and/or in the event any such additional building or buildings shall be
erected on the Property, the Landlord may, at its sole option and discretion,
include in the denominator for the purpose of calculating Tenant's Proportionate
Share of Operating Costs and Taxes, the total leasable area of all or part of
the buildings erected on the Property.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the
Landlord from liability in respect of any damage or loss caused to the Tenant as
a consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the
Landlord from liability in respect of any damage or loss caused to the Tenant
as a consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of
the foregoing without any other claims by the Tenant against the Landlord for
damage and loss of use.
Without limiting the generality of the foregoing, the Landlord hereby
reserves the right, at any time and from time to time, to make changes in,
additions to, subtractions from or rearrangements of the Building including,
without limitation, all improvements at any time thereon, all entrances and
exits thereto, and to grant, modify and terminate any servitudes or other
agreements pertaining to the use and maintenance of all or parts of the building
and to make changes or additions to the pipes, conduits, wires, ducts, utilities
and other necessary building services in the Leased Premises which serve other
premises. The Landlord agrees that in performing such alterations, it shall do
so in such manner as to minimize
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Montreal Industrial Lease
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any material interference with the Tenant's use and enjoyment of the
Leased Premises. The Landlord shall not however, be responsible for any damages
of whatsoever nature to Tenant except for physical damages to the Leased
Premises.
The Landlord shall further have the right from time to time to sever
any part or parts of the Property or any Building or improvements thereon for
purposes of sale, lease, hypothec, privilege, charge or otherwise, including the
creation of rights-of-way, servitudes and parking arrangements which the
Landlord deems necessary, and the Tenant hereby consents to any such
severance and agrees to execute any documents or consents which the Landlord
may request for these purposes. If any part or parts of the Property or
the Building or Improvements on the Property are so servered and are deemed
by the Landlord to no longer form part of the Property, such part or parts
shall be excluded from the Property for the purposes of this Lease at the
time designated by the Landlord and the Tenant shall, when requested by the
Landlord, execute a release of any interest in the Property so excluded
35. DEFAULT
The following shall be considered a default under the terms of this
Lease
(a) In the event that Tenant shall be in default under any
provision of this Lease providing for the payment of Minimum
Net Net Rental and/or Additional Rental;
(b) In the event Tenant does not take possession of the Leased
Premises or abandons or attempts to abandon the Leased
Premises before the Termination Date, with or without
Landlord's knowledge; or in the event the Leased Premises are
used by any Person other than the Person entitled to use them
hereunder, or any procedure in execution is issued pursuant to
a judgment rendered against Tenant; or if an agent, receiver
or trustee acting under a trust deed or other security, takes
possession of the Tenant's assets and/or any equipment,
fixtures, furniture or movable effects in the Leased Premises;
or if the Tenant shall make a bulk sale of its goods; or if
the Tenant should attempt to move its belongings out of the
Leased Premises;
(c) In the event that Tenant shall be in default in observing any
covenant herein contained and/or performing any of its
obligations contained in this Lease (other than a default
stipulated in sub-paragraphs (a) and (b) above) and such
default shall continue for fifteen (15) days after written
notice specifying such default shall have been given by
Landlord to Tenant, unless it is impossible for Tenant to cure
such default within the said delay of fifteen (15) days, in
which case Tenant shall, upon written request to Landlord, be
entitled to such reasonable extension of time to enable such
default to be remedied.
In the event of any default on the part of the Tenant under the terms
of this lease, Landlord shall have the right, at its sole and absolute
discretion, to terminate this Lease and in addition, Landlord may, without
notice or any form of legal process, forthwith enter upon and take possession of
the Leased Premises and operate the business and/or assume absolute ownership of
Tenant's moveable effects and/or assume absolute ownership of Tenant's movable
effects and/or remove the Tenant's effects therefore, any statute or law to the
contrary notwithstanding, the whole without prejudice to and under reserve of
all other rights and recourses of Landlord to claim any and all losses and
damages of any nature whatsoever sustained by the Landlord by reason of or
arising from any default of the Tenant including, without limitation, the
expenses of reletting the Leased Premises (including the costs of any repairs,
decorating, alterations or improvements necessitated thereby), as well as
attorney's fees of fifteen percent (15%) of any amount granted by judgment.
Where Landlord shall have instituted proceedings to cancel, terminate or confirm
its cancellation or termination of this
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Lease, notwithstanding any law or custom to the contrary, Tenant shall
not have any right to prevent such cancellation or termination by remedying its
default or defaults subsequent to the institution of such legal proceedings.
36. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay when due any taxes, rates, insurance premiums,
charges, debts or any other amounts which it owes or has herein covenanted
to pay, all such amounts shall be deemed to be and be treated as Additional
Rental, and payable and recoverable as Additional Rental. Landlord may
pay the same and shall be entitled to charge the sums so paid to Tenant
who shall pay them forthwith on demand as Additional Rental.
All arrears of Minimum Net Net Rental and Additional Rental shall bear
interest at the prime lending rate as determined by the Royal Bank of Canada on
a daily basis plus four percent (4%) from the time such arrears become due until
paid to Landlord.
37. BANKRUPTCY AND INSOLVENCY
In the event that Tenant shall be adjudicated bankrupt or make any
general assignment for the benefit of its creditors, or make a proposal to its
creditors, or take or attempt to take the benefit of any insolvency or
bankruptcy law, or if a receiver or trustee be appointed for the property of the
Tenant or any part thereof, the present Lease shall automatically terminate on
the occurrence of any of the aforesaid events without further notice or delay,
and Landlord shall be entitled to recover all arrears of Minimum Net Net Rental
and Additional Rental as well as six (6) months of future minimum Net Net Rental
and Additional Rental or such other accelerated amount that the law may at any
time provide.
38. INDEMNIFICATION
Except if caused directly by the gross negligence or fault of the
Landlord, its mandatories, employees, or representatives, or by any breach or
nonperformance by the Landlord of any covenant undertaken by virtue hereof,
the Landlord shall not be liable nor responsible in any way for any injury of
any nature whatsoever that may be suffered or sustained by the Tenant or any
other Person who may be upon the Leased Premises or for any loss of or damage to
any property belonging to the Tenant or to any other Persons while such property
is on the Leased Premises and in particular (but without limiting the generality
of the foregoing, the Landlord shall not be liable for any damage or damages of
any nature whatsoever to any such property caused by the failure, by reason of a
breakdown or other cause, to supply adequate drainage, or by reason of the
interruption of any public utility or service or in the event of steam, water,
rain or snow which may leak into issue or flow from any part of the Property or
from the water, steam, sprinkler, or drainage pipes or plumbing works of the
same, or from any other place or quarter or for any damage caused by
anything done or omitted by any tenant. The Landlord however, shall use
all reasonable diligence to remedy such condition, failure or interruption
of service when not attributable to the Tenant, after notice of same, when it
is within its power and obligation to do so. The Tenant shall not be entitled to
any abatement of Minimum Net Net Rental and Tenant's Proportionate Share of
Operating Costs and Taxes in respect of any such condition, failure or
interruption of service.
The Tenant will indemnify and hold Landlord harmless from and against
all fines, liability, damage suits, claims, demands and actions of any kind or
nature for which the Landlord shall or may become liable for or suffer by reason
of
(a) any breach or nonperformance by the Tenant of any
provision hereof; and/or
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Montreal Industrial Lease
Page 25
(b) any injury (including death resulting at any time therefrom)
or damage to property occasioned to or suffered by any Person
including the parties hereto by reason of any such breach or
nonperformance or of any wrongful act, neglect, or fault on
the part of the Tenant; and/or
(c) any damage to the Property caused by the Tenant's use and
occupancy of the Leased Premises; and/or
(d) any injury to any Person including death, sickness and
diseases resulting at any time therefrom, whether caused by a
virus, bacteria or any substance brought upon the Leased
Premises and manipulated by Tenant and/or located on or about
the Leased Premises; and/or
(e) any injuries, damages or costs relating to any environmental
impairment arising out of the occupancy of the Leased
Premises.
Such indemnification by the Tenant for any of the above items shall
survive the termination of this Lease, anything in this Lease to the contrary
notwithstanding.
39. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present
Lease the Tenant will not hold the Landlord in any way responsible for any
damages or annoyance which the Tenant may sustain through the fault of any
tenant who occupies any premises adjacent to, near, above or under the Leased
Premises, and renounces any claims it may have against the Landlord pursuant to
Article 1636 of the Civil Code of Lower Canada.
40. NONWAIVER
The failure of Landlord to insist upon a strict performance of any of
the terms hereof shall not be deemed a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent default by
Tenant of any such terms.
41. WAIVER OF COMPENSATION
The Tenant hereby waives and renounces any and all existing and future
claims, offsets and compensation against any Minimum Net Net Rental or
Additional Rental due hereunder and agrees to pay such Minimum Net Net Rental
and Additional Rental on their respective due dates, regardless of any claim,
offset or compensation which may be asserted by the Tenant or on its behalf,
except to the extent permitted hereunder.
42. IMPUTATION OF PAYMENTS
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Net Net Rental and Additional Rental shall
be deemed to be payments on account of the earliest stipulated Minimum Net Net
Rental and Additional Rental, nor is any endorsement or statement on any cheque
or any letter accompanying any cheque or payment as rent deemed as
acknowledgment of full payment or an agreement or acquiescence of or to the
terms thereof, and the Landlord may accept and cash such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rental
or pursue any other remedy provided in the Lease. The Landlord may, at its
option, apply sums received from the Tenant against any amounts due and payable
by the Tenant under this Lease in such manner as the Landlord sees fit.
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Montreal Industrial Lease
Page 26
43. CUMULATIVE REMEDIES
No reference to or exercise of any specific right or remedy by the
Landlord shall preclude the Landlord from or prejudice the Landlord in
exercising any other right under this Lease or pursuing any other remedy or
maintaining any action to which it may otherwise be entitled at law.
44. UNAVOIDABLE DELAY
Save and except for any monetary obligation under this Lease, Landlord
and Tenant shall not be liable for failure or delays in performing any of their
obligations hereunder should such failure or delay be caused by any event
(excluding the financial conditions of either party) which is beyond the
reasonable control of either party including, without limitation, cas fortuit,
force majeure, strikes, lockouts, labour troubles, inability to procure
materials, restrictive governmental rules, regulations, orders or bankruptcy of
contractors.
Without limiting the generality of the foregoing and in particular, it
is understood and agreed that whenever and to the extent that the Landlord shall
be unable to fulfill, or shall be delayed or restricted in the fulfillment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfill such obligation, or by reason of any statute,
law or order in council or any regulation or order passed or made pursuant
thereto or by reason of the order or directive of any competent authority
having jurisdiction over the Property, or inability to obtain any required
authorization therefrom, or by reason of any other cause beyond its control, the
Landlord shall be entitled to extend the time for fulfillment of such obligation
by a time equal to the duration of such delay or restriction, and the Tenant
shall not be entitled to compensation for any damages of whatsoever nature
arising therefrom.
45. MANAGEMENT OF THE PROPERTY
The Tenant hereby acknowledges to the Landlord that the Property may be
managed by any party other than the Landlord, as the Landlord from time to time
may in writing designate and, to all intents and purposes, any manager so
designated shall be the party at the Property authorized to deal with the
Tenant. All payments to Landlord in virtue of this Lease shall be made by cheque
payable to the Landlord in full unless otherwise specified in writing by
Landlord to Tenant.
46. RULES AND REGULATIONS
There is a schedule of rules and regulations annexed hereto as Schedule
"E" and the Tenant binds and obliges itself to abide by the said rules and
regulations.
The Landlord shall have the right to amend and/or rescind the rules and
regulations in Schedule "E" from time to time and to make any other reasonable
rules and regulations not contrary to the spirit and intent of this Lease as, in
its discretion, may from time to time be needful for the safety, care,
cleanliness and proper administration of the Property including the Leased
Premises, and for the preservation of good order therein, and the same shall be
observed and performed by the Tenant and by its customers, and all such rules
and regulations now or hereafter to be established by the Landlord as herein
provided shall form part of this Lease as if recited at length herein and any
such new rules and regulations shall be binding upon Tenant upon written
notification from Landlord.
<PAGE> 30
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Furthermore, in the event that Tenant does not comply with the rules
and regulations, Landlord shall have the right, without notice, to enter the
Leased Premises and execute any work necessary to rectify Tenant's
noncompliance, the cost of which shall immediately, upon Landlord's request,
be payable by Tenant as Additional Rental, it is agreed and understood that the
terms and conditions of this Lease shall prevail over any of the terms of the
rules and regulations.
47. COMPLIANCE WITH LAWS AND REGULATIONS
The tenant shall, at its own expense, promptly comply with the
requirements of every applicable statute, law and ordinance and with every
applicable lawful regulation or order with respect to the removal of any
encroachment placed by the Tenant, or to the condition, equipment, furniture,
fixtures, maintenance, or use, or occupation of the Leased Premises, including
the making of any alteration, addition in or to any structure upon, connected
with or appurtenant to the Leased Premises, whether or not such alteration be
structural or be required on account of any particular use to which the Leased
Premises or part thereof may be put and whether or not such requirement,
regulation or order be of a kind now existing or within the contemplation of the
parties hereto; and shall comply with any applicable regulation, recommendation
or order of the Insurers' Advisory Organization of Canada, or any body having
similar functions or of any liability or fire insurance company by which the
Landlord and/or the Tenant may be insured.
48. WINDOW COVERINGS
In order to preserve a more uniform and attractive appearance of the
Property for the benefit of all the tenants, the Tenant herein binds and obliges
itself to place vertical blinds for air porosity, over all windows which are
located in the front of the Building or on any side of the Building which faces
a public street and where such windows are for other than office areas, such
vertical blinds shall remain drawn at all times.
49. PERMITS AND LICENSES
The Tenant shall obtain all necessary permits and licenses required for
the occupancy and carrying on of its business, the Landlord making no
representations or warranties whatsoever as to whether said permits and licenses
may be obtained by Tenant. Should the Tenant fail to obtain any required permit
and/or license, it shall nevertheless remain bound to perform all of its
obligations pursuant to the present Lease including, without limitation, payment
of Minimum Net Net Rental and Additional Rental.
50. EXPIRATION OF LEASE
Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto Landlord, who shall become absolute owner
thereof, the Leased Premises together with all buildings, alterations,
additions, erections, leasehold improvements, repairs and installations,
including the air-conditioning and heating system, done or made by the Tenant,
both movable and immovable, except the equipment and furniture belonging to
Tenant which must be removed at Tenant's expense on or before the expiration of
the Lease. Tenant shall repair any and all damages caused to the Leased Premises
and/or to the Building as a result of such removal, using materials equal in
quality to that of the damaged materials, failing which Landlord may do so at
Tenant's expense.
Notwithstanding the above, Landlord may at its option advise Tenant in
writing that he does not wish the ownership of all or any part of the above
<PAGE> 31
Montreal Industrial Lease
Page 28
described property, in which case Tenant shall remain owner of such property
refused by Landlord and shall, at its own expense, immediately remove such
property and repair any damage to the Leased Premises and/or the Building caused
by the original installation and/or removal, using materials equal in quality to
that of the damaged materials, failing which Landlord may do so at Tenant's
expense.
If Tenant leaves any equipment or furniture in the Leased Premises
following the expiration of the Term, it is understood that Landlord may then,
at its option, either accept full and absolute ownership of same and may use it
or dispose of it as Landlord determines, without compensation payable to Tenant
and without incurring any liability to Tenant, or Landlord may dispose of same
as it sees fit, at Tenant's expense, without incurring any liability to Tenant.
If the Tenant has failed to fulfill its obligations under this lease
with respect to the maintenance, repair and alteration of the Leased Premises
and removal of improvements and fixtures from the Leased Premises during or at
the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration or
sooner termination of the Term.
51. CONSTITUT OR TENURE ACT
The Tenant hereby renounces any rights which it may have or acquire
under the Constitut or Tenure System Act, R.S.Q., 1977, c. C-64, to purchase or
acquire the Leased Premises or the Property.
52. DOMICILE AND NOTICES
The Tenant hereby elects domicile at the Leased Premises for the
purpose of service of any writs of summons or other legal document in any action
or proceeding whatsoever by the Landlord against the Tenant.
Any notice or demand given by Landlord to Tenant or by Tenant to
Landlord pursuant to the present Lease shall be deemed to be duly given if
served upon the Tenant or Landlord personally, or if delivered or mailed by
prepaid certified or registered mail to :
(a) LANDLORD: 7405 Trans Canada Highway
St. Laurent, Quebec H4T 1Z2
(b) TENANT: At the Leased Premises
Landlord may, by notice in writing to the Tenant, change the address to
which any notice or demand intended for the Landlord shall be addressed. Tenant
may, by notice in writing, require that a copy of any writ of summons or other
legal document or proceeding and a notice or demand served on the Leased
Premises be mailed by regular mail to an additional address.
53. SUCCESSORS AND ASSIGNS
The Lease shall enure to the benefit of Landlord's or Tenant's
respective heirs, executors, administrators, successors and assigns.
54. DESCRIPTIVE HEADINGS
Any descriptive headings appearing in this Lease have been inserted as
a matter of convenience and reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provisions hereof.
<PAGE> 32
Montreal Industrial Lease
Page 29
55. GOVERNING LAW/SEVERABILITY
The present Lease shall be construed and governed by the laws of the
Province of Quebec. Should any provision of this Lease be or become illegal or
not enforceable, it shall be considered separate and severable from the present
Lease and the remaining provisions shall continue in full force and effect and
be binding upon the parties hereto as though said provisions had never been
included. In this Lease, singular words shall be interpreted as including the
plural and vice versa and the words of masculine gender shall be interpreted as
including the feminine gender. Where more than one landlord or tenant is
referred to or when Tenant shall be of feminine gender or a corporation, all
the proper grammatical changes shall be inferred.
56. COST OF PREPARATION, REGISTRATION AND RADIATION
Tenant shall be permitted at its own cost to register the Lease by
memorial only, upon obtaining Landlord's prior written consent as to the form
and content of the memorial.
In addition, Tenant shall, at is own cost, at the expiration of the
Term, radiate the registration of the Lease from the Index of Immoveables.
In the event the said registration is not radiated within thirty (30)
days from the expiration of the Term, Tenant hereby irrevocably appoints the
Landlord as the Tenant's attorney with full power and authority to execute in
the name of the Tenant any documents and instruments required to effect the said
radiation of the registration of the Lease from the Index of Immoveables and
Tenant further authorizes Landlord to deliver the said instruments and documents
to the appropriate Registry Office for the purpose of effecting all the
appropriate registrations and radiations. The cost of the preparation of said
documents and instruments as well as the cost of registering said documents and
instruments shall be borne by Tenant.
57. BROKERAGE COMMISSION
The Landlord and Tenant hereby guarantee that no brokerage commission
or charges are owing to any broker or brokerage company with respect to the
present transaction.
Tenant shall indemnify and hold Landlord harmless from any and all
brokerage claims as described above.
58. SCHEDULES
Schedules "B" and "E" hereto form an integral part of this Lease.
59. CERTIFICATE OF INCORPORATION
Where Tenant is corporation, Tenant undertakes to remit to Landlord
upon the signing of the Lease, a copy of its Certificate of Incorporation.
60. ENTIRE AGREEMENT
Tenant acknowledges that there are no covenants, representations,
agreements, warranties or conditions in any way relating to the subject matter
of this Lease, whether expressed or implied, collateral or otherwise, either
oral or written, including promotional material, except those set forth in this
Lease; the Tenant agrees that he has not relied upon any representation in any
brochures, and
<PAGE> 33
Montreal Industrial Lease
Page 30
the Tenant expressly declares that this Lease constitutes the
entire agreement between the Landlord and the Tenant. Except as otherwise
provided herein, no subsequent alteration, amendment, change or addition to this
Lease shall be binding upon the Landlord or the Tenant unless agreed to in
writing by the parties.
61. LANGUAGE
Each of the parties does hereby confirm that it has expressly required
that this contract, as well as any document related hereto, be drawn up in the
English language. Chacune des parties confirme par les presentes avoir
expressement demande que le present contrat, ainsi que tous les documents y
afferent, solent rediges en anglais.
IN WITNESS WHEREOF THE LANDLORD HAS SIGNED
AT ST. LAURENT, QUEBEC, THIS 29th DAY OF JANUARY, 1995.
DOULKA INVESTMENTS INC.
Per:
--------------------------------
--------------------------------
Witness
-------------------------------
Witness
IN WITNESS WHEREOF THE TENANT HAS
SIGNED AT ST. LAURENT THIS 27TH DAY OF JANUARY, 1995
BUDDY L. CANADA INC.
Per:
-------------------------------
---------------------------------
Witness
--------------------------------
Witness
<PAGE> 34
[GRAPHIC OF 'Certificat of Localisation']
<PAGE> 35
SCHEDULE "E"
RULES AND REGULATIONS
1. The Landlord reserves entire control of the sidewalks, entries,
corridors and passages; washrooms and lavoratories; fan
rooms, janitor's closets, electrical closets and other closets;
stairs, flues, stacks, pipe shafts, and ducts; the whole not
within the Leased Premises, and of all parts of the building
employed for the common benefit of the Tenants, and shall
have the right to place such signs and appliances therein, as
they may deem advisable, provided that ingress to and egress
from the Leased Premises is not impaired thereby.
2. The Landlord shall have the exclusive right to prescribe the
weight and proper positions of metal safes or machinery as
well as the right to prescribe the weight and position of any
floor load. All damage done to the Building or the Leased
Premises by moving or using heavy equipment of any
description or furniture contrary to the Landlords'
prescriptions shall be repaired at the expense of the Tenant.
No such equipment or furniture shall be moved unless a time
therefor has been arranged with and consented to by the
Landlord.
3. The Tenant shall not permit the introduction into the Leased Premises
or the Building of any machine or mechanical device of any nature
whatsoever which may be liable to cause objectionable noise or
vibration or be injurious to the Leased Premises or Building.
4. Canvassing, soliciting and peddling in the Building are
prohibited.
5. Furniture, bulky articles and construction materials which the Tenant
may require from time to time for the construction of internal
partitions or for the purpose of effecting alterations or improvements,
the whole provided Tenant has obtained Landlord's approval pursuant to
the Article of this Lease entitled "Improvements and Alterations,"
shall be carried to the Leased Premises at such hour and in such manner
as the Landlord may reasonably designate. Any damage which may be
caused to the Building or the Leased Premises by the carrying of such
furniture, bulky articles or construction materials to or from the
Leased Premises shall be at the responsibility and cost of the Tenant.
6. Any hand trucks, carryalls, or similar appliances used for the delivery
or receipt of merchandise or equipment shall be equipped with rubber
tires, side guard and such other safeguards as the Landlord shall
require.
7. If any apparatus used or installed by the Tenant requires a
permit as a condition for its installation, the Tenant must file
a copy of such permit with the Landlord.
8. The Tenant shall give the Landlord prompt written notice of any
accident to or defect in water or gas pipes, heating or sprinkler
system in the demised Leased Premises, of which he is aware.
9. The Tenant shall not place any additional locks upon any
doors of the Leased Premises or the Building without the written
consent of the Landlord.
10. No animals or birds shall be brought or kept in or about the
Leased Premises or the Building.
11. No auction sales shall be allowed in the Leased Premises or
the Building.
12. The water closets and other water apparatus of the Building or Leased
Premises shall not be used for any purpose but those for which they are
constructed, and no sweepings, rubbish, rags, ashes, chemicals or other
substances shall be thrown therein.
13. The Tenant shall not permit any employees to smoke or
congregate in the halls (if any) of the said Building.
14. The Tenant, when closing the premises, during the day or evening, shall
have all windows closed, to avoid possible damage from fire, storms,
rain or freezing, and will not shut off the radiators and/or baseboard
heaters when the premises are locked.
15. The Tenant shall follow such instructions, if any, as Tenant may from
time
<PAGE> 36
Montreal Industrial Lease
Schedule "E"
Page 2
to time receive from Landlord relating to the maintenance and care
of the heating, ventilating and air-conditioning equipment installed
within the Leased Premises.
16. Front Signage
The Tenant may identify his business with a front sign, the whole
provided Tenant complies with the conditions stipulated hereunder:
(a) Letter: individual to the Tenant's style.
(b) Height: 24"
(c) Permitted materials - plastic, composite or solid
- rustproof metal composite or
solid.
(d) Lighting (optional) - integrated
- halo-lit (back-lighting)
(e) Lighting control - dedicated circuit
- photo-cell switch, timer switch
or manual switch
Before the fabrication of any signage, the Tenant must obtain the
written approval of the Landlord. A request for approval must be accompanied by
the following information:
(a) Elevation plan indicating the proposed sign
- (Scale - 3/8" = 1')
(b) Sign dimensions: height, length, thickness, and
distance from wall.
(c) Construction and installation details.
(d) Material and finish specifications (use of styrofoam
is prohibited).
(e) Colour specifications.
(f) Lighting specifications: number of amperes, volts
and circuits.
(g) Name of designer and of fabrication and installation
contractors.
(h) Request for Municipal permit.
(i) Any other additional information that the Landlord may require
to study a particular sign request.
Furthermore, Tenant shall only be entitled to purchase any signage
approved form the following suppliers which may be changed by Landlord from time
to time:
Eseignes Trans Canada Signs Inc.
9310 Parkway
Ville d'Anjou, Quebec
H1J 1W7
Claude Neon Limitee
1855 Hymus Boulevard
Dorval, Quebec
H9P 1J8
Enselcom Inc.
1700 Claire Crescent
Lachine, Quebec
H8S 1A2
17. Facade and secondary windows
(a) All front windows must have off-white vertical
blinds.
(b) Adjustment of vertical blinds of front windows of
storage space must be half closed.
(c) All windows, including secondary windows, must be washed by
Tenant at its cost, at least twice a year on both the interior
and exterior faces.
18. Miscellaneous signage
Miscellaneous traffic and "no parking" signs are supplied and installed
by the Landlord.
<PAGE> 37
Montreal Industrial Lease
Schedule "E"
Page 3
19. Garbage container
(a) The Tenant must provide the garbage container which best
satisfies its business activity so that the size and water
tightness retain all garbage without affecting the
environment.
(b) The Tenant must assure that the container is neatly located on
the designated area and that the lids are kept closed.
20. Exterior storage
(a) It is strictly forbidden to store anything outside the
Building, even on a temporary basis.
(b) Used boxes, pallets must be kept inside the Building
until collected for disposal.
21. Special installations
Tenant must obtain Landlord's approval prior to the installation of any
equipment, machinery, fixtures and furniture which have to be attached
to, mounted to or pierced through any element of the Leased Premises
and/or the Building. Furthermore, Tenant must obtain Landlord's
approval prior to the installation of any equipment, tank and any other
item that Tenant wants to install outside the Building (hereinafter the
"Special Installation").
Any request for the approval of a Special Installation must be
submitted in writing along with the technical drawings or pertinent
data which can easily identify the specific nature of the installation.
Furthermore, Special Installation must conform to terms and conditions
stipulated in the lease.
Following completion of a Special Installation which conforms to
preceding authorization, the Landlord will proceed, at Tenant's cost,
with the inspection of the installation for final acceptance.
<PAGE> 1
Exhibit 10.37
<PAGE> 2
DEED OF LEASE
BETWEEN
ZMD SPORTS INVESTMENTS INC.
(THE "LANDLORD")
AND
SPORT MASKA INC.
(THE "TENANT")
<PAGE> 3
TABLE OF CONTENTS
ZMD SPORTS INVESTMENTS INC.
SECTION PAGE
------- ----
1. CERTAIN BASIC LEASE PROVISIONS................ 1
2. DEFINITIONS................................... 1
3. TERM.......................................... 5
4. OCCUPANCY..................................... 6
5. MINIMUM NET NET RENTAL........................ 6
6. RENTAL ON NET NET RETURN BASIS................ 6
7. ADDITIONAL RENTAL............................. 7
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE....... 7
9. CONTESTATION OF TAXES......................... 8
10. UTILITIES AND EQUIPMENT....................... 8
11. USE OF PREMISES............................... 8
12. PLATE GLASS AND DOOR SIGNS.................... 9
13. PROHIBITED ACTIVITIES......................... 9
14. CONDITION OF PREMISES......................... 9
15. RELOCATION.................................... 9
16. MAINTENANCE AND REPAIRS....................... 10
17. INSPECTION AND REPAIR......................... 10
18. ODOURS, DUST OR NOISE......................... 10
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION..... 11
20. ACCESS........................................ 11
21. PARKING....................................... 11
22. SIGNS OF LANDLORD............................. 12
23. SIGNS OF TENANT............................... 12
24. LANDLORD'S WORK............................... 13
25. IMPROVEMENTS AND ALTERATIONS.................. 13
26. COST.......................................... 15
27. INSURANCE REQUIREMENTS........................ 15
28. CANCELLATION OF INSURANCE..................... 16
29. DAMAGE OR DESTRUCTION......................... 17
30. TRANSFER CONSENT REQUIRED..................... 19
31. PRIVILEGE OF LANDLORD......................... 21
32. ASSIGNMENT BY LANDLORD........................ 21
33. EXPROPRIATION................................. 22
34. EXTENSIONS.................................... 22
35. DEFAULT....................................... 23
36. FAILURE OF TENANT TO PERFORM.................. 24
37. BANKRUPTCY AND INSOLVENCY..................... 24
38. INDEMNIFICATION............................... 24
39. DISTURBANCE................................... 25
40. NONWAIVER..................................... 25
41. WAIVER OF COMPENSATION........................ 26
42. IMPUTATION OF PAYMENTS........................ 26
43. CUMULATIVE REMEDIES........................... 26
44. UNAVOIDABLE DELAY............................. 26
45. MANAGEMENT OF THE PROPERTY.................... 26
46. RULES AND REGULATIONS......................... 27
47. COMPLIANCE WITH LAWS AND REGULATIONS.......... 27
48. WINDOW COVERINGS.............................. 27
49. PERMITS AND LICENSES.......................... 27
50. EXPIRATION OF LEASE........................... 28
51. CONSTITUT OR TENURE SYSTEM ACT................ 28
52. DOMICILE AND NOTICES.......................... 28
53. SUCCESSORS AND ASSIGNS........................ 29
54. DESCRIPTIVE HEADINGS.......................... 29
55. GOVERNING LAW / SEVERABILITY.................. 29
56. COST OF PREPARATION, REGISTRATION
AND RADIATION............................... 29
57. BROKERAGE COMMISSION.......................... 29
58. SCHEDULES..................................... 30
59. CERTIFICATE OF INCORPORATION.................. 30
60. ENTIRE AGREEMENT.............................. 30
61. LANGUAGE...................................... 30
<PAGE> 4
DEED OF LEASE
BETWEEN: ZMD SPORTS INVESTMENTS INC., a body politic and corporate, duly
incorporated and having its head office and principal place of
business in Montreal, Quebec herein acting and represented by
JEAN-PIERRE CARETTE its duly authorized representative.
(hereinafter the "Landlord")
PARTY OF THE FIRST PART
AND: SPORT MASKA INC., a body politic and corporate, duly
incorporated, having its head office and principal place of
business in Montreal, Quebec, herein acting through and
represented by _______________, its _____________ hereunto duly
authorized as he so declares. (hereinafter the "Tenant")
PARTY OF THE SECOND PART
1. CERTAIN BASIC LEASE PROVISIONS
The following are certain basic lease provisions of this Lease.
1.1 Addresses for purposes of notice
Landlord: 7405 Trans Canada Highway
St. Laurent, Quebec
H4t 1Z2
Tenant: 15855 Hubert Street
St. Hyacinthe, Quebec
1.2 Location of Premises: Leased Premises comprising of the Building and
the property found on the land described in Schedule "B" annexed
hereto.
1.3 Property: 15855 Hubert Street
St. Hyacinthe, Quebec
1.4 Area: Approximately seventy-eight thousand
(78,000) square feet.
1.5 Term: Ten (10) years
1.6 Commencement Date: February 1, 1995
1.7 Termination Date: January 31, 2005
1.8 Minimum Net Net Rental: An amount equal to three hundred twenty-four
thousand dollars ($324,000.00) per annum, during the period from
February 1, 1995 to January 31, 2000 and an amount of three hundred
fifty-six thousand four hundred dollars ($356,400.00) per annum during
the period from February 1, 2000 to January 31, 2005 the whole payable
pursuant to the Article entitled "Minimum Net Net Rental".
1.9 Schedules:
"B" - Cadastral Description
"E" - Rules and Regulations
<PAGE> 5
Montreal Industrial Lease
Page 2
2. DEFINITIONS
2.1 Additional Rental means: Any and all amounts due or becoming payable to
the Landlord pursuant to this Lease other than the Minimum Net Net
Rental, whether such amounts are specifically referred to as Additional
Rental or not, the whole payable pursuant to the Article entitled
"Additional Rental".
2.2 Architect means: The independent architect, engineer, or land surveyor
named by the Landlord from time to time.
2.3 Area means: The area of the Leased Premises as calculated in the manner
stipulated in Schedule "D".
2.4 Building means: The building or buildings, as these may be added or
modified from time to time, found on the parcel of land described in
Schedule "B".
2.5 Capital Tax means: For the purpose of this lease, "Capital Tax" means
the capital tax liability of the Landlord for each of the Landlord's
fiscal years during the Term or any renewal thereof as per the
Landlord's tax returns multiplied by the proportion that the net book
value of the Property is of the net book value of the total assets of
the Landlord, as determined in accordance with the Landlord's audited
financial statements.
2.6 Commencement Date means: The first day of the Term.
2.7 Common Areas and Facilities means:
(a) Those areas, facilities, utilities, improvements,
equipment and installations in the Property which,
from time to time, are not designated or intended by
the Landlord to be used, exclusively for the benefit
of any individual tenant of the Property; and
(b) Those areas, facilities, utilities, improvements,
equipment and installations which serve or are for
the benefit of the Property, whether or not located
within, adjacent to, or near the Property and which
are designated from time to time by the Landlord as
part of the Common Areas and Facilities of the
Property. Common Areas and Facilities include,
without limitation, all areas, facilities, utilities,
improvements, equipment and installations which are
provided or designated (and which may be changed from
time to time) by the Landlord for the use or benefit
of the tenants, their employees, customers and other
Persons for whom Landlord shall permit the use or
benefit thereof, in the manner and for the purposes
permitted by the Lease.
(c) Without limiting the generality of (a) and (b) above,
Common Areas and Facilities include the roof,
exterior wall assemblies including weather walls,
exterior and interior structural elements and bearing
walls in the buildings and improvements comprising
the Property; parking areas and parking garages, all
entrances and exits thereto and all structural
elements thereof, employee parking areas, truck
courts, access roads, driveways, truckways, delivery
passages, package pick-up stations; loading docks and
related areas; pedestrian sidewalks, covered walkways
and sidewalks; roadways; landscaped and planted
areas; courts and arcades; public seating and service
areas; corridors; bus kiosk, if any; roadways and
stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways, ramps,
moving sidewalks, and other transportation equipment
and systems; electrical, telephone, meter, valve,
mechanical, mail, storage, service and janitor rooms
and galleries; communication, security and fire
prevention and protection systems; general signs;
columns, pipes, electrical, plumbing, drainage,
mechanical and all other installations, equipment or
services located therein or related thereto, as well
as the structures housing the same.
<PAGE> 6
Montreal Industrial Lease
Page 3
2.8 CPI means: The Consumer Price Index, all items Montreal, established by
Statistics Canada or any index in substitution and/or replacement
thereof, published by Statistics Canada or any other federal or
provincial governmental agency. In the case of any required
substitution, Landlord shall be entitled to make all necessary
conversions for comparison purposes.
2.9 Date of Occupancy means: The date on which Landlord is ready to give
possession of the Leased Premises to the Tenant, subject to the terms
stipulated in the Article entitled "Occupancy".
2.10 Deposit means: The amount(s) stipulated in the Article entitled
"Deposit".
2.11 Landlord means: The party first hereinabove described or its successors
and assigns.
2.12 Landlord's Work means: The work to be executed by Landlord as
stipulated in the Articles entitled "Landlord's Work" and "Landlord's
Work at Tenant's Expense".
2.12 Lease means: This agreement and all attached Schedules.
2.14 Leased Premises means: The premises described in paragraph 1.2, the
location of which is outlined in red on Schedule "A".
2.15 Lease Year means: In the case of the first Lease Year, a period
commencing on the Commencement Date and terminating on the last day of
the twelfth month thereafter and shall also refer to any succeeding
twelve (12) month period thereafter.
2.16 Minimum Net Net Rental means: The amount stipulated in the Article
entitled "Minimum Net Net Rental".
2.17 Operating Costs means: The aggregate of Landlord's annual costs and
expenses incurred in insuring, operating, administering and if
applicable, maintaining the Property and shall include, without
duplication or limitation, the cost of:
(i) all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of real estate taxes, the whole subject
to the Article of this Lease entitled "Contestation of Taxes";
(ii) the cost of insuring the Property (including such insurance as
the Landlord shall effect or shall be required to effect by
any secured creditor) against fire and any other perils which
presently are or hereafter may be, from time to time, embraced
by or defined in a standard fire insurance policy with
extensive coverage, comprehensive general liability insurance,
boiler and pressure vessel insurance, business interruption
and/or loss of rentals insurance and such other insurance as
the Landlord, acting reasonably, may deem necessary or
advisable.
<PAGE> 7
Montreal Industrial Lease
Page 4
(iii) Capital Tax as defined herein.
(iv) Debt Service in accordance with the Article entitled "Rental
on Net Net Return Basis.
2.18 Person means, depending on context: Any person, firm, company,
corporation, partnership, association, or any group or combination
thereof.
2.19 Property means: The lands and buildings found on the lots described in
Schedule "B" as these may be varied, from time to time, by adding or
subtracting land or Buildings or by any other means as Landlord
considers necessary or advisable, even if parts of the said lands or
Buildings may be separated from others by lanes, streets, highways or
any other means of passage in or upon which others may have rights. The
said lands or Buildings shall include all buildings, construction and
Common Areas and Facilities on the lands and/or Buildings as each of
the foregoing exists from time to time.
2.20 Proportionate Share means: 100% of the Operating Costs and Taxes of the
property and of the Leased Premises.
2.21 Sales Tax means; Any goods and services tax, business transfer tax,
value-added tax, multi-stage sales tax, sales tax or any other tax
imposed with respect to Minimum Net Net Rental and Additional Rental
payable under this Lease, whatever name such tax may bear and whether
such tax is in force at the date hereof or whether it is adopted
subsequently. The amount of the Sales Tax so payable by Tenant shall be
calculated by Landlord in accordance with the applicable legislation
and shall be paid to Landlord at the same time as the amounts to which
such Sales Tax apply or at such other time as Landlord may from time to
time determine. Landlord shall have the same remedies for and rights of
recovery of such amounts as it has for the recovery of Additional
Rental.
2.22 Security means: Any hypothec, trust deed, debenture or other security
to be placed form time to time on the Property or any part thereof for
the purpose of securing any indebtedness of Landlord.
2.23 Taxes means: All taxes, whether special or general, including, without
limitation, property taxes, municipal taxes, school taxes, levies,
charges, rates including local improvement rates, duties and
assessments that may now or in the future be levied, rated, charged or
assessed against the Property, and/or all equipment and facilities
thereon or therein, and/or the land described in Schedule "B" attached
hereto, and/or any property on or in the Building owned or brought
thereon or therein by the Landlord and/or against Landlord or Tenant
and/or its Transferees in respect thereof, whether such taxes, rates,
duties or assessments are charged by a municipal, parliamentary, school
or any other body of competent jurisdiction. If the system of real
estate taxation shall be altered or varied and any new tax shall be
levied or imposed on the Property and/or the revenues therefrom and/or
the Landlord in substitution for and/or in addition to real estate
taxes presently levied or imposed on
<PAGE> 8
Montreal Industrial Lease
Page 5
immovables in the City, Region, Province or Country in which the
Property is situated, then any such new tax or levy shall be included
within the present definition of Taxes. However, Tenant shall not be
responsible for any income tax or corporation taxes of the Landlord,
save and except for its Proportionate Share of Capital Tax and Tenant
shall be solely responsible for any Sales Tax.
2.24 Tenant means: The person executing this Lease as Tenant. Tenant also
includes all employees, mandatories and contractors of Tenant, as well
as any Person under Tenant's control or for whom Tenant is responsible.
2.25 Tenant Security means: Any trust deed, bond debenture, pledge,
commercial pledge, warehouse receipt, conditional sales contract,
privilege, hypothec, charge or any other form of encumbrance or
security granted or agreed to by Tenant or any other Person (other than
Landlord) with respect to its rights in this Lease, the Leased
Premises, or any property, whether movable or immovable, located in or
forming part of the Leased Premises, to secure, in whole or in part,
any loan, indebtedness, credit line, or other obligation.
2.26 Tenant's Work means: The work to be executed by Tenant as stipulated in
the Article entitled "Tenant's Work".
2.27 Term means: The period specified in the Article entitled "Term" and
includes all renewals or extensions agreed to in writing by the
Landlord.
2.28 Termination Date means: The last day of the Term as herein defined or
any renewal thereof, or the last day of the Term or renewal thereof
which is terminated prior to the Termination Date.
2.28 Transfer means: Any assignment or transfer of this Lease (other than as
Tenant Security), any sublease or permitted occupation of all or any
part of the Leased Premises to any Person (hereinafter the
"Transferee") and any amalgamation or change in the effective control
of the voting shares of Tenant if Tenant is a corporation, or any
change in the partners constituting the partnership or any change in
the Interest of the partners in the partnership if Tenant is a
partnership, from conditions existing on the date the corporation or
the partnership first incurs any obligations to Landlord pursuant to
this Lease, the whole whether effected by sale, by assignment, by
operation of law or otherwise.
3. TERM
Landlord hereby leases the Leased Premises to Tenant for a Term of ten
(10) years, commencing on the first day of February 1995 and terminating on the
last day of January 2005 unless sooner terminated under the provisions hereof.
Should the Tenant continue to occupy the Leased Premises after the
expiry of the Term, without a written agreement there shall be no tacit renewal
and the Tenant shall pay to the Landlord, as liquidated damages, the highest
Minimum Net Net Rental payable during the Term and Additional Rental for the
period of occupancy plus fifty percent (50%) thereof, without prejudice to any
of Landlord's other rights and recourses including Landlord's right to obtain
vacant possession of the Leased Premises. Tenant acknowledges that it is not to
have the right to occupy the Leased Premises beyond the expiry of the Term.
4. OCCUPANCY
Tenant shall be allowed to occupy the Leased Premises on February 1,
1995 (hereinafter referred to as the "Date of Occupancy").
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If the Landlord is unable to give possession of the Leased Premises to
the Tenant on the Commencement Date, the Lease shall not be void or voidable nor
shall the Landlord be liable for any loss or damage resulting therefrom.
However, any postponement of the Date of Occupancy by Landlord shall have the
effect of delaying the Commencement Date and the Termination Date for a number
of days equal to the number of days of such postponement, the whole without any
liability on the part of the Landlord.
5. MINIMUM NET NET RENTAL
Tenant covenants and agrees to pay to Landlord in lawful money of
Canada without deduction, abatement or set-off, a Minimum Net Net Rental as
follows:
a) during the period from February 1, 1995 to January 31, 2000,
the amount of three hundred twenty-four thousand dollars
($324,000.00) per annum, net, net, payable in equal
consecutive monthly instalments, each in advance, on the
first day of each month during the said period of twenty-seven
thousand dollars ($27,000.00) each;
b) during the period from February 1, 2000 to January 31, 2005,
the amount of three hundred fifty-six thousand four hundred
dollars ($356,400.00) per annum, net, net, payable in equal
consecutive monthly installments, each in advance on the first
day of each month during the said period of twenty-nine
thousand seven hundred dollars ($29,700.00) each.
Any Minimum Net Net Rental due for any period of time during the Term which is
less than a month shall be paid for on a pro-rated basis.
The Minimum Net Net Rental shall be considered as annual and accruing
from day to day and where it becomes necessary for any reason to calculate such
rental for an irregular period of less than one (1) Lease Year, an appropriate
apportionment and adjustment shall be made.
The Minimum Net Net Rental as herein provided shall be paid to Landlord
and/or its nominee at the Head Office of the Landlord, at 7405 Trans Canada
Highway, St. Laurent, Quebec, H4T 1Z2, or at such other place in Canda as shall
be designated by Landlord in writing to Tenant.
6. RENTAL ON NET NET RETURN BASIS
It is agreed and understood between the parties that the Minimum Net
Net Rental herein shall be a revenue absolutely net, net to the Landlord, free
of any and all costs and expenses of any nature whatsoever. Tenant shall pay on
its own account, to the complete exoneration of Landlord, all taxes and expenses
of whatsoever nature, its Proportionate Share of Operating Costs and Taxes and
any Additional Rental with respect to the Leased Premises unless otherwise
stipulated in this Lease. It is understood that Tenant shall be responsible for
the payment of any increase in the interest and capital repayments of Landlord
with respect to mortgages or other security that Landlord may be subjected to
after the Commencement Date of the Term of this Lease (hereinafter "Debt
Service"). The Landlord shall be responsible for any income tax or corporation
taxes due by Landlord. Tenant shall pay its Proportionate Share of Capital Tax
and Tenant shall be solely responsible for any Sales Tax.
Without limiting the generality of the foregoing, Tenant
shall, in each and every Lease Year, pay and discharge or cause to be paid and
discharged all license fees, public utility charges, water rates, sewer rates
and other like fees, charges, rates and assessments that may be levied, charged,
rated or assessed against the Leased Premises and/or all equipment and
facilities thereon or therein and/or any property on the Leased Premises owned
or
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brought thereon by Tenant, and any and every of its Transferees or visitors
and/or against Landlord or Tenant in respect thereof, and every tax and license
fee in respect of any and every business carried on therein, or with respect to
the occupancy of the Leased Premises by Tenant (and any and every of its
Transferees), whether such license fees, charges, rates, assessments and taxes
are charged by municipal, parliamentary, school of any other body of competent
jurisdiction, and all charges for public utilities including electric current,
gas, water, steam or hot water used upon or in respect of the Leased Premises
and for fittings, machines, apparatus meters or other things leased in respect
thereof and for all work or services performed by a corporation or commission in
connection with such public utilities. Tenant shall indemnify and hold the
Landlord harmless from and against payment of all losses, costs, charges and
expenses occasioned by and arising from any and every such duty, license fee,
charge, rate, assessment and tax. If such tax, rate, charge, assessment, duty or
license fee should be assessed or charged to Landlord for all or a substantial
number of the tenants of the Property, Tenant shall, at Landlord's discretion
and upon demand in the manner determined by Landlord, pay its Proportionate
Share of such duty, license fee, charge, rate, assessment and tax.
It is further agreed and understood that any amount and any obligation
which is not expressly declared in this lease to be that of the Landlord shall
be deemed to be the obligation of the Tenant. Without limiting the generality of
the foregoing, should at any time the taxation authorities directly attribute
any part of the Taxes to the Leased Premises or the improvements therein, Tenant
shall pay for same in addition to Tenant's Proportionate Share of the remainder
of the Taxes.
Tenant shall furnish to Landlord, immediately upon Landlord's request,
a receipt or other appropriate evidence satisfactory to Landlord as to the
payment of any amounts payable by Tenant pursuant to the present Article.
7. ADDITIONAL RENTAL
It is agreed and understood that Additional Rental other than Tenant's
Proportionate Share, shall be payable on the first day of the month immediately
following the date the said amount is claimed, or on such date as the Landlord
may designate. Where the calculation of any Additional Rental is not made until
after the Termination Date, the obligation of the Tenant to pay such Additional
Rental shall survive the termination of the Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE
On the first day of each and every month, Tenant shall pay to the
Landlord throughout the Term or any renewals, its Proportionate Share of the
Operating Costs and Taxes, as well as an administration fee equal to three
percent (3%) of the said Operating Costs and Taxes and of the Minimum Net Net
Rental as well as three percent (3%) of the total costs and expenses incurred by
the Tenant, for the month immediately preceding, in maintaining, repairing and
operating the Property, (the said costs and expenses incurred by Tenant being
hereinafter referred to as "Tenant's Costs"). Upon Landlord's request, the
Tenant shall furnish the Landlord with a statement in writing showing in
reasonable detail and in such a form as Landlord may require the Tenant's Costs.
Furthermore, Tenant shall furnish to Landlord, immediately upon Landlord's
request, receipts or other appropriate evidence satisfactory to Landlord as to
the payment of Tenant's Costs and shall make available to Landlord for
Landlord's inspection and audit Tenant's books and records relating to Tenant's
Costs.
Notwithstanding anything to the contrary herein contained, the Landlord
may, prior to the commencement of each calendar year or as soon thereafter as is
reasonably possible, furnish to the Tenant an estimate of the
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Operating Costs and Taxes for such calendar year, and the Tenant shall pay to
the Landlord, in advance, on the first day of each month during the year in
question, Additional Rental equal to one twelfth (1/12) of the Tenant's
Proportionate Share of the estimated Operating Costs and Taxes. Should the first
Lease Year of the Term not commence on the first (1st) day of January or should
the last Lease Year of the Term not terminate on the thirty-first (31st) day of
December, then prior to the Commencement Date of the Term or prior to the
anniversary of the Commencement Date in the last Lease Year of the Term, as the
case may be, or as soon thereafter as is reasonably possible, Landlord shall
furnish to Tenant an estimate of the Operating Costs and Taxes for the part of
the Lease Year in question, and the Tenant shall pay to the Landlord, in
advance, on the first day of each month during the part of the Lease Year in
question, Additional Rental equal to the Tenant's Proportionate Share of the
estimated Operating Costs and Taxes divided by the number of months for that
part of the Lease Year in question.
After the end of each calendar year, or after the end of the Term in
the case of the final lease Year, the Landlord shall furnish the Tenant with
financial statements setting forth the actual Operating Costs and Taxes for such
calendar year (or part of the Lease Year, as the case may be) and the Tenant
shall pay to the Landlord forthwith an amount equal to its Proportionate Share
of the excess of the actual Operating Costs and Taxes over the estimated
Operating Costs and Taxes. Should the estimated Operating Costs and Taxes exceed
the actual Operating Costs and Taxes, the Tenant shall receive credit for its
Proportionate Share of the excess. The appropriate adjustments shall be made
between the parties hereto within thirty (30) days after the date on which the
Landlord has furnished the Tenant with such statement.
9. CONTESTATION OF TAXES
Landlord shall have no obligation to contest, appeal, object to or
litigate the levying or imposition of Taxes and/or any valuation imposed with
respect thereto, and Landlord may settle, compromise, consent to, waive or
otherwise determine, in its sole discretion, all matters and things relating
thereto. Tenant shall not itself contest, appeal, object to or litigate the
levying or imposition of real estate taxes.
In the event that Landlord should contest any Taxes and thereafter
receive a refund of any portion thereof, and provided Tenant shall have paid its
Proportionate Share of said Taxes, the Landlord shall reimburse to the Tenant
the Tenant's Proportionate Share of such refund.
10. UTILITIES AND EQUIPMENT
The Tenant shall pay for its electricity (including without limitation
any electricity used for heating and/or air conditioning the Leased Premises),
for the cost of operating, repairing, maintaining, replacing and inspecting the
machinery and other facilities required for the heating, ventilating and air
conditioning of the Leased Premises and facilities and gas, water, sewer and
electric utility costs relating to same, telephone and all public utilities with
respect to the Leased Premises.
Throughout the Term of the Lease, the Tenant shall engage a qualified
air conditioning maintenance contractor to maintain and repair the heating,
ventilating and air conditioning system. The Tenant shall, within thirty (30)
days of signing these presents, provide the landlord with a copy of a duly
executed heating, ventilating and air conditioning maintenance and repair
contract, as well as all renewals of the said contract.
11. USE OF PREMISES
The Leased Premises shall be used by the Tenant only for offices,
warehousing, manufacturing and distribution of sports related goods, and for
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no other purpose.
12. PLATE GLASS AND DOOR SIGNS
Any breakage of glass or plate glass in or about the Leased Premises
and any damage to signs on Tenant's doors, except for breakage or damage caused
by the negligence or fault of the Landlord or its employees or mandatories shall
be charged to and payable by the Tenant.
13. PROHIBITED ACTIVITIES
Subject to the other terms and conditions of the Lease and in addition
to any other prohibitions stipulated in the Lease, the Tenant undertakes:
(i) not to use any part of the exterior parking and
loading areas or any other areas outside the Leased
Premises, reasonably designated by the Landlord, for
any purpose other than parking, shipping or
receiving;
(ii) not to obstruct or use any part of the Common Areas
and Facilities except as permitted by the Landlord;
(iii) not to do or suffer or permit to be done any act in
or about the Common Areas and Facilities which, in
the Landlord's opinion, hinders or interrupts the
flow of traffic to, in or from the Property and shall
not do, nor suffer or permit anything to be done,
which in the Landlord's opinion, in any way obstructs
the free movement of people doing business in the
Property;
(iv) not to bring upon the Leased Premises or any part
thereof any machinery, equipment, article or thing
that by reason of its weight, function or size might
damage the Leased Premises and not to overload the
floors of the Leased Premises at any time and if any
damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by
overloading or by any act; neglect or misuse on the
part of Tenant, Tenant will forthwith pay to Landlord
the cost of restoring the leased Premises to their
original condition;
(v) not to obstruct the sidewalks, entries, passage
corridors and stairways, or use same for purposes
other than for ingress and egress to or from the
Leased Premises, and the Tenant shall save the
Landlord harmless from damages to persons or property
because of any articles thrown by the Tenant out of
the windows or doors or down the passages of the
Building.
14. CONDITIONS OF PREMISES
The Tenant represents that the Leased Premises have been examined by
the Tenant and that the Tenant accepts the same, in the condition or state in
which they are at the Date of Occupancy by Tenant, without representation or
warranty, expressed or implied, oral or written, in fact or in law, by the
Landlord, and without recourse to the Landlord as to the nature, condition or
usability thereof or as to the use or uses to which the Leased Premises or any
part thereof may be put.
15. RELOCATION
Landlord shall have the right at any time either during the Term or
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Montreal Industrial Lease
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prior to the Commencement Date thereof, to change the location of the Leased
Premises as set forth in Article 1.2 hereof to comparable premises in the
Building or in any of Landlord's other buildings or in any other building in
which Landlord has an interest. Should Landlord desire to move Tenant after the
Commencement Date, Landlord shall pay all reasonable transportation, telephone
installation and reasonable printing costs relating to letterheads and business
cards in stock, as well as reasonable printing costs of notice of change of
address to Tenant's customers, provided Tenant submits proof of payment of said
costs.
16. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1604(2), 1605 and 1627 of
the Civil Code of Lower Canada, the Tenant shall, at its own expense, operate,
maintain and keep the Leased Premises including all facilities, equipment and
services, both inside and outside, available to the Tenant exclusively, in such
good order and condition as they would be kept by a prudent owner and Tenant
shall promptly make all needed repairs and replacements to the Leased Premises
(save and except for those structural repairs and replacements that are
exceptional, nonrecurring and result from latent defects) which a careful owner
would make, including without limitation, the water, gas, drain and sewer
connections, pipes and mains, electrical wiring, water closets, sinks and
accessories thereof, and all equipment belonging to or connected with the Leased
Premises or used in its operation.
17. INSPECTION AND REPAIR
Landlord and its representatives shall have the right, during all
reasonable business hours during the Term, to enter the Leased Premises to
examine the condition thereof and to ascertain whether Tenant is performing its
obligations hereunder, and Tenant shall make any repairs which Tenant is obliged
to make pursuant to the terms of this Lease. If Tenant fails to make any such
repairs within thirty (30) days after written notice from Landlord requesting
Tenant to do so, provided that such repairs may reasonably be made within the
said period, Landlord may, without prejudice to any other rights or remedies it
may have, make such repairs and charge the cost thereof to Tenant. Nothing in
this Lease shall be construed to obligate or require Landlord to make any
repairs for which the Tenant is responsible hereunder but Landlord shall have
the right at any time to make emergency or urgent repairs without prior notice
to Tenant and charge the cost thereof to Tenant. Any costs chargeable to Tenant
hereinabove shall be payable forthwith on demand as Additional Rental and shall
bear interest from the date of such demand at the prime lending rate as
determined by the Royal Bank of Canada on a daily basis plus four percent (4%)
until paid to Landlord in full.
18. ODOURS, DUST OR NOISE
The Tenant warrants that no noxious/obnoxious odours, dust or noise
will emanate from the Leased Premises as a result of the operations conducted
by the Tenant therein and Tenant further covenants that it will not cause or
maintain any nuisance in, at or on the Leased Premises and/or the Property and
Tenant further warrants that it will not use the Leased Premises for any
purpose or in any manner notwithstanding anything stated in this Lease which
may cause noise, disturbance or noxious/obnoxious odours to the discomfort of
other tenants, neighbours or to the public in general. Accordingly, the Tenant
agrees that should such noxious/obnoxious odor, dust or noise conditions exist,
or should Landlord receive any complaint of odours, dust, noise or any other
nuisance, Tenant will, at its own cost and expense, take such steps as may be
necessary to rectify the same, including any expertise Landlord may require,
which expertise must be acceptable to
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Montreal Industrial Lease
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Landlord, provided further that if the Tenant shall fail to commence to do so
within forty-eight (48) hours and complete the same within a reasonable time
after notice is received by the Tenant from the Landlord, then the Landlord may
at its option and without prejudice to its other rights and recourses:
(a) notify Tenant that it must shut down all its operations in the
Leased Premises; and
(b) Landlord may proceed forthwith to take reasonable measures to
correct the same, at Tenant's cost as Additional Rental.
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION
The Tenant shall not place or leave or permit to be placed or left in
or upon any part of the Property outside of the Leased Premises any debris or
refuse except as allowed by the Landlord at specific times and deposited in
areas indicated by the Landlord in proper receptacles provided and placed for
that purpose by the Tenant and Tenant shall furthermore comply with any of
Landlord's rules and regulations with respect to garbage containers. The Tenant
shall arrange and pay for the cost of those services required to remove
diligently and efficiently all of Tenant's garbage and refuse of any nature
whatsoever.
Tenant, at its sole cost shall keep, the Leased Premises shall be kept
in a clean and sanitary condition and in accordance with the laws
of the municipality in which the Property is located and in accordance with all
other regulations of any agency having jurisdiction over the Property and in
accordance with the instructions, policies and recommendations of Landlord's
insurers. If any such laws, instructions, policies and recommendations by
Landlord's insurers require any changes whatsoever to the Leased Premises, the
Tenant shall effect such changes at its own expense but subject to the approval
of the Landlord. The Tenant agrees to provide strict measures for rat prevention
and pest control and shall, if the Landlord deems the same to be necessary,
enter into a regular contract with a firm of exterminators acceptable to
Landlord. In the event that the Tenant fails to comply with the foregoing
provisions, then Landlord, without prejudice to all of its other rights and
recourses, shall have the right, without prior notice to the Tenant, to engage a
firm of exterminators and to enter the Leased Premises with representatives of
said firm in order to rectify the situation, the whole at Tenant's cost as
Additional Rental.
20. ACCESS
The Landlord shall have the right of access to the Leased Premises only
during reasonable business hours (except in the case of an emergency when
Landlord shall have access at al time), and the right to perform such work as it
chooses to do upon the Leased Premises, the Tenant renouncing any claim to any
indemnity or reduction in rental provided such work be carried out with
reasonable diligence.
21. PARKING
Parking shall be regulated by the Landlord in a reasonable manner and
the Tenant and its customers shall abide by such regulations as may from time to
time be established by the Landlord. If requested by the Landlord, the Tenant
shall supply its employees' automobile licence numbers to the Landlord. Tenant
shall indemnify and hold Landlord harmless from any claims should Landlord find
it necessary to tow away from a restricted area any vehicle belonging to Tenant
or to its customers.
The Tenant acknowledges that the parking of its vehicle(s) and those of
its customers in the parking facilities shall be at the risk and peril of Tenant
and/or its customers, and that the Landlord shall not be responsible for any
damages or loss whatsoever, whether caused by theft, fire or any other cause
<PAGE> 15
Montreal Industrial Lease
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to the Tenant's vehicle(s) or to those of its customers or to any property found
in Tenant's vehicle(s) or those of its customers or for any injury to Tenant or
other Persons on or in the immediate vicinity of the parking facilities and
Tenant hereby releases Landlord of all liabilities of whatsoever nature with
respect to the above.
Notwithstanding anything contained herein, Tenant agrees to participate
in a ticket validation system if one is established by the Landlord for the
parking facilities of the Property, and to pay forthwith on demand as Additional
Rental, all attributable parking charges.
22. SIGNS OF LANDLORD
Landlord shall have the right, at all times, to place upon the Property
a notice of reasonable dimensions and reasonably placed in order not to
interfere with the business of Tenant, stating that the Property is for sale
and/or rent, and Landlord shall have the right, during the last six (6) months
prior to the Termination Date, to place upon the Leased Premises a notice of
reasonable dimensions and reasonably place stating that the Leased Premises are
for rent and Tenant will not remove any such notice or knowingly permit either
of them to be removed.
Landlord shall have the right to exhibit the Leased Premises from time
to time to any prospective tenant or hypothecary creditor during all business
hours of the Tenant and Tenant hereby renounces to Article 1645 of the Civil
Code of Lower Canada.
23. SIGNS OF TENANT
The Tenant shall be entitled, at its expense, to install on the Leased
Premises such signs as are normally installed in connection with its business,
as well as to identify itself on the exterior front of the Building provided
such signs comply with municipal by-laws and with the Rules and Regulations as
established from time to time by Landlord in accordance with the Article
entitled "Rules and Regulations", and provided further that the Tenant obtains
Landlord's consent for both the sign and its location. Furthermore, the
authorization to install a sign will be issued in exchange for a deposit
equivalent of the estimated cost of the repair of the supporting Building
surface following the removal of the sign and Landlord shall not pay any
interest to Tenant on said deposit. The installed sign must be subject to
inspection by the Landlord who will proceed to the inspection upon receipt of
proof of municipal permit and, in the case of electrified signs, of proof of
approval by the Canadian Standards Association or other governing body.
Except as provided above and unless specifically provided for in this
Lease, Tenant shall not be entitled to install or put up any signs or posters of
whatsoever nature on the windows of the Leased Premises and/or the Building
and/or the Property.
All civic numbers are supplied and installed at Tenant's expense by the
Landlord according to its standards. The Tenant's identification at the rear of
the Building is also supplied and installed by the Landlord at Tenant's expense
according to Belcourt's standard # 20.11.87 attached to the Rules and
Regulations in Schedule E.
In the event that Tenant installs any sign without satisfying the
requirements of this Article, Tenant shall remove such sign upon receipt of
Landlord's notice. If Tenant falls to remove such sign within twenty-four (24)
hours of receipt of Landlord's notice, then Landlord shall have the right,
without further notice or any form of legal process, to remove same at Tenant's
expense and to repair any damages caused by such removal. Landlord shall not be
responsible for damages to Tenant's property or sign resulting from such
removal. Tenant expressly waives its recourse in damages against the Landlord
and shall hold Landlord harmless of any claim by any third party with respect to
the said sign. Tenant shall immediately pay
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Montreal Industrial Lease
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Landlord for all costs described hereinabove, upon demand, as Additional Rental.
24. LANDLORD'S WORK
The Leased Premises shall be delivered in an "as is" basis and Tenant
accepts same in the condition in which they are at the signing of these
presents.
25. IMPROVEMENTS AND ALTERATIONS
(a) The Tenant shall not have the right to execute any changes,
alterations, additions, erections, leasehold improvements, repairs and
installations to the Leased Premises (hereinafter the "Work"), unless
it has obtained Landlord's prior written consent. In the event Landlord
consents to such Work, then Tenant undertakes to conform to the
conditions stipulated hereunder.
(i) All Work shall be carried out with reasonable
dispatch and in a good workmanlike manner and in
compliance with all applicable permits,
authorizations, building and zoning by-laws and with
all regulations and requirements of all competent
authorities having jurisdiction over the Leased
Premises;
(ii) The Property shall at all times by free of all
pledges, registered privileges and any other
encumbrances;
(iii) If the cost of any Work shall be in excess of five
thousand dollars ($5,000.00) as reasonably estimated
by Landlord. Landlord may require Tenant to furnish
security satisfactory to Landlord guaranteeing the
completion of the Work, the payment of the cost
thereof and that the Property is free and clear of
all pledges, registered privileges and any other
encumbrances;
(iv) Tenant shall maintain workmen's compensation
insurance covering all persons employed in connection
with the Work and shall produce evidence of such
insurance to Landlord and Tenant shall also maintain
such general liability insurance for the protection
of Landlord and Tenant upon the terms Landlord may
reasonably require, as well as contractor's
protective liability insurance. Tenant shall further
comply with all of the stipulations of the Article
entitled "CSST" (Commission de la Sante et de la
Securite au Travail du Quebec);
(v) The Tenant shall promptly pay for all materials
supplied and work done in respect of the Leased
Premises in order to ensure that no privilege is
registered against any portion of the Property. If a
privilege is registered or filed, the Tenant shall
forthwith discharge it at its expense, failing which
the Landlord may, at its option, discharge the same
by paying the amount claimed to be due into court or
directly to any such privilege claimant and the
amount so paid and all expenses of the Landlord
including any judicial and extrajudicial costs and
attorney's fees incurred by the Landlord shall be
paid by the Tenant to the Landlord within five (5)
days after demand.
It is agreed and understood that no Work by or on
behalf of Tenant shall be permitted which, in Landlord's sole
judgement, may weaken or endanger the structure or adversely
affect the condition or operation of the Leased Premises
and/or the Property or diminish the value thereof or restrict
or reduce Landlord's
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coverage for insurance purposes.
(b) Notwithstanding the contents of (a) above, Landlord may,
at its sole option and discretion, execute itself or inspect
any Work approved by Landlord, in which event the Tenant shall
pay for the costs of either the Work or the inspection
thereof, and, in the event that Landlord executes the Work,
Tenant shall pay an additional amount equal to twenty per cent
(20%) of the costs of said Work on account of Landlord's
overhead and administration costs. However, whether or not
Landlord carries out or inspects the Work, the Tenant shall
pay the fees of all architectural and engineering consultants
and/or the cost of all construction drawings prepared to
comply with the Tenant's requirements and for the cost of
entering the information of such drawings on the original
drawings of the Building as well as twenty per cent (20%) of
such costs on account of administration and general expenses
of Landlord. Payment shall be effected by way of a cash
deposit and progress draws during the course of the Work, the
specifics of which shall be established by the Landlord,
acting reasonably, from time to time.
(c) Any Work by the Tenant made without the prior written
consent of the Landlord, or which is not made in accordance
with the design criteria and specifications approved by the
Landlord, shall be removed by the Tenant immediately upon
demand and the Leased Premises shall be restored to their
previous condition by Tenant, the whole at the Tenant's cost,
failing which Landlord shall have the right to remove said
Work at Tenant's entire cost and Landlord shall not be
responsible for damages to Tenant's property resulting from
such removal.
(d) Notwithstanding anything contained in this Article. Tenant
shall not have the right to do any structural, mechanical or
electrical Work in the Leased Premises.
In the event that Tenant requests any structural,
mechanical or electrical work, Landlord, at its sole option
and discretion, shall be entitled to execute said Work. Said
Work shall be governed by the provisions of sub-paragraph
(b) above.
In the event that Landlord does not choose to execute
said Work and consents to having Tenant execute same, then
Tenant shall furnish to Landlord plans and specifications
showing in reasonably complete detail the Work proposed to be
carried out and the estimated cost thereof. Landlord shall
approve or reject such plans and specifications within thirty
(30) days after receipt of the same. If such plans and
specifications are approved, all Work shall be carried out in
compliance with the same. Furthermore, in the case where
Tenant is authorized to carry out said Work, Tenant shall, at
its cost, provide Landlord with an engineer's certificate upon
completion of said Work. Any costs incurred by Landlord of any
nature whatsoever in order to permit Landlord to approve or
reject Tenant's plans and specifications shall be reimbursed
by Tenant immediately upon Landlord's request. In addition to
the above, Tenant shall comply with all the conditions
stipulated in (a) and (c) above.
It is agreed and understood that when completed, all Work
shall be comprised in and form part of the Leased Premises and be subject to all
the provisions of this Lease. Furthermore, any authorization given by Landlord
to Tenant to do any Work in accordance with this Article, shall not relieve
Tenant of its responsibility for the Work in question.
Subject to the terms and conditions of this Article, in the
event that the Tenant constructs a mezzanine in the Leased Premises, the Tenant
will pay the amount of any increase in Taxes on the whole of the Building of
which the Leased Premises form part, if such increase is caused by the
construction or occupancy of said mezzanine. Furthermore, the Tenant will
<PAGE> 18
Montreal Industrial Lease
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pay for any increase in Operating Costs resulting from the construction or
occupancy of the said mezzanine.
Tenant shall not make use or cause to be removed any part or all of the
ceiling system for any purposes, including that of storage.
Moreover, Tenant shall pay to Landlord the amount of any increase for
any Taxes to the extent that such increase is directly attributable to any
action by Tenant under this Article.
26. CSST (COMMISSION DE LA SANTE ET DE
LA SECURITE AU TRAVAIL DU QUEBEC)
Tenant shall ensure itself that its contractor and/or subcontractors
comply with all the requirements established by La Commission de la Sante et de
la Securite au Travail du Quebec (hereinafter the "CSST") and more specifically,
Tenant shall ensure itself that its contractor and/or subcontractors have
instituted a safety program for its employees. Tenant shall provide proof to
Landlord, upon demand, that all requirements of the CSST have been met. It is
expressly understood that Tenant shall indemnify and hold Landlord harmless from
any proceedings, claim or demand which could be instituted against Landlord for
the failure of Tenant's contractor and/or subcontractors to comply with CSST's
requirements and the Tenant shall pay upon demand any judicial or extrajudicial
costs so incurred by Landlord.
27. INSURANCE REQUIREMENTS
Tenant shall not do or commit any act upon the Leased Premises or bring
into or keep upon the Leased Premises any article which will affect the fire
risk or increase the rate of fire insurance or other insurance on the Property.
Tenant shall not commit any act upon the Leased Premises or make any
use thereof which may make void or voidable any insurance on the Leased Premises
or on the Building or Property and should any act so committed or any use so
made by Tenant, including any unauthorized vacancy thereof, result in an
increased or extra premium payable for insurance on the Leased Premises,
Building or Property, then Landlord may, in addition to all other remedies,
elect to pay the amount of such increase or extra premium, the amount so paid
becoming immediately due and payable by Tenant and collectible as Additional
Rental.
Tenant shall comply with the rules and requirements of the Insurers'
Advisory Organization of Canada or any successor body, and/or a loss prevention
firm or consultant chosen by Landlord's insurers, and with the requirements of
all insurance companies having policies of any kind whatsoever in effect
covering the Property, including policies insuring against delictual liability.
In no event shall any inflammable material, except for kinds and
quantities permitted by the insurance policies covering the Property, or any
explosives or radioactive material whatsoever, be taken into the Leased Premises
or retained therein.
Tenant shall take out and keep in force the following insurance.
(a) comprehensive general liability insurance including blanket
contractual liability and broad form property damage coverage,
with respect to the business carried on in or from the Leased
Premises and the use and occupancy thereof, for bodily injury
and death and damage to property of others in an amount of at
least two million dollars ($2,000,000.00) for each occurrence
or such greater amount as Landlord may, from time to time,
reasonably require;
(b) an "all risks" insurance with extended coverage including the
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Montreal Industrial Lease
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perils of fire, leakage from sprinklers and other fire
protective devices, earthquake, collapse, flood and sewer
back-ups in respect to furniture, equipment, inventory and
stock in trade, fixtures (plate glass if appropriate) and
leasehold improvements located within the Leased Premises and
such other property located in or forming part of the Leased
Premises, including all mechanical or electrical systems (or
portions thereof) installed by Tenant in the Leased Premises,
the whole for the full replacement value thereof (without
depreciation) in each such instance;
(c) Tenant's legal liability insurance in an amount equal to the
replacement cost of the Leased Premises or such greater amount
as Landlord may, from time to time, reasonably require;
(d) an environmental liability policy of a coverage of at least
one million dollars ($1,000,000.00); and
(e) such additional insurance as Landlord or its insurers, acting
reasonably, may from time to time require.
All the above-mentioned policies of insurance shall (i) be in form
satisfactory to Landlord; (ii) be placed with insurers acceptable to Landlord
and (iii) provide that they will not be cancelled or permitted to lapse unless
the insurer notifies Landlord in writing at least sixty (60) days prior to the
date of cancellation or lapse. Each such policy shall name Landlord and any
other party required by Landlord, as an additional insured as their interest may
appear. Each liability policy will contain a provision of cross-liability and
severability of interest as between Landlord and Tenant. All other policies
referred to above shall contain a waiver of subrogation rights which Tenant's
insurers may have against Landlord. Landlord's insurers and any Persons for
whom Landlord is responsible. Notwithstanding anything to the contrary
contained in this Lease, Tenant hereby releases and waives any and all claims
against Landlord and any Persons for whom Landlord is responsible with respect
to occurrences which are or which are required to be insured against by Tenant
hereunder. Tenant shall provide Landlord with copies of each insurance policy
referred to above upon execution of said policy and at the latest fifteen (15)
days prior to the Tenant's occupation of the Leased Premises. It is understood
that no review or approval of any insurance certificate or policy by Landlord
shall derogate from or diminish Landlord's rights under this Lease.
Tenant agrees that if Tenant fails to take out or to keep in force such
insurance Landlord may, at its sole option and discretion, do so and pay the
premium therefor and in such event Tenant shall repay to Landlord the amount
paid as a premium, which repayment shall be collectible as Additional Rental.
28. CANCELLATION OF INSURANCE
If any insurance policy mentioned in the preceding Article and/or any
insurance contracted by Landlord or any part of it is cancelled and/or
threatened to be cancelled by the insurer, or if the coverage under it is
reduced in any way by the insurer because of the use or occupation of any part
of the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to the cancellation, threatened cancellation or reduction of coverage
within forty-eight (48) hours after notice from the Landlord, the Landlord may,
either:
(a) enter and take possession of the Leased Premises immediately
by leaving upon the Leased Premises a notice of its intention
to do so, upon which the Landlord will have the same rights
and remedies that are available to him under this Lease or in
virtue of the law; or,
<PAGE> 20
Montreal Industrial Lease
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(b) enter upon the Lease Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or reduction
of coverage and the Tenant will immediately pay the costs to
the Landlord, together with a fee of fifteen percent (15%) of
such costs representing the Landlord's overhead, which costs
may be collected by the Landlord as Additional Rental, and the
Landlord will not be liable for any damage caused to any
property of the Tenant or others located on the Leased
Premises as a result of the entry.
29. DAMAGE OR DESTRUCTION
29.1 If the Leased Premises are at any time destroyed or damaged, the
following provisions will apply:
(i) if, in the opinion of the Landlord, the Leased Premises are
fit for tenancy in whole or in part, the Lease shall continue
in full force and effect without abatement or diminution of
any Minimum Net Net Rental or Operating Costs and Taxes;
(ii) if, in the opinion of the Landlord, the Leased Premises are
rendered partly unfit for tenancy, this Lease shall continue
in full force and effect, except that the Minimum Net Net
Rental and Operating Costs and Taxes will abate to the extent
Landlord's Architect determines that the Leased Premises
cannot reasonably be used for their intended purposes;
(iii) if Landlord determines that the Leased Premises are rendered
wholly unfit for tenancy, this Lease shall continue in full
force and effect, except that Minimum Net Net Rental and
Operating Costs and Taxes will fully abate;
(iv) all abatements will occur from the date of the damage or
destruction until the earlier of the date that the Leased
Premises are delivered to Tenant or the date of termination of
the period of Indemnity under Landlord's insurance policy for
business interruption and/or loss of rentals;
(v) Landlord will commence and proceed diligently to reconstruct,
rebuild or repair any damage to Leased Premises to meet
Landlord's base building criteria for the Property which
Landlord may modify to be consistent with the plans,
specifications and design criteria for the rebuilding of the
Building and/or the Leased Premises, chosen by Landlord acting
reasonably;
(vi) to restore the Leased Premises, Landlord will be under no
obligation to perform work other than that stipulated in
subparagraph (v) above;
(vii) whether or not the damage to the Leased Premises may have been
caused by Tenant's negligence or fault, Tenant shall commence
to repair, rebuild or reconstruct, at its own cost, all
leasehold improvements, fixturing and equipment in the Leased
Premises within fifteen (15) days from Landlord's notice that
Landlord has completed its work and Tenant shall complete said
work within thirty (30) days from Landlord's notice;
(viii) Tenant shall not be entitled to any allowance, inducement,
payment or other consideration from Landlord in connection
with Tenant's work described in sub-paragraph (vii) above,
even if such allowance, inducement, payment or other
consideration was made at the time of original construction of
the Leased Premises.
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Montreal Industrial Lease
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29.2 Despite any provision to the contrary contained in this Lease and,
specifically but without limitation, anything contained in the present Article,
if the Property is totally or partially damaged or destroyed (whether the Leased
Premises are affected or not) and;
(i) in the Landlord's opinion, the damaged or destroyed portions
cannot reasonably be repaired, restored or rebuilt within one
(1) year following the occurrence without overtime or other
special arrangements, or
(ii) the cost, as estimated by the Landlord, of repairing,
restoring or rebuilding the damaged or destroyed portions will
exceed the proceeds of insurance available to Landlord for
such purpose or the damage or destruction was caused by a
peril which is not covered by Landlord's insurance; or
(iii) less than two (2) years remain during the Term;
Then in any of the above cases, Landlord may, at its option
(to be exercised by written notice to Tenant within ninety
(90) days following any such occurrence) elect to terminate
this Lease.
If Landlord elects to terminate this Lease, then the following will apply:
(iv) if the Leased Premises have been rendered wholly unfit for
tenancy, the termination will take effect from the
date of the damage or destruction and all Minimum Net Net
Rental and Operating Costs and Taxes be adjusted to that date;
(v) if the Leased Premises have been rendered only partly unfit
for tenancy and Tenant has occupied or has been reasonably
capable of occupying any part of the Leased Premises from the
date of the damage or destruction, the Lease will terminate
ten (10) days from Landlord's notice. All unabated Minimum Net
Net Rental and Operating Costs and Taxes will be adjusted to
the date of termination. Minimum Net Net Rental and Operating
Costs and Taxes will abate from the date of the damage and
destruction until the date of termination to the extent the
Leased Premises cannot reasonably be used for their intended
purposes;
(vi) if the Leased Premises were not rendered wholly or partly
unfit for tenancy, the Lease will terminate ten (10) days from
Landlord' notice and all Minimum Net Net Rental and Operating
Costs and Taxes will be adjusted to that date;
Landlord may, at its sole option, rather than elect to terminate
this Lease, relocate Tenant to premises reasonably similar to the
Leased Premises within the same general vicinity of the Leased
Premises for a period corresponding to the unexpired Term of this
Lease or until such time as Landlord has reconstructed the Leased
Premises.
If the Property is totally or partially damaged or destroyed and
Landlord does not elect to terminate this Lease, subject to
paragraph (viii) below, Landlord shall commence and proceed
diligently to reconstruct, rebuild or repair, as necessary, those
portions of the Property which have been so damaged or destroyed
in accordance with Landlord's base building criteria for said
Property, exclusive of obligations of tenants in respect of the
Property pursuant to any lease. Furthermore, if the Leased
Premises are being repaired, rebuilt or reconstructed, the
provisions of the present Article relating to the Leased Premises
shall apply.
<PAGE> 22
Montreal Industrial Lease
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(vii) Tenant acknowledges and agrees that if Landlord does any
reconstruction, rebuilding or repairing of the Property,
Landlord may do any one or more of the following;
(a) use plans, specifications and working drawings which
differ from those applicable to the Property in
existence prior to the damage or destruction;
(b) change the configuration, design and/or size of the
Property or any of its component parts to suit
Landlord's needs at the time, including, without
limitation, the location and size of any court,
entrance, parking facility or any other Common Area
or Facility;
(c) redesign the tenant mix to suit Landlord's needs at
the time of reconstruction, with respect to the kinds
of uses which will be included in the tenant mix and
rearrange the locations in the Property in which
various types of uses shall be permitted.
In the present Article, the Landlord's opinion shall be final and
binding on the parties. It is further understood and agreed that nothing herein
shall oblige Landlord, under any circumstances and in any manner whatsoever, to
spend an amount greater than the proceeds of insurance received by Landlord as a
result of the damage or destruction described in the present Article for any
reconstruction contemplated herein.
Tenant agrees that none of the foregoing shall constitute a change of
form or destination, nor shall the validity or enforceability of this Lease be
affected in any manner by any of the foregoing.
30. TRANSFER CONSENT REQUIRED
No Transfer of this Lease shall be effected by Tenant without the prior
written consent of the Landlord in each instance, which consent may not be
unreasonably withheld.
Landlord's refusal of consent shall be deemed reasonable (without in
any way restricting Landlord's right to refuse it consent on other reasonable
grounds) under the following circumstances:
(a) where the Transferee proposed by Tenant is then a tenant of
the Property and Landlord has or will have during the next six
(6) months suitable space for rent in the Property;
(b) where Tenant is in default under any provisions of this Lease;
(c) where the Landlord has reasonable grounds to believe that the
proposed Transferee does not possess the financial means
necessary to fulfill all its financial obligations herein;
(d) where the Transfer applies to part of the Leased Premises
only;
(e) where the proposed Transferee's use of the Leased Premises
violates any laws or rights granted to other tenants or
retained by Landlord, or where such use may be disruptive or
objectionable to other tenants or to the Landlord, or where
such use shall detract from the dignity or character of the
Property;
(f) where the Landlord has not obtained the consent of a secured
creditor or any Person who may have the right to approve the
Transfer;
<PAGE> 23
Montreal Industrial Lease
Page 20
(g) where a previous Transferor or guarantor does not approve the
Transfer and/or refuses to remain jointly and severally liable
towards Landlord for the execution of Tenant's obligations
under this Lease and/or refuses to sign a Transfer document
to that effect.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, with Landlord's consent, of this Lease or of any interest
hereunder, then the Tenant undertakes not to print, publish, post, display or
broadcast any notice or advertisement or otherwise advertise the whole or any
part of the Leased Premises for purposes of a Transfer, and shall not permit any
broker or other Person to do any of the foregoing, unless the complete text and
format of any such notice, advertisement, or offer is first approved in writing
by the Landlord. Without in any way restricting or limiting the Landlord's right
to refuse any text or format on other grounds, any text or format proposed by
the Tenant shall not contain any reference to the rental rate of the Leased
Premises. Notwithstanding anything contained herein, no sign shall be posted,
affixed, displayed or inscribed in any manner whatsoever on the Leased Premises
or the Property advertising that the Leased Premises are for rent.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, of this Lease or of any interest hereunder, then, and as often
as such event shall occur, the Tenant shall give prior written notice to the
Landlord of such intent, specifying therein the proposed Transferee, providing
such information with respect thereto, including without limitation, information
concerning the principals thereof and as to any credit, financial or business
information relating to the proposed Transferee as the Landlord or the
hypothecary creditor requires, and shall pay Landlord in advance for the cost of
Landlord's inquiries as well as it processing fee for the examination of
Tenant's request, and the Landlord shall, within thirty (30) days following the
completion of Landlord's study of Tenant's request, notify the Tenant in writing
that:
(a) it consents or does not consent to the Transfer in accordance
with the provisions and qualifications of this Article;
(b) it elects to cancel this Lease in preference to giving such a
consent.
The mere occupation of all or part of the Leased Premises or Landlord's
tolerance thereof, the payment of any amount by the proposed Transferee to
Landlord, or the consent to any previous Transfer shall not constitute a waiver
of Tenant's obligation to obtain Landlord's consent to any Transfer, nor will
any of the foregoing be construed to constitute a consent by Landlord to the
proposed Transfer. Nevertheless, whether or not Landlord consents to any
Transfer, it may collect rent or other amounts from any proposed Transferee and
apply the said amount to the amounts payable under this Lease, without in any
manner prejudicing any of its rights. This prohibition against a Transfer is
construed in a manner to include a prohibition against any Transfer by operation
of law, and no Transfer shall take place by reason of a failure by the Landlord
to reply to a request by the Tenant for consent to a Transfer.
Notwithstanding any such Transfer consented to by the Landlord, no
acceptance by the Landlord of any payments by a Transferee shall be deemed a
waiver of the requirements contained herein or a release of the Tenant from the
further performance by the Tenant of the obligations on the part of the Tenant
herein contained and Tenant shall be jointly and severally liable with the
Transferee for all of the Tenant's obligations stipulated in the Lease and shall
not be released from performing any of the obligations under the Lease during
the Term.
In addition to any of the requirements stipulated herein, Landlord's
consent to the Transfer is conditional upon Tenant and Transferee signing
<PAGE> 24
Montreal Industrial Lease
Page 21
with Landlord a document prepared by Landlord evidencing such Transfer, and
Tenant undertakes to cause the Transferee to promptly sign said document in
which Transferee shall agree to be bound directly with Landlord to all of the
obligations contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. The above-mentioned document shall further
provide that the Tenant transfers to the Transferee any rights it may have
with respect to the Deposit retained by Landlord pursuant to this Lease and
Tenant renounces all of its rights thereto. In addition thereto, the Transferee
may be required by Landlord to supplement any security deposit given in this
Lease.
Should the Minimal Net Net Rental per square foot to be paid by a
Transferee, whether in cash, goods, services or other consideration, exceed the
Minimum Net Net Rental per square foot payable hereunder, then Tenant shall pay
to Landlord monthly, as Additional Rental, the amount of or and amount
equivalent to such excess.
Notwithstanding anything contained in this Article, the Tenant may
sublet the Leased Premises or assign the Lease to a parent, subsidiary or
affiliate company without seeking the consent of the Landlord provided, however,
that such sub-tenant or assignee shall remain bound jointly and severally with
the Tenant for all the terms and covenants of this Lease, and provided further
that Tenant shall notify Landlord in writing prior to such sublet or assignment.
Upon the execution of this Lease and upon each succeeding anniversary
date or at any sooner time requested by the Landlord, the Tenant shall deliver
to the Landlord a statement, certified as being true and correct and verified by
the corporate secretary, showing the names of all existing shareholders of
record and their respective ownership interest as at that date. The Tenant
shall, at the request of the Landlord, make available to the Landlord for
inspection or copying or both, all books and records of the Tenant which, alone
or with other data, show the applicability or inapplicability of this Article.
If any shareholder of the Tenant shall, after the request of the Landlord to
do so, fail or refuse to furnish forthwith to the Landlord any data verified
by the affidavit of such shareholder or other credible person, which data,
alone or with other data show the applicability or inapplicability of this
paragraph, the Landlord may terminate this Lease by giving the Tenant prior
written notice of thirty (30) days of such termination.
31. PRIVILEGE OF LANDLORD
Tenant covenants to furnish the Leased Premises with and to maintain at
all times thereon, a sufficient quantity of furniture, fixtures and other
effects to secure the payment of at least six (6) months of Minimum Net Net
Rental and Additional Rental which shall at all times be free and clear of all
Tenant Security and shall be subject to a privilege in favor of the Landlord for
the payment of Minimum Net Net Rental and Additional Rental and the fulfillment
of all other covenants and agreements herein contained.
32. ASSIGNMENT BY LANDLORD
Landlord declares that it may assign its rights under this Lease to a
lending institution or to any Person as collateral security for a loan to
Landlord and, in the event that such an assignment is given and executed by
Landlord and notification thereof is given to Tenant by or on behalf of
Landlord, it is expressly agreed that this Lease shall not be canceled or
modified for any reason whatsoever without the consent in writing of such
lending institution or Person if such consent is required.
This Lease and all rights of the Tenant under the Lease shall be
subject to and subordinate to any Security. Tenant hereby covenants and agrees
that it will, whenever reasonably required by Landlord and at Landlord's
expense, consent to and become a party to any instrument
<PAGE> 25
Montreal Industrial Lease
Page 22
subordinating the Lease to any Security. However, no subordination by the Tenant
shall have the effect of permitting the holder of any Security to disturb the
Tenant's enjoyment of the Leased Premises as long as the Tenant shall comply
with the covenants to be kept and performed by it under this Lease.
The Tenant will, upon request of the Landlord or the Person holding the
Security or any Person having an interest in the project, execute and deliver
promptly those instruments referred to herein. However, if ten (10) days after
the date of request, the Tenant has not executed and delivered them, the Tenant
hereby irrevocably appoints the Landlord as the Tenant's attorney with full
power and authority to execute and deliver in the name of the Tenant said
instruments or the Landlord may, at its sole option and discretion, terminate
this Lease upon giving Tenant a forty-eight-hour (48) notice of its intention to
do so, the whole without incurring any liability whatsoever and without
prejudice to all of its other rights and recourses.
It is agreed and understood that in the event of any sale of the
Property by Landlord, then Landlord shall automatically be relieved of any and
all obligations and liabilities under this Lease accruing from and after the
date of such sale.
33. EXPROPRIATION
If the whole or any part of the Leased Premises and/or the Property
shall be condemned, expropriated or taken in any manner for any public or
quasi-public use or purpose, Landlord may, at its option, terminate this Lease
by giving notice in writing to Tenant that the Term hereof shall expire upon the
day when possession is required for such purpose and in the event of such
expiration Landlord shall have no liability of any nature to Tenant resulting
from said expiration.
34. EXTENSIONS
The Landlord shall have the right, at its option and from time to time,
to make extensions and/or additions and/or to add one or more additional floors
or storeys onto all or part of the building comprising the Leased Premises, or
on to any other buildings of the Property, or to add one or more buildings to
the Property. In the event that any such extensions an/or additions be made to
the building comprising the Leased Premises or to any other buildings of the
Property and/or in the event any such additional building or buildings shall be
erected on the Property, the Landlord may, at its sole option and discretion,
include in the denominator for the purpose of calculating Tenant's Proportionate
Share of Operating Costs and Taxes, the total leasable area of all or part of
the buildings erected on the Property.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts, and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonably delay and that this Article shall not absolve or release the Landlord
from Liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only ); all of
the foregoing without any other claims by the Tenant against the Landlord for
damage and loss of use.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
<PAGE> 26
Montreal Industrial Lease
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improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
Without limiting the generality of the foregoing, the Landlord hereby
reserves the right, at any time and from time to time, to make changes in,
additions to, subtractions from or rearrangements of the Building including,
without limitation, all improvements at any time thereon, all entrances and
exits thereto, and to grant, modify and terminate any servitudes or other
agreements pertaining to the use and maintenance of all or parts of the Building
and to make changes or additions to the pipes, conduits, wires, ducts, utilities
and other necessary building services in the Leased Premises which serve other
premises. The Landlord agrees that in performing such alterations, it shall do
so in such manner as to minimize any material interference with the Tenant's
use and enjoyment of the Leased Premises. The Landlord shall not however, be
responsible for any damages of whatsoever nature to Tenant except for physical
damages to the Leased Premises.
The Landlord shall further have the right from time to time to sever
any part or parts of the Property or any Building or improvements thereon for
purposes of sale, lease, hypothec, privilege, charge or otherwise, including the
creation of rights-of-way, servitudes and parking arrangements which the
Landlord deems necessary and the Tenant hereby consents to any such severance
and agrees to execute any documents or consents which the Landlord may request
for these purposes. If any part or parts of the Property or the Building or
improvements on the Property are so severed and are deemed by the Landlord to
no longer form part of the Property, such part or parts shall be excluded from
the Property for the purposes of this Lease at the time designated by the
Landlord and the Tenant shall, when requested by the Landlord, execute a
release of any interest in the Property so excluded.
35. DEFAULT
The following shall be considered a default under the terms of this
Lease:
(a) In the event that Tenant shall be in default under any
provision of this Lease providing for the payment of Minimum
Net Net Rental and/or Additional Rental;
(b) In the event Tenant does not take possession of the Leased
Premises or abandons or attempts to abandon the Leased
Premises before the Termination Date, with or without
Landlord's knowledge; or in the event the Leased Premises are
used by any Person other than the Person entitled to use them
hereunder; or any procedure in execution is issued pursuant
to a judgment rendered against Tenant; or if an agent,
receiver or trustee acting under a trust deed or other
security, takes possession of the Tenant's assets and/or any
equipment, fixtures, furniture or movable effects in the
Leased Premises; or if the Tenant shall make a bulk sale of
its goods; or if the Tenant should attempt to move its
belongings out of the Leased Premises;
<PAGE> 27
Montreal Industrial Lease
Page 24
(c) In the event that Tenant shall be in default in observing any
covenant herein contained and/or performing any of its
obligations contained in this Lease (other than a default
stipulated in sub-paragraphs (a) and (b) above) and such
default shall continue for fifteen (15) days after written
notice specifying such default shall have been given by
Landlord to Tenant, unless it is impossible for Tenant to cure
such default within the said delay of fifteen (15) days, in
which case Tenant shall, upon written request to Landlord, be
entitled to such reasonable extension of time to enable such
default to be remedied.
In the event of any default on the part of the Tenant under the terms
of this Lease, Landlord shall have the right, at its sole and absolute
discretion, to terminate this Lease and in addition, Landlord may, without
notice or any form of legal process, forthwith enter upon and take possession of
the Leased Premises and operate the business and/or assume absolute ownership of
Tenant's movable effects and/or remove the Tenant's effects therefrom, any
statute or law to the contrary notwithstanding, the whole without prejudice to
and under reserve of all other rights and recourses of Landlord to claim any and
all losses and damages of any nature whatsoever sustained by the Landlord by
reason of or arising from any default of the Tenant including, without
limitation, the expenses of reletting the Leased Premises (including the costs
of any repairs, decorating, alterations or improvements necessitated thereby),
as well as attorney's fees of fifteen percent (15%) of any amount granted by
judgment. Where Landlord shall have instituted proceedings to cancel, terminate
or confirm its cancellation or termination of this Lease, notwithstanding any
law or custom to the contrary, Tenant shall not have any right to prevent such
cancellation or termination by remedying its default or defaults subsequent to
the institution of such legal proceedings.
36. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay when due any taxes, rates, insurance premiums,
charges, debts or any other amounts which it owes or has herein covenanted to
pay, all such amounts shall be deemed to be and be treated as Additional Rental
and payable and recoverable as Additional Rental. Landlord may pay the same and
shall be entitled to charge the sums so paid to Tenant who shall pay them
forthwith on demand as Additional Rental.
All arrears of Minimum Net Net Rental and Additional Rental shall bear
interest at the prime lending rate as determined by the Royal Bank of Canada on
a daily basis plus four percent (4%) from the time such arrears become due until
paid to Landlord.
37. BANKRUPTCY AND INSOLVENCY
In the event that Tenant shall be adjudicated bankrupt or make any
general assignment for the benefit of its creditors, or make a proposal to its
creditors, or take or attempt to take the benefit of any insolvency or
bankruptcy law, or if a receiver or trustee be appointed for the property of the
Tenant or any part thereof, the present Lease shall automatically terminate on
the occurrence of any of the aforesaid events without further notice or delay,
and Landlord shall be entitled to recover all arrears of Minimum Net Net Rental
and Additional Rental as well as six (6) months of future Minimum Net Net Rental
and Additional Rental or such other accelerated amount that the law may at any
time provide.
38. INDEMNIFICATION
Except if caused directly by the gross negligence or fault of the
Landlord, its mandatories, employees, or representatives, or by any breach or
nonperformance by the Landlord of any covenant undertaken by virtue hereof, the
Landlord shall not be liable nor responsible in any way for any injury of
<PAGE> 28
Montreal Industrial Lease
Page 25
any nature whatsoever that may be suffered or sustained by the Tenant or any
other Person who may be upon the Leased Premises or for any loss of or damage to
any property belonging to the Tenant or to any other Person while such property
is on the Leased Premises and in particular (but without limiting the generality
of the foregoing), the Landlord shall not be liable for any damage or damages of
any nature whatsoever to any such property caused by the failure, by reason of a
breakdown or other cause, to supply adequate drainage, or by reason of the
interruption of any public utility or service or in the event of steam, water,
rain or snow which may leak into, issue or flow from any part of the Property or
from the water, steam, sprinkler, or drainage pipes or plumbing works of the
same, or from any other place or quarter or for any damage caused by anything
done or omitted by any tenant. The Landlord, however, shall use all reasonable
diligence to remedy such condition, failure or interruption of service when not
attributable to the Tenant, after notice of same, when it is within its power
and obligation to do so. The Tenant shall not be entitled to any abatement of
Minimum Net Net Rental and Tenant's Proportionate Share of Operating Costs and
Taxes in respect of any such condition, failure or interruption of service.
The Tenant will indemnify and hold Landlord harmless from and against
all fines, liability, damage suits, claims, demands and actions of any kind or
nature for which the Landlord shall or may become liable for or suffer by reason
of:
(a) any breach or nonperformance by the Tenant of any provision
hereof; and/or
(b) any injury (including death resulting at any time therefrom)
or damage to property occasioned to or suffered by any Person
including the Parties hereto by reason of any such breach or
nonperformance or of any wrongful act, neglect, or fault on
the part of the Tenant; and/or
(c) any damage to the Property caused by the Tenant's use and
occupancy of the Leased Premises; and/or
(d) any injury to any Person including death, sickness and
diseases resulting at any time therefrom, whether caused by a
virus, bacteria or any substance brought upon the Leased
Premises and manipulated by Tenant and/or located on or about
the Leased Premises; and/or
(e) any injuries, damages or costs relating to any environmental
impairment arising out of the occupancy of the Leased
Premises.
Such indemnification by the Tenant for any of the above items shall
survive the termination of this Lease, anything in this Lease to the contrary
notwithstanding.
39. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present
Lease, the Tenant will not hold the Landlord in any way responsible for any
damages or annoyance which the Tenant may sustain through the fault of any
tenant who occupies any premises adjacent to, near, above or under the Leased
Premises, and renounces any claims it may have against the Landlord pursuant to
Article 1636 of the Civil Code of Lower Canada.
40. NONWAIVER
The failure of Landlord to insist upon a strict performance of any of
the terms hereof shall not be deemed a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent default by
Tenant of any such terms.
<PAGE> 29
Montreal Industrial Lease
Page 26
41. WAIVER OF COMPENSATION
The Tenant hereby waives and renounces any and all existing and future
claims, offsets and compensation against any Minimum Net Net Rental or
Additional Rental due hereunder and agrees to pay such Minimum Net Net Rental
and Additional Rental on their respective due dates, regardless of any claim,
offset or compensation which may be asserted by the Tenant or on its behalf,
except to the extent permitted hereunder.
42. IMPUTATION OF PAYMENTS
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Net Net Rental and Additional Rental shall
be deemed to be payments on account of the earliest stipulated Minimum Net Net
Rental and Additional Rental, nor is any endorsement or statement on any cheque
or any letter accompanying any cheque or payment as rent deemed as
acknowledgment of full payment or an agreement or acquiescence of or to the
terms thereof, and the Landlord may accept and cash such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rental
or pursue any other remedy provided in this Lease. The Landlord may, at its
option, apply sums received from the Tenant against any amounts due and payable
by the Tenant under this Lease in such manner as the Landlord sees fit.
43. CUMULATIVE REMEDIES
No reference to or exercise of any specific right or remedy by the
Landlord shall preclude the Landlord from or prejudice the Landlord in
exercising any other right under this Lease or pursuing any other remedy or
maintaining any action to which it may otherwise be entitled at law.
44. UNAVOIDABLE DELAY
Save and except for any monetary obligation under this Lease, Landlord
and Tenant shall not be liable for failure or delays in performing any of their
obligations hereunder should such failure or delay be caused by any event
(excluding the financial conditions of either party) which is beyond the
reasonable control of either party including, without limitation, cas fortuit,
force majeure, strikes, lockouts, labour troubles, inability to procure
materials, restrictive governmental rules, regulations, orders or bankruptcy of
contractors.
Without limiting the generality of the foregoing and in particular, it
is understood and agreed that whenever and to the extent that the Landlord shall
be unable to fulfill, or shall be delayed or restricted in the fulfillment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfill such obligation, or by reason of any statute,
law or order in council or any regulation or order passed or made pursuant
thereto or by reason of the order or directive of any competent authority
having jurisdiction over the Property, or inability to obtain any required
authorization therefrom, or by reason of any other cause beyond its control,
the Landlord shall be entitled to extend the time for fulfillment of such
obligation by a time equal to the duration of such delay or restriction, and
the Tenant shall not be entitled to compensation for any damages of whatsoever
nature arising therefrom.
45. MANAGEMENT OF THE PROPERTY
The Tenant hereby acknowledges to the Landlord that the Property may be
managed by any party other than the Landlord, as the Landlord from
<PAGE> 30
Montreal Industrial Lease
Page 27
time to time may in writing designate and, to all intents and purposes, any
manager so designated shall be the party at the Property authorized to deal with
the Tenant. All payments to Landlord in virtue of this Lease shall be made by
cheque payable to the Landlord in full unless otherwise specified in writing by
Landlord to Tenant.
46. RULES AND REGULATIONS
There is a schedule of rules and regulations annexed hereto as Schedule
"E" and the Tenant binds and obliges itself to abide by the said rules and
regulations.
The Landlord shall have the right to amend and/or rescind the rules and
regulations in Schedule "E" from time to time and to make any other reasonable
rules and regulations not contrary to the spirit and intent of this Lease as, in
its discretion, may from time to time be needful for the safety, care,
cleanliness and proper administration of the Property including the Leased
Premises, and for the preservation of good order therein, and the same shall be
observed and performed by the Tenant and by its customers, and all such rules
and regulations now or hereafter to be established by the Landlord as herein
provided shall form part of this Lease as if recited at length herein and any
such new rules and regulations shall be binding upon Tenant upon written
notification from Landlord.
Furthermore, in the event that Tenant does not comply with the rules
and regulations, Landlord shall have the right, without notice, to enter the
Leased Premises and execute any work necessary to rectify Tenant's
noncompliance, the cost of which shall immediately, upon Landlord's request, be
payable by Tenant as Additional Rental. It is agreed and understood that the
terms and conditions of this Lease shall prevail over any of the terms of the
rules and regulations.
47. COMPLIANCE WITH LAWS AND REGULATIONS
The Tenant shall, at its own expense, promptly comply with the
requirements of every applicable statute, law and ordinance and with every
applicable lawful regulation or order with respect to the removal of any
encroachment placed by the Tenant, or to the condition, equipment, furniture,
fixtures, maintenance, or use, or occupation of the Leased Premises, including
the making of any alteration, addition in or to any structure upon, connected
with or appurtenant to the Leased Premises, whether or not such alteration be
structural or be required on account of any particular use to which the Leased
Premises or part thereof may be put and whether or not such requirement,
regulation or order be of a kind now existing or within the contemplation of the
parties hereto; and shall comply with any applicable regulation, recommendation
or order of the Insurers' Advisory Organization of Canada, or any body having
similar functions or of any liability or fire insurance company by which the
Landlord and/or the Tenant may be insured.
48. WINDOW COVERINGS
In order to preserve a more uniform and attractive appearance of the
Property for the benefit of all the tenants, the Tenant herein binds and obliges
itself to place vertical blinds for air porosity, over all windows which are
located in the front of the Building or on any side of the Building which faces
a public street and where such windows are for other than office areas, such
vertical blinds shall remain drawn at all times.
49. PERMITS AND LICENSES
The Tenant shall obtain all necessary permits and licenses required for
the occupancy and carrying on of its business, the Landlord making no
representations or warranties whatsoever as to whether said permits and
<PAGE> 31
Montreal Industrial Lease
Page 28
licenses may be obtained by Tenant. Should the Tenant fail to obtain any
required permit and/or license, it shall nevertheless remain bound to perform
all of its obligations pursuant to the present Lease including, without
limitation, payment of Minimum Net Net Rental and Additional Rental.
50. EXPIRATION OF LEASE
Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto Landlord, who shall become absolute owner
thereof, the Leased Premises together with all buildings, alterations,
additions, erections, leasehold improvements, repairs and installations
including the air-conditioning and heating system, done or made by the Tenant,
both movable and immovable, except the equipment and furniture belonging to
Tenant which must be removed at Tenant's expense on or before the expiration of
the Lease. Tenant shall repair any and all damages caused to the Leased Premises
and/or to the Building as a result of such removal, using materials equal in
quality to that of the damaged materials, failing which Landlord may do so at
Tenant's expense.
Notwithstanding the above, Landlord may at its option advise Tenant in
writing that he does not wish the ownership of all or any part of the above
described property, in which case Tenant shall remain owner of such property
refused by Landlord and shall, at its own expense, immediately remove such
property and repair any damage to the Leased Premises and/or the Building caused
by the original installation and/or removal, using materials equal in quality to
that of the damaged materials, failing which Landlord may do so at Tenant's
expense.
If Tenant leaves any equipment or furniture in the Leased Premises
following the expiration of the Term, it is understood that Landlord may then,
at its option, either accept full and absolute ownership of same and may use it
or dispose of it as Landlord determines, without compensation payable to Tenant
and without incurring any liability to Tenant, or Landlord may dispose of same
as it sees fit, at Tenant's expense, without incurring any liability to Tenant.
If the Tenant has failed to fulfill its obligations under this lease
with respect to the maintenance, repair and alteration of the Leased Premises
and removal of improvements and fixtures from the Leased Premises during or at
the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration or
sooner termination of the Term.
51. CONSTITUT OR TENURE SYSTEM ACT
The Tenant hereby renounces any rights which it may have or acquire
under the Constitut or Tenure System Act, R.S.Q., 1977, c. C-64, to purchase or
acquire the Leased Premises or the Property.
52. DOMICILE AND NOTICES
The Tenant hereby elects domicile at the Leased Premises for the
purpose of service of any writs of summons or other legal document in any action
or proceeding whatsoever by the Landlord against the Tenant.
Any notice or demand given by Landlord to Tenant or by Tenant to
Landlord pursuant to the present Lease shall be deemed to be duly given if
served upon the Tenant or Landlord personally, or if delivered or mailed by
prepaid certified or registered mail to:
(a) LANDLORD: 7405 Trans Canada Highway
St. Laurent, Quebec
(b) TENANT: At the Leased Premises
<PAGE> 32
Montreal Industrial Lease
Page 29
Landlord may, by notice in writing to the Tenant, change the address to
which any notice or demand intended for the Landlord shall be addressed. Tenant
may, by notice in writing, require that a copy of any writ of summons or other
legal document or proceeding and a notice or demand served on the Leased
Premises by mailed by regular mail to an additional address.
53. SUCCESSORS AND ASSIGNS
This Lease shall enure to the benefit of Landlord's or Tenant's
respective heirs, executors, administrators, successors and assigns.
54. DESCRIPTIVE HEADINGS
Any descriptive headings appearing in this Lease have been inserted as
a matter of convenience and reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provisions hereof.
55. GOVERNING LAW / SEVERABILITY
The present Lease shall be construed and governed by the laws of the
Province of Quebec. Should any provision of this Lease be or become illegal or
not enforceable, it shall be considered separate and severable from the present
Lease and the remaining provisions shall continue in full force and effect and
be binding upon the parties hereto as though said provisions had never been
included. In this Lease, singular words shall be interpreted as including the
plural and vise versa and the words of masculine gender shall be interpreted as
including the feminine gender. Where more than one landlord or tenant is
referred to or when Tenant shall be of feminine gender or a corporation, all the
proper grammatical changes shall be inferred.
56. COST OF PREPARATION, REGISTRATION AND RADIATION
Tenant shall be permitted at it own cost to register the Lease by
memorial only, upon obtaining Landlord's prior written consent as to the form
and content of the memorial.
In addition, Tenant shall, at its own cost, at the expiration of the
Term, radiate the registration of the Lease from the index of immovables.
In the event the said registration is not radiated within thirty (30)
days from the expiration of the Term, Tenant hereby irrevocably appoints the
Landlord as the Tenant's attorney with full power and authority to execute in
the name of the Tenant any documents and instruments required to effect the said
radiation of the registration of the Lease from the Index of Immovables and
Tenant further authorizes Landlord to deliver the said instruments and documents
to the appropriate Registry Office for the purpose of effecting all the
appropriate registrations and radiations. The cost of the preparation of said
documents and instruments as well as the cost of registering said documents and
instruments shall be borne by Tenant.
57. BROKERAGE COMMISSION
The Landlord and Tenant hereby guarantee that no brokerage commission
or charges are owing to any broker or brokerage company with respect to the
present transaction.
Tenant shall Indemnify and hold Landlord harmless from any and all
brokerage claims as described above.
<PAGE> 33
Montreal Industrial Lease
Page 30
58. SCHEDULES
Schedules "B" and "E", hereto form an integral part of this Lease.
59. CERTIFICATE OF INCORPORATION
Where Tenant is a corporation, Tenant undertakes to remit to Landlord
upon the signing of the Lease, a copy of its Certificate of Incorporation.
60. ENTIRE AGREEMENT
Tenant acknowledges that there are no covenants, representations,
agreements, warranties or conditions in any way relating to the subject matter
of this Lease, whether expressed or implied, collateral or otherwise, either
oral or written, including promotional material, except those set forth in this
Lease, the Tenant agrees that he has not relied upon any representation in any
brochures, and the Tenant expressly declares that this Lease constitutes the
entire agreement between the Landlord and the Tenant. Except as otherwise
provided herein, no subsequent alteration, amendment, change or addition to this
Lease shall be binding upon the Landlord or the Tenant unless agreed to in
writing by the parties.
61. LANGUAGE
Each of the parties does hereby confirm that it has expressly required
that this contract, as well as any document related hereto, be drawn up in the
English language. Chacune des parties confirme par les presentes avoir
expressement demande que le present contrat, ainsi que tous les documents y
afferent, solent rediges en anglais.
IN WITNESS WHEREOF THE LANDLORD HAS SIGNED AT ST. LAURENT, QUEBEC,
THIS 27TH DAY OF JANUARY, 1995.
ZMD SPORTS INVESTMENTS INC.
Per: /s/
-----------------------------
/s/
---------------------
Witness
/s/
---------------------
Witness
IN WITNESS WHEREOF THE TENANT HAS SIGNED AT ST. LAURENT THIS 27TH DAY
OF JANUARY, 1995.
SPORT MASKA INC.
Per: /s/
-----------------------------
/s/
---------------------
Witness
/s/
---------------------
Witness
<PAGE> 34
SCHEDULE "9"
EXTRACT OF A CERTIFICATE OF LOCATION DATED AUGUST 25, 1989:
L'emplacement est designe sous le numero CENT, subdivision QUATRE-VINGT-QUATRE
(100-84) du cadastre de la paroisse de Notre-Dame-de-Saint-Hyacinthe, division
d'enregistrement de Saint-Hyacinthe, et peut etre plus particulierement decrit
comme suit:
Borne au nord-est par les lots 100-65 et 100-66 (avenue Hubert), au
sud-est par le lot 100-67 (rue St-Charles), au sud-ouest par les lots
99-2 et 99-3, au nord-ouest par les lots 99-2 et 99-3, au nord-ouest
par le lot 100-78; mesurant, successivement, dix-sept metres et
sioxante-huit centiemes (17,68m), onze metres et vingt et un centiemes
(11,21 m) suivant un arc engendre par un rayon de quarante-huit metres
et soixante-dix-sept centiemes (48,77 m), quarante-huit metres et
cinquante et un centiemes (48,51 m), cent quarante et un metres et
quatre-vingt-quinze centiemes (141,95 m) le tout le long d'une ligne
bri-see au nord-est, quarante-huit metres et soixante-cinq centiemes
(48,65 m) au sud-est, deux cent dix-sept metres et quatre-vingt-quinze
centiemes (217, 95 m) au sud-ouest, trente-six metres et treize
centie-mes (36,13 m) au nord-ouest; contenant, en superficie, neuf
mille neuf cent soixante-dix-sept metres carres et deux dixie-mes (9
977, 2 m2)
<PAGE> 35
SCHEDULE "E"
RULES AND REGULATIONS
1. The Landlord reserves entire control of the sidewalks, entries,
corridors and passages; washrooms and lavoratories; fan rooms,
janitor's closets, electrical closets and other closets; stairs, flues,
stacks, pipe shafts and ducts, the whole not within the Leased
Premises, and of all parts of the Building employed for the common
benefit of the Tenants, and shall have the right to place such signs
and appliances therein, as they may deem advisable, provided that
ingress to and egress from the Leased Premises is not impaired thereby.
2. The Landlord shall have the exclusive right to prescribe the weight and
proper positions of metal safes or machinery as well as the right to
prescribe the weight and position of any floor load. All damage done to
the Building or the Leased Premises by moving or using heavy equipment
of any description or furniture contrary to the Landlords'
prescriptions shall be repaired at the expense of the Tenant. No such
equipment or furniture shall be moved unless a time therefor has been
arranged with and consented to by the Landlord.
3. The Tenant shall not permit the introduction into the Leased Premises
or the Building of any machine or mechanical device of any nature
whatsoever which may be liable to cause objectionable noise or
vibration or be injurious to the Leased Premises or Building.
4. Canvassing, soliciting and peddling in the Building are prohibited.
5. Furniture, bulky articles and construction materials which the Tenant
may require from time to time for the construction of internal
partitions or for the purpose of effecting alterations or improvements,
the whole provided Tenant has obtained Landlord's approval pursuant to
the Article of this Lease entitled "Improvements and Alterations",
shall be carried to the Leased Premises at such hour and in such manner
as the Landlord may reasonably designate. Any damage which may be
caused to the Building or the Leased Premises by the carrying of such
furniture, bulky articles or construction materials to or from the
Leased premises shall be at the responsibility and cost of the Tenant.
6. Any hand trucks, carryalls, or similar appliances used for the delivery
or receipt of merchandise or equipment shall be equipped with rubber
tires, side guards and such other safeguards as the Landlord shall
require.
7. If any apparatus used or installed by the Tenant requires a permit as a
condition for its installation, the Tenant must file a copy of such
permit with the Landlord.
8. The Tenant shall give the Landlord prompt written notice of any
accident to or defect in water or gas pipes, heating or sprinkler
system in the demised Leased premises, of which he is aware.
9. The Tenant shall not place any additional locks upon any doors of the
Leased Premises or the Building without the written consent of the
Landlord.
10. No animals or birds shall be brought or kept in or about the Leased
Premises or the Building.
11. No auction sales shall be allowed in the Leased Premises or the
Building.
12. The water closets and other water apparatus of the Building or Leased
Premises shall not be used for any purpose but those for which they are
constructed, and no sweepings, rubbish, rags, ashes, chemicals or other
substances shall be thrown therein.
13. The Tenant shall not permit any employees to smoke or congregate in the
halls (if any) of the said Building.
<PAGE> 36
Montreal Industrial Lease
Schedule "E"
Page 2
14. The Tenant, when closing the premises, during the day or evening, shall
have all windows closed, to avoid possible damage from fire, storms,
rain or freezing, and will not shut off the radiators and/or baseboard
heaters when the premises are locked.
15. The Tenant shall follow such instructions, if any, as Tenant may from
time to time receive from Landlord relating to the maintenance and care
of the heating, ventilating and air-conditioning equipment installed
within the leased Premises.
16. Front Signage
The Tenant may identify his business with a front sign, the whole
provided Tenant complies with the conditions stipulated hereunder:
(a) Letter: individual to the Tenant's Style.
(b) Height: 24".
(c) Permitted materials - plastic, composite or solid.
- rustproof metal, composite or solid.
(d) Lighting (optional) - integrated.
- halo-lit (back-lighting).
(e) Lighting control - dedicated circuit.
- photo-cell switch,timer switch or
manual switch.
Before the fabrication of any signage, the Tenant must obtain the
written approval of the Landlord. A request for approval must be accompanied by
the following information:
(a) Elevation plan indicating the proposed sign -- (Scale - 3/8' =
1').
(b) Sign dimensions: height, length, thickness, and distance from
wall.
(c) Construction and installation details.
(d) Material and finish specifications (use of styrofoam is
prohibited).
(e) Colour specifications.
(f) Lighting specifications: number of amperes, volts and
circuits.
(g) Name of designer and of fabrication and installation
contractors.
(h) Request for Municipal permit.
(i) Any other additional information that the Landlord may
require to study a particular sign request.
Furthermore, Tenant shall only be entitled to purchase any signage
approved from the following suppliers which may be changed by Landlord from time
to time:
Enseignes Trans Canada Signs Inc.
9310 Parkway
Ville d'Anjou, Quebec
H1J 1W7
Claude Neon Limitee
1855 Hymus Boulevard
Dorval, Quebec
H9P 1J8
Enselcom Inc.
1700 Claire Crescent
Lachine, Quebec
H8S 1A2
17. Facade and secondary windows
(a) All front windows must have off-white vertical blinds.
(b) Adjustment of vertical blinds of front windows of storage
space must be half closed.
<PAGE> 37
Montreal Industrial Lease
Schedule "E"
Page 3
(c) All windows, including secondary windows, must be washed by
Tenant at its cost, at least twice a year on both the interior
and exterior faces.
18. Miscellaneous signage
Miscellaneous traffic and "no parking" signs are supplied and
installed by the Landlord.
19. Garbage container
(a) The Tenant must provide the garbage container which best
satisfies its business activity so that the size and water
tightness retain all garbage without affecting the
environment.
(b) The Tenant must assure that the container is neatly located on
the designated area and that the lids are kept closed.
20. Exterior storage
(a) It is strictly forbidden to store anything outside the
Building, even on a temporary basis.
(b) Used boxes, pallets must be kept inside the Building until
collected for disposal.
21. Special Installations
Tenant must obtain Landlord's approval prior to the installation of any
equipment, machinery, fixtures and furniture which have to be attached
to, mounted to or pierced through any element of the Leased Premises
and/or the Building. Furthermore, Tenant must obtain Landlord's
approval prior to the installation of any equipment, tank and any other
item that Tenant wants to install outside the Building (hereinafter the
"Special Installation") .
Any request for the approval of a Special Installation must be
submitted in writing along with the technical drawings or pertinent
data which can easily identify the specific nature of the installation.
Furthermore, Special Installation must conform to terms and
conditions stipulated in the lease.
Following completion of a Special Installation which conforms to
preceding authorization, the Landlord will proceed, at Tenant's cost,
with the inspection of the installation for final acceptance.
<PAGE> 1
Exhibit 10.38
<PAGE> 2
File No. sportmas.4
DEED OF LEASE
BETWEEN
ZMD SPORTS INVESTMENTS INC.
(the "Landlord")
AND
SPORT MASKA INC.
(the "Tenant")
<PAGE> 3
TABLE OF CONTENTS
ZMD SPORTS
INVESTMENTS INC.
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
1. CERTAIN BASIC LEASE PROVISIONS................................... 1
2. DEFINITIONS...................................................... 2
3. TERM............................................................. 5
4. OCCUPANCY........................................................ 6
5. MINIMUM NET NET RENTAL........................................... 6
6. RENTAL ON NET NET RETURN BASIS................................... 6
7. ADDITIONAL RENTAL................................................ 7
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE.......................... 7
9. CONTESTATION OF TAXES............................................ 8
10. UTILITIES AND EQUIPMENT.......................................... 8
11. USE OF PREMISES.................................................. 9
12. PLATE GLASS AND DOOR SIGNS....................................... 9
13. PROHIBITED ACTIVITIES............................................ 9
14. CONDITION OF PREMISES............................................ 9
15. RELOCATION....................................................... 10
16. MAINTENANCE AND REPAIRS.......................................... 10
17. INSPECTION AND REPAIR............................................ 10
18. ODOURS, DUST OR NOISE............................................ 11
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION........................ 11
20. ACCESS........................................................... 11
21. PARKING.......................................................... 12
22. SIGNS OF LANDLORD................................................ 12
23. SIGNS OF TENANT.................................................. 12
24. LANDLORD'S WORK.................................................. 13
25. IMPROVEMENTS AND ALTERATIONS..................................... 13
26. CSST............................................................. 15
27. INSURANCE REQUIREMENTS........................................... 15
28. CANCELLATION OF INSURANCE........................................ 17
29. DAMAGE OR DESTRUCTION............................................ 17
30. TRANSFER CONSENT REQUIRED........................................ 19
31. PRIVILEGE OF LANDLORD............................................ 22
32. ASSIGNMENT BY LANDLORD........................................... 22
33. EXPROPRIATION.................................................... 22
34. EXTENSIONS....................................................... 22
35. DEFAULT.......................................................... 24
36. FAILURE OF TENANT TO PERFORM..................................... 24
37. BANKRUPTCY AND INSOLVENCY........................................ 25
38. INDEMNIFICATION.................................................. 25
39. DISTURBANCE...................................................... 26
40. NONWAIVER........................................................ 26
41. WAIVER OF COMPENSATION........................................... 26
42. IMPUTATION OF PAYMENTS........................................... 26
43. CUMULATIVE REMEDIES.............................................. 26
44. UNAVOIDABLE DELAY................................................ 27
45. MANAGEMENT OF THE PROPERTY....................................... 27
46. RULES AND REGULATIONS............................................ 27
47. COMPLIANCE WITH LAWS AND REGULATIONS............................. 28
48. WINDOW COVERINGS................................................. 28
49. PERMITS AND LICENSES............................................. 28
50. EXPIRATION OF LEASE.............................................. 28
51. CONSTITUT OR TENURE SYSTEM ACT .................................. 29
52. DOMICILE AND NOTICES............................................. 29
53. SUCCESSORS AND ASSIGNS........................................... 29
54. DESCRIPTIVE HEADINGS............................................. 29
55. GOVERNING LAW / SEVERABILITY..................................... 29
56. COST OF PREPARATION, REGISTRATION AND RADIATION.................. 30
57. BROKERAGE COMMISION.............................................. 30
58. SCHEDULES........................................................ 30
59. CERTIFICATE OF INCORPORATION..................................... 30
60. ENTIRE AGREEMENT................................................. 30
61. LANGUAGE......................................................... 30
</TABLE>
<PAGE> 4
DEED OF LEASE
BETWEEN: ZMD SPORTS INVESTMENTS INC., a body politic and
corporate, duly incorporated, having its head office
and principal place of business in Montreal, Quebec
herein acting and represented by JEAN-PIERRE CARETTE
its duly authorized representative,
(hereinafter the "Landlord")
PARTY OF THE FIRST PART
AND: SPORT MASKA INC., a body politic and corporate, duly
incorporated, having its head office and principal
place of business in Montreal, Quebec, herein acting
through and represented by________________________
its ____________________________ hereunto duly
authorized as he so declares,
(hereinafter the "Tenant")
PARTY OF THE SECOND PART
1. CERTAIN BASIC LEASE PROVISIONS
The following are certain basic Lease provisions of this Lease.
1.1 Addresses for purposes of notice:
Landlord: 7405 Trans Canada Highway
St. Laurent, Quebec H4T 1Z2
Tenant: 175 Dessureault
Cap-de-la-Madeleine, Quebec
1.2 Location of Premises: Leased Premises comprising of the Building and
the property found on the land described in Schedule "B" annexed
hereto.
1.3 Property: 175 Dessureault
Cap-de-la-Madeleine, Quebec
1.4 Area: Approximately twelve thousand (12,000) square feet.
1.5 Term: ten (10) years
1.6 Commencement Date: February 1, 1995
1.7 Termination Date: January 31, 2005
1.8 Minimum Net Net Rental: An amount equal to thirty-five thousand four
hundred dollars ($35,400.00) per annum during the period from February
1, 1995 to January 31, 2000 and an amount of forty-four thousand one
hundred ninety-nine dollars and ninety-six cents ($44,199.96) per annum
during the period from February 1, 2000 to January 31, 2005, the whole
payable pursuant to the Article entitled "Minimum Net Net Rental".
1.9 Schedules:
"B" - Cadastral Description
"E" - Rules and Regulations
<PAGE> 5
MONTREAL INDUSTRIAL LEASE
Page 2
2. DEFINITIONS
2.1 Additional Rental means: Any and all amounts due or becoming payable to
the Landlord pursuant to this Lease other than the Minimum Net Net
Rental, whether such amounts are specifically referred to as Additional
Rental or not, the whole payable pursuant to the Article entitled
"Additional Rental".
2.2 Architect means: The independent architect, engineer, or land
surveyor named by Landlord from time to time.
2.3 Area means: The area of the Leased Premises as calculated in
the manner stipulated in Schedule "D".
2.4 Building means: The building or buildings, as these may be added or
modified from time to time, found on the parcel of land described in
Schedule "B".
2.5 Capital Tax means: For the purpose of this lease, "Capital Tax" means
the capital tax liability of the Landlord for each of the Landlord's
fiscal years during the Term or any renewal thereof as per the
Landlord's tax returns multiplied by the proportion that the net book
value of the Property is of the net book value of the total assets of
the Landlord, as determined in accordance with the Landlord's audited
financial statements.
2.6 Commencement Date means: The first day of the Term.
2.7 Common Areas and Facilities means:
(a) Those areas, facilities, utilities, improvements, equipment
and installations in the Property which, from time to time,
are not designated or intended by the Landlord to be used
exclusively for the benefit of any individual tenant of the
Property; and
(b) Those areas, facilities, improvements, equipment and
installations which serve or are for the benefit of the
Property, whether or not located within, adjacent to, or near
the Property and which are designated from time to time by the
Landlord as part of the Common Areas and Facilities of the
Property. Common Areas and Facilities include, without
limitation, all areas, facilities, utilities, improvements,
equipment and installations which are provided or designated
(and which may be changed from time to time) by the Landlord
for the use or benefit of the tenants, their employees,
customers and other Persons for whom Landlord shall permit the
use or benefit thereof, in the manner and for the purposes
permitted by the Lease.
(c) Without limiting the generality of (a) and (b) above, Common
Areas and Facilities include the roof, exterior wall
assemblies including weather walls, exterior and interior
structural elements and bearing walls in the buildings and
improvements comprising the Property; parking areas and
parking garages, all entrances and exits thereto and all
structural elements thereof, employee parking areas, truck
courts, access roads, driveways, truck ways, delivery
passages, package pick-up stations; loading docks and related
areas; pedestrian sidewalks, covered walkways and sidewalks;
roadways; landscaped and planted areas; courts and arcades;
public seating and service areas; corridors; bus kiosk, if
any; roadways and stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways, ramps, moving
sidewalks, and other transportation equipment and systems;
electrical, telephone, meter, valve, mechanical, mail storage,
service and janitor rooms and galleries;
<PAGE> 6
MONTREAL INDUSTRIAL LEASE
Page 3
communication, security and fire prevention and protection
systems; general signs, columns, pipes, electrical, plumbing,
drainage, mechanical and all other installations, equipment or
services located therein or related thereto, as well as the
structures housing the same.
2.8 CPI means: The Consumer Price Index, all items Montreal, established by
Statistics Canada or any index in substitution and/or replacement
thereof, published by Statistics Canada or any other federal or
provincial governmental agency. In the case of any required
substitution, Landlord shall be entitled to make all necessary
conversions for comparison purposes.
2.9 Date of Occupancy means: The date on which Landlord is ready to give
possession of the Leased Premises to the Tenant, subject to the terms
stipulated in the Article entitled "Occupancy".
2.10 Deposit means: The amount(s) stipulated in the Article entitled
"Deposit".
2.11 Landlord means: The party first hereinabove described or its successors
and assigns.
2.12 Landlord's Work means: The work to be executed by Landlord as
stipulated in the Articles entitled "Landlord's Work" and "Landlord's
Work at Tenant's Expense".
2.13 Lease means: This agreement and all attached Schedules.
2.14 Leased Premises means: the premises described in paragraph 1.2, the
location of which is outlined in red on Schedule "A".
2.15 Lease Year means: In the case of the first Lease Year, a period
commencing on the Commencement Date and terminating on the last day of
the twelfth month thereafter and shall also refer to any succeeding
twelve (12) month period thereafter.
2.16 Minimum Net Net Rental means: The amount stipulated in the Article
entitled "Minimum Net Net Rental".
2.17 Operating Costs means: The aggregate of Landlord's annual costs and
expenses incurred in insuring, operating, administering and if
applicable, maintaining the Property and shall include, without
duplication or limitation, the cost of:
(I) all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of real estate taxes, the whole subject
to the Article of this Lease entitled "Contestation of Taxes";
(ii) the cost of insuring the Property (including such insurance as
the Landlord shall effect or shall be required to effect by
any secured creditor) against fire and any other perils which
present are or hereafter may be, from time to time, embraced
by or defined in a standard fire insurance policy
<PAGE> 7
MONTREAL INDUSTRIAL LEASE
Page 4
with extensive coverage, comprehensive general liability
insurance, boiler and pressure vessel insurance, business
interruption and/or loss of rentals insurance and such other
insurance as the Landlord, acting reasonably, may deem
necessary or advisable.
(iii) Capital Tax as defined herein.
(iv) Debt Service in accordance with the Article entitled "Rental
on Net Net Return Basis".
2.18 Person means, depending on context: Any person, firm, company,
corporation, partnership, association, or any group or combination
thereof.
2.19 Property means: The lands and buildings found on the lots described in
Schedule "B" as these may be varied, from time to time, by adding or
subtracting land or Buildings or by any other means as Landlord
considers necessary or advisable, even if parts of the said lands or
Buildings may be separated from others by lanes, streets, highways or
any other means of passage in or upon which others may have rights. The
said lands or Buildings shall include all buildings, construction and
Common Areas and Facilities on the lands and/or Buildings as each of
the foregoing exists from time to time.
2.20 Proportionate Share means: 100% of the Operating Costs and Taxes of the
Property and of the Leased Premises.
2.21 Sales Tax means: Any goods and services tax, business transfer tax,
value-added tax, multi-stage sales tax, sales tax or any other tax
imposed with respect to Minimum Net Net Rental and Additional Rental
payable under this Lease, whatever name such tax may bear and whether
such tax is in force at the date hereof or whether it is adopted
subsequently. The amount of the Sales Tax so payable by Tenant shall be
calculated by Landlord in accordance with the applicable legislation
and shall be paid to Landlord at the same time as the amounts to which
such Sales Tax apply or at such other time as Landlord may from time to
time determine. Landlord shall have the same remedies for and rights of
recovery of such amounts as it has for the recovery of Additional
Rental.
2.22 Security means: Any hypothec, trust deed, debenture or other security
to be placed from time to time on the Property or any part thereof for
the purpose of securing any indebtedness of Landlord.
2.23 Taxes means: All taxes, whether special or general, including, without
limitation, property taxes, municipal taxes, school taxes, levels,
charges, rates including local improvement rates, duties and
assessments that may now or in the future be levied, rated, charged or
assessed against the Property, and/or all equipment and facilities
thereon or therein, and/or the land described in Schedule "B" attached
hereto, and/or any property on or in the Building owned
<PAGE> 8
MONTREAL INDUSTRIAL LEASE
Page 5
or brought thereon or therein by the Landlord and/or against Landlord
or Tenant and/or its Transferees in respect thereof, whether such
taxes, rates, duties or assessments are charged by a municipal,
parliamentary, school or any other body of competent jurisdiction. If
the system of real estate taxation shall be altered or varied and any
new tax shall be levied or imposes on the Property and/or the revenues
therefrom and/or the Landlord in substitution for and/or in addition to
real estate taxes presently levied or imposed on immovables in the
City, Region, Province or Country in which the Property is situated,
then any such new tax or levy shall be included within the present
definition of Taxes. However, Tenant shall not be responsible for any
income tax or corporation taxes of the Landlord, save and except for
its Proportionate Share of Capital Tax and Tenant shall be solely
responsible for any Sales Tax.
2.24 Tenant means: The person executing this Lease as Tenant. Tenant also
includes all employees, mandatories and contractors of Tenant, as well
as any Person under Tenant's control or for whom Tenant is responsible.
2.25 Tenant Security means: Any trust deed, bond, debenture, pledge,
commercial pledge, warehouse receipt, conditional sales contract,
privilege, hypotec, charge or any other form of encumbrance or security
granted by or agreed to by Tenant or any other Person (other than
Landlord) with respect to its rights in this Lease, the Leased
Premises, or any property, whether movable or immovable, located in or
forming part of the Leased Premises, to secure, in whole or in part,
any loan, indebtedness, credit line, or other obligation.
2.26 Tenant's Work means: The work to be executed by Tenant as stipulated in
the Article entitled "Tenant's Work".
2.27 Term means: The period specified in the Article entitled "Term" and
includes all renewals or extensions agreed to in writing by the
Landlord.
2.28 Termination Date means: The last day of the Term as herein defined or
any renewal thereof, or the last day of the Term or renewal thereof
which is terminated prior to the Termination Date.
2.29 Transfer means: Any assignment or transfer of this Lease (other than as
Tenant Security), any sublease or permitted occupation of all or any
part of the Leased Premises to any Person (hereinafter the
"Transferee") and any amalgamation or change in the effective control
of the voting shares of Tenant if Tenant is a corporation, or any
change in the partners constituting the partnership or any change in
the interest of the partners in the partnership if Tenant is a
partnership, from conditions existing on the date the corporation or
the partnership first incurs any obligations to Landlord pursuant to
this Lease, the whole whether effected by sale, by assignment, by
operation of law or otherwise.
3. TERM
Landlord hereby leases the Leased Premises to Tenant for a Term of ten
(10) years, commencing on the first day of February 1995 and terminating on the
last day of January 2005 unless sooner terminated under the provisions hereof.
Should the Tenant continue to occupy the Leased Premises after the
expiry of the Term, without a written agreement there shall be no tacit renewal
and the Tenant shall pay to the Landlord, as liquidated damages, the highest
Minimum Net Net Rental payable during the term and Additional Rental for the
period of occupancy plus fifty percent (50%) thereof, without prejudice to any
of Landlord's other rights and recourses including Landlord's right to
<PAGE> 9
MONTREAL INDUSTRIAL LEASE
Page 6
obtain vacant possession of the Leased Premises. Tenant acknowledges that it is
not to have the right to occupy the Leased Premises beyond the expiry of the
Term.
4. OCCUPANCY
Tenant shall be allowed to occupy the Leased Premises on February 1st,
1995 (hereinafter referred to as the "Date of Occupancy").
If the Landlord is unable to give possession of the Leased Premises to
the Tenant on the Commencement Date, the Lease shall not be void or voidable nor
shall the Landlord be liable for any loss or damage resulting therefrom.
However, any postponement of the Date of Occupancy by Landlord shall have the
effect of delaying the Commencement Date and the Termination Date for a number
of days equal to the number of days of such postponement, the whole without any
liability on the part of the Landlord.
5. MINIMUM NET NET RENTAL
Tenant covenants and agrees to pay to Landlord in lawful money of
Canada without deduction, abatement or set-off, a Minimum Net Net Rental as
follows;
a) during the period from February 1, 1995 to January 31, 2000, the
amount of thirty-five thousand four hundred dollars ($35,400.00) per
annum, net, net, payable in equal consecutive monthly installments,
each in advance, on the first day of each month during the said period
of two thousand nine hundred and fifty dollars ($2,950.00) each;
b) during the period from February 2000 to January 31, 2005, the amount of
forty-four thousand one hundred ninety-nine dollars and ninety-six
cents ($44,199.96) per annum, net, net, payable in equal consecutive
monthly instalments, each in advance, on the first day of each month
during the said period of three thousand six hundred eighty-three
dollars and thirty-three cents ($3,683.33) each.
Any Minimum Net Net Rental due for any period of time during the Term which is
less than a month shall be paid for on a pro-rated basis.
The Minimum Net Net Rental shall be considered as annual and accruing
from day to day and where it becomes necessary for any reason to calculate such
rental for an irregular period of less than one (1) Lease Year, an appropriate
apportionment and adjustment shall be made.
The Minimum Net Net Rental as herein provided shall be paid to Landlord
and/or its nominee at the Head Office of the Landlord, at 7405 Trans Canada
Highway, St. Laurent, Quebec, H4T 1Z2, or at such other place in Canada as shall
be designated by Landlord in writing to Tenant.
6. RENTAL ON NET NET RETURN BASIS
It is agreed and understood between the parties that the Minimum Net
Net Rental herein shall be a revenue absolutely net, net to the Landlord, free
of any and all costs and expenses of any nature whatsoever. Tenant shall pay on
its own account, to the complete exoneration of Landlord, all taxes and expenses
of whatsoever nature, its Proportionate Share of Operating Costs and Taxes and
any Additional Rental with respect to the Leased Premises unless otherwise
stipulated in this Lease. It is understood that Tenant shall be responsible for
the payment of any increase in the interest and capital repayments of Landlord
with respect to mortgages or other security that Landlord may be subjected to
after the Commencement Date of the Term of this Lease (hereinafter "Debt
Service"). The Landlord shall be responsible for any income tax or corporation
taxes due by Landlord. Tenant shall pay its Proportionate Share of Capital Tax
and Tenant shall be solely responsible for any Sales Tax.
<PAGE> 10
MONTREAL INDUSTRIAL LEASE
Page 7
Without limiting the generality of the foregoing, Tenant shall, in each
and every Lease Year, pay and discharge or cause to be paid and discharged all
license fees, public utility charges, water rates, sewer rates and other like
fees, charges, rates and assessments that may be levied, charged, rated or
assessed against the Leased Premises and/or all equipment and facilities thereon
or therein and/or any property on the Leased Premises owned or brought thereon
by Tenant, and any and every of its Transferees or visitors and/or against
Landlord or Tenant in respect thereof, and every tax and license fee in respect
of any and every business carried on therein, or with respect to the occupancy
of the Leased Premises by Tenant (and any and every of its Transferees), whether
such license fees, charges, rates, assessments and taxes are charged by
municipal, parliamentary, school or any other body of competent jurisdiction,
and all charges for public utilities including electric current, gas, water,
steam or hot water used upon or in respect of the Leased Premises and for
fittings, machines, apparatus, meters or other things leased in respect thereof
and for all work or services performed by a corporation or commission in
connection with such public utilities. Tenant shall indemnify and hold the
Landlord harmless from and against payment of all losses, costs, charges and
expenses occasioned by and arising from any and every such duty, license fee,
charge, rate, assessment and tax. If such tax, rate, charge, assessment, duty or
license fee should be assessed or charged to Landlord for all or a substantial
number of the tenants of the Property, Tenant shall, at Landlord's discretion
and upon demand in the manner determined by Landlord, pay its Proportionate
Share of such duty, license fee, charge, rate, assessment and tax.
It is further agreed and understood that any amount and any obligation
which is not expressly declared in this Lease to be that of the Landlord shall
be deemed to be the obligation of the Tenant. Without limiting the generality of
the foregoing, should at any time the taxation authorities directly attribute
any part of the Taxes to the Leased Premises or the improvements therein, Tenant
shall pay for same in addition to Tenant's Proportionate Share of the remainder
of the Taxes.
Tenant shall furnish to Landlord, immediately upon Landlord's request,
a receipt or other appropriate evidence satisfactory to Landlord as to the
payment of any amounts payable by Tenant pursuant to the present Article.
7. ADDITIONAL RENTAL
It is agreed and understood that Additional Rental other than Tenant's
Proportionate Share, shall be payable on the first day of the month immediately
following the date the said amount is claimed, or on such date as the Landlord
may designate. Where the calculation of any Additional Rental is not made until
after the Termination Date, the obligation of the Tenant to pay such Additional
Rental shall survive the termination of this Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE
On the first day of each and every month, Tenant shall pay to the
Landlord throughout the Term or any renewals, its Proportionate Share of the
Operating Costs and Taxes, as well as an administration fee equal to three
percent (3%) of the said Operating Costs and Taxes and of the Minimum Net Net
Rental as well as three percent (3%) of the total costs and expenses incurred by
the Tenant, for the month immediately preceding, in maintaining, repairing and
operating the Property, (the said costs and expenses incurred by Tenant being
hereinafter referred to as "Tenant's Costs"). Upon Landlord's request, the
Tenant shall furnish the Landlord with a statement in writing showing in
reasonable detail and in such a form as Landlord may require the Tenant's Costs.
Furthermore, Tenant shall furnish to Landlord, immediately upon Landlord's
request, receipts or other appropriate evidence satisfactory to landlord as to
the payment of Tenant's Costs and shall make available to Landlord for
Landlord's inspection and audit Tenant's books and records
<PAGE> 11
MONTREAL INDUSTRIAL LEASE
Page 8
relating to Tenant's Costs.
Notwithstanding anything to the contrary herein contained, the Landlord
may, prior to the commencement of each calendar year or as soon thereafter as is
reasonably possible, furnish to the Tenant an estimate of the Operating Costs
and Taxes for such calendar year, and the Tenant shall pay to the Landlord, in
advance, on the first day of each month during the year in question, Additional
Rental equal to one twelfth (1/12) of the Tenant's Proportionate Share of the
estimated Operating Costs and Taxes. Should the first Lease Year of the Term not
commence on the first (1st) day of January or should the last Lease Year of the
Term not terminate on the thirty-first (31st) day of December, then prior to the
Commencement Date of the Term or prior to the anniversary of the Commencement
Date in the last Lease Year of the Term, as the case may be, or as soon
thereafter as is reasonably possible, Landlord shall furnish to Tenant an
estimate of the Operating Costs and Taxes for the part of the Lease Year in
question, and the Tenant shall pay to the Landlord, in advance, on the first day
of each month during the part of the Lease Year in question. Additional Rental
equal to the Tenant's Proportionate Share of the estimated Operating Costs and
Taxes divided by the number of months for that part of the Lease Year in
question.
After the end of each calendar year, or after the end of the Term in
the case of the final Lease Year, the Landlord shall furnish the Tenant with
financial statements setting forth the actual Operating Costs and Taxes for such
calendar year (or part of the Lease Year, as the case may be) and the Tenant
shall pay to the Landlord forthwith an amount equal to its Proportionate Share
of the excess of the actual Operating Costs and Taxes over the estimated
Operating Costs and Taxes. Should the estimated Operating Costs and Taxes exceed
the actual Operating Costs and Taxes, the Tenant shall receive credit for its
Proportionate Share of the excess. The appropriate adjustments shall be made
between the parties hereto within thirty (30) days after the date on which the
Landlord has furnished the Tenant with such statement.
9. CONTESTATION OF TAXES
Landlord shall have no obligation to contest, appeal, object to or
litigate the levying or imposition of Taxes and/or any valuation imposed with
respect thereto, and Landlord may settle, compromise, consent to, waive or
otherwise determine, in its sole discretion, all matters and things relating
thereto. Tenant shall not itself contest, appeal, object to or litigate the
levying or imposition of real estate taxes.
In the event that Landlord should contest any Taxes and thereafter
receive a refund of any portion thereof, and provided Tenant shall have paid its
Proportionate Share of said Taxes, the Landlord shall reimburse to the Tenant
the Tenant's Proportionate Share of such refund.
10. UTILITIES AND EQUIPMENT
The Tenant shall pay for its electricity (including without limitation
any electricity used for heating and/or air conditioning the Leased Premises),
for the cost of operating, repairing, maintaining, replacing and inspecting the
machinery and other facilities required for the heating, ventilating and air
conditioning of the Leased Premises and facilities and gas, water, sewer and
electric utility costs relating to same, telephone and all public utilities with
respect to the Leased Premises.
Throughout the Term of the Lease, the Tenant shall engage a qualified
air conditioning maintenance contractor to maintain and repair the heating,
ventilating and air conditioning system. The Tenant shall, within thirty (30)
days of signing these presents, provide the Landlord with a copy of a duly
executed heating, ventilating and air conditioning maintenance and repair
contract, as well as all renewals of the said contract.
<PAGE> 12
MONTREAL INDUSTRIAL LEASE
Page 9
11. USE OF PREMISES
The Leased Premises shall be used by the Tenant only for offices,
warehousing, manufacturing and distribution of sports related goods, and for no
other purpose.
12. PLATE GLASS AND DOOR SIGNS
Any breakage of glass or plate glass in or about the Leased Premises
and any damage to signs on Tenant's doors, except for breakage or damage caused
by the negligence or fault of the Landlord or its employees or mandatories shall
be charged to and payable by the Tenant.
13. PROHIBITED ACTIVITIES
Subject to the other terms and conditions of the Lease and in addition
to any other prohibitions stipulated in the Lease, the Tenant undertakes:
(i) not to use any part of the exterior parking and loading areas
or any other areas outside the Leased Premises, reasonably
designated by the Landlord, for any purpose other than
parking, shipping or receiving;
(ii) not to obstruct or use any part of the Common Areas
and Facilities except as permitted by the Landlord;
(iii) not to do or suffer or permit to be done any act in or about
the Common Areas and Facilities which, in the Landlord's
opinion, hinders or interrupts the flow of traffic to, in or
from the Property and shall not do, nor suffer or permit
anything to be done, which in the landlord's opinion, in any
way obstructs the free movement of people doing business in
the Property;
(iv) not to bring upon the Leased Premises or any part thereof any
machinery, equipment, article or thing that by reason of its
weight, function or size might damage the Leased Premises and
not to overload the floors of the Leased Premises at any time
and if any damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by overloading or by
any act, neglect or misuse on the part of Tenant, Tenant will
forthwith pay to Landlord the cost of restoring the Leased
Premises to their original condition;
(v) not to obstruct the sidewalks, entries, passage corridors and
stairways, or use same for purposes other than for ingress and
egress to or from the Leased Premises, and the Tenant shall
save the Landlord harmless from damages to persons or property
because of any articles thrown by the Tenant out of the
windows or doors or down the passages of the Building.
14. CONDITION OF PREMISES
The Tenant represents that the Leased Premises have been examined by
the Tenant and that the Tenant accepts the same, in the condition or state
<PAGE> 13
MONTREAL INDUSTRIAL LEASE
Page 10
in which they are at the Date of Occupancy by Tenant, without representation or
warranty, expressed or implied, oral or written. In fact or in law, by the
Landlord, and without recourse to the Landlord as to the nature, condition or
usability thereof or as to the use or uses to which the Leased Premises or any
part thereof may be put.
15. RELOCATION
Landlord shall have the right at any time either during the Term or
prior to the Commencement Date thereof, to change the location of the Leased
Premises as set forth in Article 1.2 hereof to comparable premises in the
Building or in any of Landlord's other buildings or in any other building in
which Landlord has an interest. Should Landlord desire to move Tenant after the
Commencement Date, Landlord shall pay all reasonable transportation, telephone
installation and reasonable printing costs relating to letterheads and business
cards in stock, as well as reasonable printing costs of notice of change of
address to Tenant's customers, provided Tenant submits proof of payment of said
costs.
16. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1604(2), 1605 and 1627 of
the Civil Code of Lower Canada, the Tenant shall, at its own expense, operate,
maintain and keep the Leased Premises including all facilities, equipment and
services, both inside and outside, available to the Tenant exclusively, in such
good order and condition as they would be kept by a prudent owner and Tenant
shall promptly make all needed repairs and replacements to the Leased Premises
(save and except for those structural repairs and replacements that are
exceptional, nonrecurring and result from latent defects) which a careful owner
would make, including without limitation, the water, gas, drain and sewer
connections, pipes and mains, electrical wiring, water closets, sinks and
accessories thereof, and all equipment belonging to or connected with the Leased
Premises or used in its operation.
17. INSPECTION AND REPAIR
Landlord and its representatives shall have the right, during all
reasonable business hours during the Term, to enter the Leased Premises to
examine the condition thereof and to ascertain whether Tenant is performing its
obligations hereunder, and Tenant shall make any repairs which Tenant is obliged
to make pursuant to the terms of this Lease. If Tenant fails to make any such
repairs within thirty (30) days after written notice from Landlord requesting
Tenant to do so, provided that such repairs may reasonably be made within the
said period, Landlord may, without prejudice to any other rights or remedies it
may have, make such repairs and charge the cost thereof to Tenant. Nothing in
this Lease shall be construed to obligate or require Landlord to make any
repairs for which the Tenant is responsible hereunder but Landlord shall have
the right at any time to make emergency or urgent repairs without prior notice
to Tenant and charge the cost thereof to Tenant. Any costs chargeable to Tenant
hereinabove shall be payable forthwith on demand as Additional Rental and shall
bear interest from the date of such demand at the prime lending rate as
determined by the Royal Bank of Canada on a daily basis plus four percent (4%)
until paid to Landlord in full.
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MONTREAL INDUSTRIAL LEASE
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18. ODOURS, DUST OR NOISE
The Tenant warrants that no noxious/obnoxious odours, dust or noise
will emanate from the Leased Premises as a result of the operations conducted by
the Tenant therein and Tenant further covenants that it will not cause or
maintain any nuisance in, at or on the Leased Premises and/or the Property and
Tenant further warrants that it will not use the Leased Premises for any purpose
or in any manner notwithstanding anything stated in this Lease which may cause
noise, disturbance or noxious/obnoxious odours to the discomfort of other
tenants, neighbors or to the public in general. Accordingly, the Tenant agrees
that should such noxious/obnoxious odour, dust or noise conditions exist, or
should Landlord receive any complaint of odours, dust, noise or any other
nuisance, Tenant will, at its own cost and expense, take such steps as may be
necessary to rectify the same, including any expertise Landlord may require,
which expertise must be acceptable to Landlord, provided further that if the
Tenant shall fail to commence to do so within forty-eight (48) hours and
complete the same within a reasonable time after notice is received by the
Tenant from the Landlord, then the Landlord may at its option and without
prejudice to its other rights and recourses:
(a) notify Tenant that it must shut down all its operations in the
Leased Premises; and
(b) Landlord may proceed forthwith to take reasonable measures to
correct the same, at Tenant's cost as Additional Rental.
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION
The Tenant shall not place or leave or permit to be placed or left in
or upon any part of the Property outside of the Leased Premises any debris or
refuse except as allowed by the Landlord at specific times and deposited in
areas indicated by the Landlord in proper receptacles provided and placed for
that purpose by the Tenant and Tenant shall furthermore comply with any of
Landlord's rules and regulations with respect to garbage containers. The Tenant
shall arrange and pay for the cost of those services required to remove
diligently and efficiently all of Tenant's garbage and refuse of any nature
whatsoever.
Tenant, at its sole cost shall keep, the Leased Premises shall be kept
in a clean and sanitary condition and in accordance with the laws of the
municipality in which the Property is located and in accordance with all other
regulations of any agency having jurisdiction over the Property and in
accordance with the instructions, policies and recommendations of Landlord's
Insurers. If any such laws, instructions, policies and recommendations by
Landlord's insurers require any changes whatsoever to the Leased Premises, the
Tenant shall effect such changes at its own expense but subject to the approval
of the Landlord. The Tenant agrees to provide strict measures for rat prevention
and pest control and shall, if the Landlord deems the same to be necessary,
enter into a regular contract with a firm of exterminators acceptable to
Landlord. In the event that the Tenant fails to comply with the foregoing
provisions, then Landlord, without prejudice to all of its other rights and
recourses, shall have the right, without prior notice to the Tenant, to engage a
firm of exterminators and to enter the Leased Premises with representatives of
said firm in order to rectify the situation, the whole at Tenant's cost as
Additional Rental.
20. ACCESS
The Landlord shall have the right of access to the Leased Premises only
during reasonable business hours (except in the case of an emergency
<PAGE> 15
MONTREAL INDUSTRIAL LEASE
Page 12
when Landlord shall have access at all times), and the right to perform such
work as it chooses to do upon the Leased Premises, the Tenant renouncing any
claim to any indemnity or reduction in rental provided such work be carried out
with reasonable diligence.
21. PARKING
The Tenant acknowledges that the parking of its vehicle(s) and those of
its customers in the parking facilities shall be at the risk and peril of Tenant
and/or its customers, and that the Landlord shall not be responsible for any
damages or loss whatsoever, whether caused by theft, fire or any other cause, to
the Tenant's vehicle(s) or to those of its customers or to any property found in
Tenant's vehicle(s) or those of its customers or for any injury to Tenant or
other Persons on or in the immediate vicinity of the parking facilities and
Tenant hereby released Landlord of all liabilities of whatsoever nature with
respect to the above.
Notwithstanding anything contained herein, Tenant agrees to participate
in a ticket validation system if one is established by the Landlord for the
parking facilities of the Property, and to pay forthwith on demand as Additional
Rental, all attributable parking charges.
22. SIGNS OF LANDLORD
Landlord shall have the right, at all times, to place upon the Property
a notice of reasonable dimensions and reasonably placed in order not to
interfere with the business of Tenant, stating that the Property is for sale
and/or rent, and Landlord shall have the right, during the Last six (6) months
prior to the Termination Date, to place upon the Leased Premises a notice of
reasonable dimensions and reasonably placed stating that the Leased Premises are
for rent and Tenant will not remove any such notice or knowingly permit either
of them to be removed.
Landlord shall have the right to exhibit the Leased Premises from time
to time to any prospective tenant or hypothecary creditor during all business
hours of the Tenant and Tenant hereby renounces to article 1645 of the Civil
Code of Lower Canada.
23. SIGNS OF TENANT
The Tenant shall be entitled, at its expense, to install on the Leased
Premises such signs as are normally installed in connection with its business,
as well as to identify itself on the exterior front of the Building provided
such signs comply with municipal by-laws and with the Rules and Regulations as
established from time to time by Landlord in accordance with the Article
entitled "Rules and Regulations", and provided further that the Tenant obtains
Landlord's consent for both the sign and its location. Furthermore, the
authorization to install a sign will be issued in exchange for a deposit
equivalent to the estimated cost of the repair of the supporting Building
surface following the removal of the sign and Landlord shall not pay any
interest to Tenant on said deposit. The installed sign must be subject to
inspection by the Landlord who will proceed to the inspection upon receipt of
proof of municipal permit and, in the case of electrified signs, of proof of
approval by the Canadian Standards Association or other governing body.
Except as provided above and unless specifically provided for in this
Lease, Tenant shall not be entitled to install or put up any signs or posters of
<PAGE> 16
MONTREAL INDUSTRIAL LEASE
Page 13
whatsoever nature on the windows of the Leased Premises and/or the Building
and/or the Property.
All civic numbers are supplied and installed at Tenant's expense by the
Landlord according to its standards. The Tenant's identification at the rear of
the Building is also supplied and installed by the Landlord at Tenant's expense
according to Belcourt's standard #20.11.87 attached to the Rules and Regulations
in Schedule E.
In the event that Tenant installs any sign without satisfying the
requirements of this Article, Tenant shall remove such sign upon receipt of
Landlord's notice. If Tenant fails to remove such sign within twenty-four (24)
hours of receipt of Landlord's notice, then Landlord shall have the right,
without further notice or any form of legal process, to remove same at Tenant's
expense and to repair any damages caused by such removal. Landlord shall not be
responsible for damages to Tenant's property or sign resulting from such
removal. Tenant expressly waives its recourse in damages against the Landlord
and shall hold Landlord harmless of any claim by any third party with respect to
the said sign. Tenant shall immediately pay Landlord for all costs described
hereinabove, upon demand, as Additional Rental.
24. LANDLORD'S WORK
The Leased Premises shall be delivered in an "as is" basis and Tenant
accepts same in the condition in which they are at the signing of these
presents.
25. IMPROVEMENTS AND ALTERATIONS
(a) The Tenant shall not have the right o execute any changes,
alterations, additions, erections, leasehold improvements, repairs and
installations to the Leased Premises (hereinafter the "Work"), unless
it has obtained Landlord's prior written consent. In the event Landlord
consents to such Work, then Tenant undertakes to conform to the
conditions stipulated hereunder.
(i) All Work shall be carried out with reasonable dispatch and in
a good workmanlike manner and in compliance with all
applicable permits, authorizations, building and zoning
by-laws and with all regulations and requirements of all
competent authorities having jurisdiction over the Leased
Premises;
(ii) The Property shall at all times be free of all pledges,
registered privileges and any other encumbrances;
(iii) If the cost of any Work shall be in excess of five
thousand dollars ($5,000.00) as reasonably estimated
by Landlord. Landlord may require Tenant to furnish
security satisfactory to Landlord guaranteeing the
completion of the Work, the payment of the cost
thereof and that the Property is free and clear of all
pledges, registered privileges and any other
encumbrances;
(iv) Tenant shall maintain workmen's compensation
insurance covering all persons employed in connection
with the Work and shall produce evidence of such
insurance to Landlord and Tenant shall also maintain
such general liability
<PAGE> 17
MONTREAL INDUSTRIAL LEASE
Page 14
insurance for the protection of Landlord and Tenant upon the
terms Landlord may reasonably require, as well as contractor's
protective liability insurance. Tenant shall further comply
with all of the stipulations of the Article entitled "CSST"
(Commission de la Sante et de la Securite au Travail du
Quebec);
(v) The Tenant shall promptly pay for all material supplied
and work done in respect of the Leased Premises in
order to ensure that no privilege is registered against
any portion of the Property. If a privilege is registered
or filed, the Tenant shall forthwith discharge it at its
expense, failing which the Landlord may, at its option,
discharge the same by paying the amount claimed to
be due into court or directly to any such privilege
claimant and the amount so paid and all expenses of
the Landlord including any judicial and extra-judicial
costs and attorney's fees incurred by the Landlord
shall be paid by the Tenant to the Landlord within five
(5) days after demand.
It is agreed and understood that no Work by or on behalf of
Tenant shall be permitted which, in Landlord's sole judgment, may
weaken or endanger the structure or adversely affect the condition or
operation of the Leased Premises and/or the Property or diminish the
value thereof or restrict or reduce Landlord's coverage for insurance
purposes.
(b) Notwithstanding the contents of (a) above, Landlord may, at its
sole option and discretion, execute itself or inspect any Work approved
by Landlord, in which event the Tenant shall pay for the costs of
either the Work or the inspection thereof, and, in the event that
Landlord executes the Work, Tenant shall pay an additional amount equal
to twenty per cent (20%) of the costs of said Work on account of
Landlord's overhead and administration costs. However, whether or not
Landlord carries out or inspects the Work, the Tenant shall pay the
fees of all architectural and engineering consultants and/or the cost
of all construction drawings prepared to comply with the Tenant's
requirements and for the cost of entering the information of such
drawings on the original drawings of the Building, as well as twenty
per cent (20%) of such costs on account of administration and general
expenses of Landlord. Payments shall be effected by way of a cash
deposit and progress draws during the course of the Work, the specifics
of which shall be established by the Landlord, acting reasonably, from
time to time.
(c) Any Work by the Tenant made without the prior written consent of
the Landlord, or which is not made in accordance with the design
criteria and specifications approved by the Landlord, shall be removed
by the Tenant immediately upon demand and the Leased Premises shall be
restored to their previous condition by Tenant, the whole at the
Tenant's cost, failing which Landlord shall have the right to remove
said Work at Tenant's entire cost and Landlord shall not be responsible
for damages to Tenant's property resulting from such removal.
(d) Notwithstanding anything contained in this Article, Tenant shall
not have the right to do any structural, mechanical or electrical Work
in the Leased Premises.
In the event that Tenant requests any structural, mechanical
or electrical Work, Landlord, at its sole option and discretion, shall
be entitled to execute said Work. Said Work shall be governed by the
provisions of sub-paragraph (b) above.
In the event that Landlord does not choose to execute said
Work and consents to having Tenant execute same, then Tenant shall
furnish to Landlord plans and specifications showing in reasonably
<PAGE> 18
MONTREAL INDUSTRIAL LEASE
Page 15
complete detail the work proposed to be carried out and the estimated
cost thereof. Landlord shall approve or reject such plans and
specifications within thirty (30) days after receipt of the same. If
such plans and specifications are approved, all Work shall be carried
out in compliance with the same. Furthermore, in the case where Tenant
is authorized to carry out said Work, Tenant shall, at its cost,
provide Landlord with an engineer's certificate upon completion of said
Work. Any costs incurred by Landlord of any nature whatsoever in order
to permit Landlord to approve or reject Tenant's plans and
specifications shall be reimbursed by Tenant immediately upon
Landlord's request. In addition to the above, Tenant shall comply with
all the conditions stipulated in (a) and (c) above.
It is agreed and understood that when completed, all Work shall be
comprised in and form part of the Leased Premises and be subject to all the
provisions of this Lease. Furthermore, any authorization given by Landlord to
Tenant to do any Work in accordance with this Article, shall not relieve Tenant
of its responsibility for the Work in question.
Subject to the terms and conditions of this Article, in the event that
the Tenant constructs a mezzanine in the Leased Premises, the Tenant will pay
the amount of any increase in Taxes on the whole of the Building of which the
Leased Premises form part, if such increase is caused by the construction or
occupancy of said mezzanine. Furthermore, the Tenant will pay for any increase
in Operating Costs resulting from the construction or occupancy of the said
mezzanine.
Tenant shall not make use or cause to be removed any part or all of the
ceiling system for any purposes, including that of storage.
Moreover, Tenant shall pay to Landlord the amount of any increase for
any Taxes to the extent that such increase is directly attributable to any
action by Tenant under this Article.
26. CSST (COMMISSION DE LA SANTE ET DE
LA SECURITE AU TRAVAIL DU QUEBEC)
Tenant shall ensure itself that its contractor and/or subcontractors
comply with all the requirements established by La Commission de la Sante et de
la Securite au Travail du Quebec (hereinafter the "CSST") and more specifically,
Tenant shall ensure itself that its contractor and/or subcontractors have
instituted a safety program its employees. Tenant shall provide proof to
Landlord, upon demand, that all requirements of the CSST have been met. It is
expressly understood that Tenant shall indemnify and hold Landlord harmless from
any proceedings, claim or demand which could be instituted against Landlord
for the failure of Tenant's contractor and/or subcontractors to comply with
CSST's requirements and the Tenant shall pay upon demand any judicial or
extrajudicial costs so incurred by Landlord.
27. INSURANCE REQUIREMENTS
Tenant shall not do or commit any act upon the Leased Premises or bring
into or keep upon the Leased Premises any article which will affect the fire
risk or increase the rate of fire insurance or other insurance on the Property.
Tenant shall not commit any act upon the Leased Premises or make any
use thereof which may make void or voidable any insurance on the Leased Premises
or on the Building or Property and should any act so com-
<PAGE> 19
MONTREAL INDUSTRIAL LEASE
Page 16
mitted or any use so made by Tenant, including any unauthorized vacancy thereof,
result in an increased or extra premium payable for insurance on the Leased
Premises, Building or Property, then Landlord may, in addition to all other
remedies, elect to pay the amount of such increase or extra premium, the amount
so paid becoming immediately due and payable by Tenant and collectible as
Additional Rental.
Tenant shall comply with the rules and requirements of the Insurers'
Advisory Organization of Canada or any successor body, and/or a loss prevention
firm or consultant chosen by Landlord's insurers, and with the requirements of
all insurance companies having policies of any kind whatsoever in effect
covering the Property, including policies insuring against delictual liability.
In no event shall any inflammable material, except for kinds and
quantities permitted by the insurance policies covering the Property, or any
explosives or radioactive material whatsoever, be taken into the Leased Premises
or retained therein.
Tenant shall take out and keep in force the following insurance:
(a) comprehensive general liability insurance including blanket
contractual liability and broad form property damage coverage,
with respect to the business carried on in or from the Leased
Premises and the use and occupancy thereof, for bodily injury
and death and damage to property of others in an amount of at
least two million dollars ($2,000,000.00) for each occurrence
or such greater amount as Landlord may, from time to time,
reasonably require;
(b) an "all risks" insurance with extended coverage including the
perils of fire, leakage from sprinklers and other fire
protective devices, earthquake, collapse, flood and sewer
back-ups in respect to furniture, equipment, inventory and
stock in trade, fixtures (plate glass if appropriate) and
leasehold improvements located within the Leased Premises and
such other property located in or forming part of the Leased
Premises, including all mechanical or electrical systems (or
portions thereof) installed by Tenant in the Leased Premises,
the whole for the full replacement value thereof (without
depreciation) in each such instance;
(c) Tenant's legal liability insurance in an amount equal to the
replacement cost of the Leased Premises or such greater amount
as Landlord may, from time to time, reasonably require;
(d) an environmental liability policy of a coverage of at least
one million dollars ($1,000,000.00); and
(e) such additional insurance as Landlord or its insurers, acting
reasonably, may from time to time require.
All the above-mentioned policies of Insurance shall (i) be in form
satisfactory to Landlord; (ii) be placed with insurers acceptable to Landlord
and (iii) provide that they will not be cancelled or permitted to lapse unless
the insurer notifies Landlord in writing at least sixty (60) days prior to the
date of cancellation or lapse. Each such policy shall name Landlord and any
other party required by Landlord, as an additional insured as their interest may
appear. Each liability policy will contain a provision of cross-liability and
severability of interest as between Landlord and Tenant. All other policies
referred to above shall contain a waiver of subrogation rights which Tenant's
insurers may have against Landlord, Landlord's insurers and any Persons for whom
Landlord is responsible. Notwithstanding anything to the contrary contained in
the Lease, Tenant hereby releases and waives any and all claims against Landlord
and any Persons for whom Landlord is responsible with respect to occurrences
which are or which are required to be insured against by Tenant hereunder.
Tenant shall provide Landlord with copies of each
<PAGE> 20
MONTREAL INDUSTRIAL LEASE
Page 17
insurance policy referred to above upon execution of said policy and at the
latest fifteen (15) days prior to the Tenant's occupation of the Leased
Premises. It is understood that no review or approval of any insurance
certificate or policy by Landlord shall derogate from or diminish Landlord's
rights under this Lease.
Tenant agrees that if Tenant fails to take out or to keep in force such
insurance Landlord may, at its sole option and discretion, do so and pay the
premium therefor and in such event Tenant shall repay to Landlord the amount
paid as a premium, which repayment shall be collectible as Additional Rental.
28. CANCELLATION OF INSURANCE
If any insurance policy mentioned in the preceding Article and/or any
insurance contracted by Landlord or any part of it is cancelled and/or
threatened to be cancelled by the Insurer, or if the coverage under it is
reduced in any way by the Insurer because of the use or occupation of any part
of the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to the cancellation, threatened cancellation or reduction of coverage
within forty-eight (48) hours after notice from the Landlord, the Landlord may,
either:
(a) enter and take possession of the Leased Premises immediately
by leaving upon the Leased Premises a notice of its intention
to do so, upon which the Landlord will have the same rights
and remedies that are available to him under this Lease or in
virtue of the law; or,
(b) enter upon the Leased Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or
reduction of coverage and the Tenant will immediately pay the
costs to the Landlord, together with a fee of fifteen percent
(15%) of such costs representing the Landlord's overhead,
which costs may be collected by the Landlord as Additional
Rental, and the Landlord will not be liable for any damage
caused to any property of the Tenant or others located on the
Leased Premises as a result of the entry.
29. DAMAGE OR DESTRUCTION
29.1 If the Leased Premises are at any time destroyed or damaged, the
following provisions will apply:
(i) If, in the opinion of the Landlord, the Leased Premises are
fit for tenancy in whole or in part, the Lease shall continue
in full force and effect without abatement or diminution of
any Minimum Net Net Rental or Operating Costs and Taxes;
(ii) If, in the opinion of the Landlord, the Leased Premises are
rendered partly unfit for tenancy, this Lease shall continue
in full force and effect, except that the Minimum Net Net
Rental and Operating Costs and Taxes will abate to the extent
Landlord's Architect determines that the Leased Premises
cannot reasonably be used for their intended purposes;
(iii) If Landlord determines that the Leased Premises are rendered
wholly unfit for tenancy, this Lease shall continue in full
force and effect, except that Minimum Net Net Rental and
Operating Costs and Taxes will fully abate;
(iv) all abatements will occur from the date of the damage or
destruction until the earlier of the date that the Leased
Premises are delivered to Tenant or the date of termination of
the period of indemnity under Landlord's insurance policy
<PAGE> 21
MONTREAL INDUSTRIAL LEASE
Page 18
for business interruption and/or loss of rentals;
(v) Landlord will commence and proceed diligently to reconstruct,
rebuild or repair any damage to the Leased Premises to meet
Landlord's base building criteria for that Property which
Landlord may modify to be consistent with the plans,
specifications and design criteria for the rebuilding of the
Building and/or the Leased Premises, chosen by Landlord acting
reasonably;
(vi) to restore the Leased Premises, Landlord will be under no
obligation to perform work other than that stipulated in
subparagraph (v) above;
(vii) whether or not the damage to the Leased Premises may have been
caused by Tenant's negligence or fault, Tenant shall commence
to repair, rebuild or reconstruct, at its own cost, all
leasehold improvements, fixturing and equipment in the Leased
Premises within fifteen (15) days from Landlord's notice that
Landlord has completed its work and Tenant shall complete said
work within thirty (30) days from Landlord's notice;
(viii) Tenant shall not be entitled to any allowance, inducement,
payment or other consideration from Landlord in connection
with Tenant's work described in sub-paragraph (vii) above,
even if such allowance, inducement, payment or other
consideration was made at the time of original construction of
the Leased Premises.
29.2 Despite any provision to the contrary contained in this Lease and,
specifically but without limitation, anything contained in the present article.
If the Property is totally or partially damaged or destroyed (whether the Leased
Premises are affected or not), and:
(i) in the Landlord's opinion, the damaged or destroyed portions
cannot reasonably be repaired, restored or rebuilt within one
(1) year following the occurrence without overtime or other
special arrangements; or
(ii) the cost, as estimated by the Landlord, of repairing,
restoring or rebuilding the damaged or destroyed portions will
exceed the proceeds of insurance available to Landlord for
such purpose or the damage or destruction was caused by a
peril which is not covered by Landlord's insurance; or
(iii) less than two (2) years remain during the Term;
then in any of the above cases, Landlord may, at its option (to be exercised by
written notice to Tenant within ninety (90) days following any such occurrence)
elect to terminate this Lease.
If Landlord elects to terminate this Leases, then the following will
apply:
(iv) If the Leased Premises have been rendered wholly unfit for
tenancy, the termination will take effect from the date of the
damage or destruction and all Minimum Net Net Rental and
Operating Costs and Taxes be adjusted to that date;
(v) If the Leased Premises have been rendered only partly
unfit for tenancy and Tenant has occupied or has been
reasonably capable of occupying any part of the
Leased Premises from the date of the damage or
destruction, the Lease will terminate ten (10) days
from Landlord's notice. All unabated Minimum Net
Net rental and Operating Costs and taxes will be
adjusted to the date of termination. Minimum Net Net
<PAGE> 22
MONTREAL INDUSTRIAL LEASE
Page 19
Rental and Operating Costs and Taxes will abate from
the date of the damage and destruction until the date of
termination to the extent the Leased Premises cannot
reasonably be used for their intended purposes;
(vi) If the Leased Premises were not rendered wholly or partly
unfit for tenancy, the Lease will terminate ten (10) days from
Landlord's notice and all Minimum Net Net Rental and Operating
Costs and Taxes will be adjusted to that date;
Landlord may, at its sole option, rather than elect to terminate this
Lease, relocate Tenant to premises reasonably similar to the Leased Premises
within the same general vicinity of the Leased Premises for a period
corresponding to the unexpired Term of this Lease or until such time as
Landlord has reconstructed the Leased Premises.
If the Property is totally or partially damaged or destroyed and
Landlord does not elect to terminate this Lease, subject to paragraph (viii)
below, Landlord shall commence and proceed diligently to reconstruct, rebuild or
repair, as necessary, those portions of the Property which have been so damaged
or destroyed in accordance with Landlord's base building criteria for said
Property, exclusive of obligations of tenants in respect of the Property
pursuant to any leases. Furthermore, if the Leased Premises are being repaired,
rebuilt or reconstructed, the provisions of the present Article relating to the
Leased Premises shall apply.
(vii) Tenant acknowledges and agrees that if Landlord does any
reconstruction, rebuilding or repairing of the Property,
Landlord may do any one or more of the following:
(a) use plans, specifications and working drawings
which differ from those applicable to the
Property in existence prior to the damage or
destruction;
(b) change the configuration, design and/or size of the
Property or any of its component parts to suit
Landlord's needs at the time, including, without
limitation, the location and size of any court,
entrance parking facility or any other Common Area or
Facility;
(c) redesign the tenant mix to suit Landlord's needs at
the time of reconstruction, with respect to the kinds
of uses which will be included in the tenant mix and
rearrange the locations in the Property in which
various types of uses shall be permitted.
In the present Article, the Landlord's opinion shall be final and
binding on the parties. It is further understood and agreed that nothing herein
shall oblige Landlord under any circumstances and in any manner whatsoever, to
spend an amount greater than the proceeds of insurance received by Landlord as a
result of the damage or destruction described in the present Article for any
reconstruction contemplated herein.
Tenant agrees that none of the foregoing shall constitute a change of
form or destination, nor shall the validity or enforceability of this Lease be
affected in any manner by any of the foregoing.
30. TRANSFER CONSENT REQUIRED
No Transfer of this Lease shall be effected by Tenant without the prior
written consent of the Landlord in each instance, which consent may not
unreasonably withheld.
Landlord's refusal of consent shall be deemed reasonable (without
<PAGE> 23
MONTREAL INDUSTRIAL LEASE
Page 20
in any way restricting Landlord's right to refuse its consent on other
reasonable grounds) under the following circumstances:
(a) where the Transferee proposed by Tenant is then a tenant of
the Property and Landlord has or will have during the next
six (6) months suitable space for rent in the Property;
(b) where Tenant is in default under any provisions of this Lease;
(c) where the Landlord has reasonable grounds to believe that the
proposed Transferee does not possess the financial means
necessary to fulfill all its financial obligations herein;
(d) where the Transfer applies to part of the Leased Premises
only;
(e) where the proposed Transferee's use of the Leased Premises
violates any laws or rights granted to other tenants or
retained by Landlord, or where such use may be disruptive or
objectionable to other tenants or to the Landlord, or where
such use shall detract from the dignity or character of the
Property;
(f) where the Landlord has not obtained the consent of a secured
creditor or any Person who may have the right to approve the
Transfer;
(g) where a previous Transferor or guarantor does not approve the
Transfer and/or refuses to remain jointly and severally liable
towards Landlord for the execution of Tenant's obligations
under this Lease and/or refuses to sign a Transfer document
to that effect.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, with Landlord's consent, of this Lease or of any interest
hereunder, then the Tenant undertakes not to print, publish, post, display or
broadcast any notice or advertisement or otherwise advertise the whole or any
part of the Leased Premises for purposes of a Transfer, and shall not permit any
broker or other Person to do any of the foregoing, unless the complete text and
format of any such notice, advertisement, or offer is first approved in writing
by the Landlord. Without in any way restricting or limiting the Landlord's right
to refuse any text or format on other grounds, any text or format proposed by
the Tenant shall not contain any reference to the rental rate of the Leased
Premises. Notwithstanding anything contained herein, no sign shall be posted,
affixed, displayed or inscribed in any manner whatsoever on the Leased Premises
or the Property advertising that the Leased Premises are for rent.
If the Tenant intends to effect a Transfer of all or any part of the
Leased Premises, of this Lease or of any interest hereunder, then, and as often
as such event shall occur, the Tenant shall give prior written notice to the
Landlord of such intent, specifying therein the proposed Transferee, providing
such information with respect thereto, including without limitation, information
concerning the principals thereof and as to any credit, financial or business
information relating to the proposed Transferee as the Landlord or the
hypothecary creditor requires, and shall pay Landlord in advance for the cost of
Landlord's inquiries as well as its processing fee for the examination of
Tenant's request, and the Landlord shall, within thirty (30) days following the
completion of Landlord's study of Tenant's request, notify the Tenant in writing
that:
(a) It consents or does not consent to the Transfer in accordance
with the provisions and qualifications of this Article;
(b) It elects to cancel this Lease in preference to giving such
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MONTREAL INDUSTRIAL LEASE
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a consent.
The mere occupation of all or part of the Leased Premises or Landlord's
tolerance thereof, the payment of any amount by the proposed Transferee to
Landlord, or the consent to any previous Transfer shall not constitute a waiver
of Tenant's obligation to obtain Landlord's consent to any Transfer, nor will
any of the foregoing be construed to constitute a consent by Landlord to the
proposed Transfer. Nevertheless, whether or not Landlord consents to any
Transfer, it may collect rent or other amounts from any proposed Transferee and
apply the said amount to the amounts payable under this Lease, without in any
manner prejudicing any of its rights. This prohibition against a Transfer is
construed in a manner to include a prohibition against any Transfer by operation
of law, and no Transfer shall take place by reason of a failure by the Landlord
to reply to a request by the Tenant for consent to a Transfer.
Notwithstanding any such Transfer consented to by the Landlord, no
acceptance by the Landlord of any payments by a Transferee shall be deemed a
waiver of the requirements contained herein or a release of the Tenant from the
further performance by the Tenant of the obligations on the part of the Tenant
herein contained and the Tenant shall be jointly and severally liable with the
Transferee for all of the Tenant's obligations stipulated in the Lease and
shall not be released from performing any of the obligations under the Lease
during the Term.
In addition to any of the requirements stipulated herein, Landlord's
consent to the Transfer is conditional upon Tenant and Transferee signing with
Landlord a document prepared by Landlord evidencing such Transfer, and Tenant
undertakes to cause the Transferee to promptly sign said document in which
Transferee shall agree to be bound directly with Landlord to all of the
obligations contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. The above-mentioned document shall further
provide that the Tenant transfers to the Transferee any rights it may have with
respect to the Deposit retained by Landlord pursuant to this Lease and Tenant
renounces all of its rights thereto. In addition thereto, the Transferee may be
required by Landlord to supplement any security deposit given in this Lease.
Should the Minimum Net Net Rental per square foot to be paid by a
Transferee, whether in cash, goods, services or other consideration, exceed the
Minimum Net Net Rental per square foot payable hereunder, then Tenant shall pay
to Landlord monthly, as Additional Rental, the amount of or an amount equivalent
to such excess.
Notwithstanding anything contained in this Article, the Tenant may
sublet the Leased Premises or assign the Lease to a parent, subsidiary or
affiliate company without seeking the consent of the Landlord provided,
however, that such sub-tenant or assignee shall remain bound jointly and
severally with the Tenant for all the terms and covenants of this Lease, and
provided further that Tenant shall notify Landlord in writing prior to such
sublet or assignment.
Upon the execution of this Lease and upon each succeeding anniversary
date or at any sooner time requested by the Landlord, the Tenant shall deliver
to the Landlord a statement, certified as being true and correct and verified by
the corporate secretary, showing the names of all existing shareholders of
record and their respective ownership interests as at that date. The Tenant
shall, at the request of the Landlord, make available to the Landlord for
inspection or copying or both, all books and records of the Tenant which, alone
or with other data, show the applicability or inapplicability of this Article.
If any shareholder of the Tenant shall, after the request of the Landlord to do
so, fail or refuse to furnish forthwith to the Landlord any data verified by the
affidavit of such shareholder or other credible person, which data, alone or
with other data show the applicability or inapplicability of this paragraph, the
Landlord may terminate this Lease by giving the Tenant prior written notice of
thirty (30) days of such termination.
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MONTREAL INDUSTRIAL LEASE
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31. PRIVILEGE OF LANDLORD
Tenant covenants to furnish the Leased Premises with and to maintain
at all times thereon, a sufficient quantity of furniture, fixtures and other
effects to secure the payment of a least six (6) months of Minimum Net Net
Rental and Additional Rental which shall at all times be free and clear of all
Tenant Security and shall be subject to a privilege in favour of the Landlord
for the payment of Minimum Net Net Rental and Additional Rental and the
fulfilment of all other covenants and agreements herein contained.
32. ASSIGNMENT BY LANDLORD
Landlord declares that it may assign its rights under this Lease to a
lending institution or to any Person as collateral security for a loan to
Landlord and, in the event that such an assignment is given and executed by
Landlord and notification thereof is given to Tenant by or on behalf of
Landlord. It is expressly agreed that this Lease shall not be cancelled or
modified for any reason whatsoever without the consent in writing of such
lending institution or Person if such consent is required.
This Lease and all rights of the Tenant under the Lease shall be
subject to and subordinate to any Security. Tenant hereby covenants and agrees
that it will, whenever reasonably required by Landlord and at Landlord's
expense, consent to and become a party to any instrument subordinating the Lease
to any security. However, no subordination by the Tenant shall have the effect
of permitting the holder of any Security to disturb the Tenant's enjoyment of
the Leased Premises as long as the Tenant shall comply with the covenants to
be kept and performed by it under this Lease.
The Tenant will, upon request of the Landlord or the Person holding the
Security or any Person having an interest in the project, execute and deliver
promptly those instruments referred to herein. However, if ten (10) days after
the date of request, the Tenant has not executed and delivered them, the Tenant
hereby irrevocably appoints the Landlord as the Tenant's attorney with full
power and authority to execute and deliver in the name of the Tenant said
instruments or the Landlord may, at its sole option and discretion, terminate
this Lease upon giving Tenant a forty-eight-hour (48) notice of its intention to
do so, the whole without incurring any liability whatsoever and without
prejudice to all of its other rights and recourses.
It is agreed and understood that in the event of any sale of the
Property by Landlord, then Landlord shall automatically be relieved of any and
all obligations and liabilities under this Lease accruing from and after the
date of such sale.
33. EXPROPRIATION
If the whole or any part of the Leased Premises and/or the Property
shall be condemned, expropriated or taken in any manner for any public or
quasi-public use or purpose, Landlord may, at its option, terminate this Lease
by giving notice in writing to Tenant that the Term hereof shall expire upon the
day when possession is required for such purpose and in the event of such
expiration Landlord shall have no liability of any nature to Tenant resulting
from said expiration.
34. EXTENSIONS
The Landlord shall have the right, at its option and from time to time,
to make extensions and/or additions and/or to add one or more additional floors
or storeys onto all or part of the building comprising the Leased Premises, or
on to any other buildings of the Property, or to add one or more buildings to
the Property. In the event that any such extensions and/or additions be made to
the building comprising the Leased Premises or to any other buildings of the
Property and/or in the event any such additional
<PAGE> 26
MONTREAL INDUSTRIAL LEASE
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building or buildings shall be erected on the Property, the Landlord may, at its
sole option and discretion, include in the denominator for the purpose of
calculating Tenant's Proportionate Share of Operating Costs and Taxes, the total
leasable area of all or part of the buildings erected on the Property.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
Without limiting the generality of the foregoing, the Landlord hereby
reserves the right, at any time and form time to time, to make changes in,
additions to, subtractions from or rearrangements of the Building including,
without limitation, all improvements at any time thereon, all entrances and
exits thereto, and to grant, modify and terminate any servitudes or other
agreements pertaining to the use and maintenance of all or parts of the Building
and to make changes or additions to the pipes, conduits, wires, ducts, utilities
and other necessary building services in the Leased Premises which serve other
premises. The Landlord agrees that in performing such alterations, it shall do
so in such manner as to minimize any material interference with the Tenant's use
and enjoyment of the Leased Premises. The Landlord shall not however, be
responsible for any damages of whatsoever nature to Tenant except for physical
damages to the Leased Premises.
The Landlord shall further have the right from time to time to sever
any part or parts of the Property or any Building or improvements thereon for
purposes of sale, lease, hypothec, privilege, charge or otherwise, including the
creation of rights-of-way, servitudes and parking arrangements which the
Landlord deems necessary and the Tenant hereby consents to any such severance
and agrees to execute any documents or consents which the Landlord may request
for these purposes. If any part or parts of the Property or the Building or
improvements on the Property are so severed and are deemed by the Landlord to no
longer form part of the Property, such part or parts shall be excluded from the
Property for the purposes of this Lease at the time designated by the Landlord
and the Tenant shall, when requested by the
<PAGE> 27
MONTREAL INDUSTRIAL LEASE
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Landlord, execute a release of any interest in the Property so excluded.
35. DEFAULT
The following shall be considered a default under the terms of this
Lease:
(a) In the event that Tenant shall be in default under any
provision of this Lease providing for the payment of Minimum
Net Net Rental and/or Additional Rental;
(b) In the event Tenant does not take possession of the
Leased Premises or abandons or attempts to abandon
the Leased Premises before the Termination Date,
with or without Landlord's knowledge; or in the event
the Leased Premises are used by any Person other than
the Person entitled to use them hereunder; or any
procedure in execution is issued pursuant to a
judgment rendered against Tenant; or if an agent,
receiver or trustee acting under a trust deed or other
security, takes possession of the Tenant's assets
and/or any equipment, fixtures, furniture or movable
effects in the Leased Premises; or if the Tenant shall
make a bulk sale of its goods; or if the Tenant should
attempt to move its belongings out of the Leased
Premises;
(c) In the event that Tenant shall be in default in observing
any covenant herein contained and/or performing any
of its obligations contained in this Lease (other than a
default stipulated in sub-paragraphs (a) and (b) above)
and such default shall continue for fifteen (15) days
after written notice specifying such default shall have
been given by Landlord to Tenant, unless it is
impossible for Tenant to cure such default within the
said delay of fifteen (15) days, in which case Tenant
shall, upon written request to Landlord, be entitled to
such reasonable extension of time to enable such
default to be remedied.
In the event of any default on the part of the Tenant under the terms
of this Lease, Landlord shall have the right, at its sole and absolute
discretion, to terminate this Lease and in addition, Landlord may, without
notice or any form of legal process, forthwith enter upon and take possession of
the Leased Premises and operate the business and/or assume absolute ownership of
Tenant's movable effects and/or remove the Tenant's effects therefrom, any
statute or law to the contrary notwithstanding, the whole without prejudice to
and under reserve of all other rights and recourses of Landlord to claim any and
all losses and damages of any nature whatsoever sustained by the Landlord by
reason of or arising from any default of the Tenant including, without
limitation, the expenses of reletting the Leased Premises (including the costs
of any repairs, decorating, alterations or improvements necessitated thereby),
as well as attorney's fees of fifteen percent (15%) of any amount granted by
judgment. Where Landlord shall have instituted proceedings to cancel, terminate
or confirm its cancellation or termination of this Lease, notwithstanding any
law or custom to the contrary, Tenant shall not have any right to prevent such
cancellation or termination by remedying its default or defaults subsequent to
the institution of such legal proceedings.
36. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay when due any taxes, rates, insurance premiums,
charges, debts or any other amounts which it owes or has herein covenanted to
pay, all such amounts shall be deemed to be and be treated as Additional
<PAGE> 28
MONTREAL INDUSTRIAL LEASE
Page 25
Rental and payable and recoverable as Additional Rental. Landlord may pay the
same and shall be entitled to charge the sums so paid to Tenant who shall pay
them forthwith on demand as Additional Rental.
All arrears of Minimum Net Net Rental and Additional Rental shall bear
interest at the prime lending rate as determined by the Royal Bank of Canada on
a daily basis plus four percent (4%) from the time such arrears become due until
paid to Landlord.
37. BANKRUPTCY AND INSOLVENCY
In the event that tenant shall be adjudicated bankrupt or make any
general assignment for the benefit of its creditors, or make a proposal to its
creditors, or take or attempt to take the benefit of any insolvency or
bankruptcy law, or if a receiver or trustee be appointed for the property of the
Tenant or any part thereof, the present Lease shall automatically terminate on
the occurrence of any of the aforesaid events without further notice or delay,
and Landlord shall be entitled to recover all arrears of Minimum Net Net Rental
and Additional Rental as well as six (6) months of future Minimum Net Net Rental
and Additional Rental or such other accelerated amount that the law may at any
time provide.
38. INDEMNIFICATION
Except if caused directly by the gross negligence or fault of the
Landlord, its mandatories, employees, or representatives, or by any breach or
nonperformance by the Landlord of any covenant undertaken by virtue hereof, the
Landlord shall not be liable nor responsible in any way for any injury of any
nature whatsoever that may be suffered or sustained by the Tenant or any other
Person who may be upon the Leased Premises or for any loss of or damage to any
property belonging to the Tenant or to any other Person while such property is
on the Leased Premises and in particular (but without limiting the generality
of the foregoing), the Landlord shall not be liable for any damage or damages
of any nature whatsoever to any such property caused by the failure, by reason
of a breakdown or other cause, to supply adequate drainage, or by reason
of the interruption of any public utility or service or in the event of steam,
water, rain or snow which may leak into, issue or flow from any part of the
Property or from the water, steam, sprinkler, or drainage pipes or plumbing
works of the same, or from any other place or quarter or for any damage caused
by anything done or omitted by any tenant. The Landlord however, shall use all
reasonable diligence to remedy such condition, failure or interruption of
service when not attributable to the Tenant, after notice of same, when it is
within its power and obligation to do so. The Tenant shall not be entitled to
any abatement of Minimum Net Net Rental and Tenant's Proportionate Share of
Operating Costs and Taxes in respect of any such condition, failure or
interruption of service.
The Tenant will indemnify and hold Landlord harmless from and against
all fines, liability, damage suits, claims, demands and actions of any kind or
nature for which the Landlord shall or may become liable for or suffer by reason
of:
(a) any breach or nonperformance by the Tenant of any
provision hereof; and/or
(b) any injury (including death resulting at any time therefrom)
or damage to property occasioned to or suffered by any Person
including the parties hereto by reason of any such breach or
nonperformance or of any wrongful act, neglect, or fault on
the part of the Tenant; and/or
(c) any damage to the Property caused by the Tenant's use
and occupancy of the Leased Premise; and/or
(d) any injury to any Person including death, sickness and
<PAGE> 29
MONTREAL INDUSTRIAL LEASE
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diseases resulting at any time therefrom, whether caused by a
virus, bacteria or any substance brought upon the Leased
Premises and manipulated by Tenant and/or located on or about
the Leased Premises; and/or
(e) any injuries, damages or costs relating to any environmental
impairment arising out of the occupancy of the Leased
Premises.
Such indemnification by the Tenant for any of the above items shall
survive the termination of this Lease, anything in this Lease to the contrary
notwithstanding.
39. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present
Lease, the Tenant will not hold the Landlord in any way responsible for any
damages or annoyance which the Tenant may sustain through the fault of any
tenant who occupies any premises adjacent to, near, above or under the Leased
Premises, and renounces any claims it may have against the Landlord pursuant to
Article 1636 of the Civil Code of Lower Canada.
40. NONWAIVER
The failure of Landlord to insist upon a strict performance of any of
the terms hereof shall not be deemed a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent default by
Tenant of any such terms.
41. WAIVER OF COMPENSATION
The Tenant hereby waives and renounces any and all existing and future
claims, offsets and compensation against any Minimum Net Net Rental or
Additional Rental due hereunder and agrees to pay such Minimum Net Net Rental
and Additional Rental on their respective due dates, regardless of any claim,
offset or compensation which may be asserted by the Tenant or on its behalf,
except to the extent permitted hereunder.
42. IMPUTATION OF PAYMENTS
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Net Net Rental and Additional Rental shall
be deemed to be payments on account of the earliest stipulated Minimum Net Net
Rental and Additional Rental, nor is any endorsement or statement on any cheque
or any letter accompanying any cheque or payment as rent deemed as
acknowledgement of full payment or an agreement or acquiescence of or to the
terms thereof, and the Landlord may accept and cash such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rental
or pursue any other remedy provided in this Lease. The Landlord may, at its
option, apply sums received from the Tenant against any amounts due and payable
by the Tenant under this Lease in such manner as the Landlord sees fit.
43. CUMULATIVE REMEDIES
No reference to or exercise of any specific right or remedy by the
Landlord shall preclude the Landlord from or prejudice the Landlord in
exercising any other right under this Lease or pursuing any other remedy or
maintaining any action to which it may otherwise be entitled at law.
<PAGE> 30
MONTREAL INDUSTRIAL LEASE
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44. UNAVOIDABLE DELAY
Save and except for any monetary obligation under this Lease, Landlord
and Tenant shall not be liable for failure or delays in performing any of their
obligations hereunder should such failure or delay be caused by any event
(excluding the financial conditions of either party) which is beyond the
reasonable control of either party including, without limitation, cas fortuit,
force majeure, strikes, lockouts, labour troubles, inability to procure
materials, restrictive governmental rules, regulations, orders or bankruptcy of
contractors.
Without limiting the generality of the foregoing and in particular, it
is understood and agreed that whenever and to the extent that the Landlord shall
be unable to fulfill, or shall be delayed or restricted in the fulfilment of any
obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfil such obligation, or by reason of any statute,
law or order in council or any regulation or order passed or made pursuant
thereto or by reason of the order or directive of any competent authority having
jurisdiction over the Property, or inability to obtain any required
authorization therefrom, or by reason of any other cause beyond its control, the
Landlord shall be entitled to extend the time for fulfilment of such obligation
by a time equal to the duration of such delay or restriction, and the Tenant
shall not be entitled to compensation for any damages of whatsoever nature
arising therefrom.
45. MANAGEMENT OF THE PROPERTY
The Tenant hereby acknowledges to the Landlord that the Property may be
managed by any party other than the Landlord, as the Landlord from time to time
may in writing designate and, to all intents and purposes, any manager so
designated shall be the party at the Property authorized to deal with the
Tenant. All payments to Landlord in virtue of this Lease shall be made by cheque
payable to the Landlord in full unless otherwise specified in writing by
Landlord to Tenant.
46. RULES AND REGULATIONS
There is a schedule of rules and regulations annexed hereto as Schedule
"E" and the Tenant binds and obliges itself to abide by the said rules and
regulations.
The Landlord shall have the right to amend and/or rescind the rules and
regulations in Schedule "E" from time to time and to make any other reasonable
rules and regulations not contrary to the spirit and intent of this Lease as, in
its discretion, may from time to time be needful for the safety, care,
cleanliness and proper administration of the Property including the Leased
Premises, and for the preservation of good order therein, and the same shall be
observed and performed by the Tenant and by its customers, and all such rules
and regulations now or hereafter to be established by the Landlord as herein
provided shall form part of this Lease as if recited at length herein and any
such new rules and regulations shall be binding upon Tenant upon written
notification from Landlord.
Furthermore, in the event that Tenant does not comply with the rules
and regulations, Landlord shall have the right, without notice, to enter the
Leased Premises and execute any work necessary to rectify Tenant's
noncompliance, the cost of which shall immediately, upon Landlord's request, be
payable by Tenant as Additional Rental. It is agreed and understood that the
terms and conditions of this Lease shall prevail over any of the terms of the
rules and regulations.
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MONTREAL INDUSTRIAL LEASE
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47. COMPLIANCE WITH LAWS AND REGULATIONS
The Tenant shall, at its own expense, promptly comply with the
requirements of every applicable statute, law and ordinance and with every
applicable lawful regulation or order with respect to the removal of any
encroachment placed by the Tenant, or to the condition, equipment, furniture,
fixtures, maintenance, or use, or occupation of the Leased Premises, including
the making of any alteration, addition in or to any structure upon, connected
with or appurtenant to the Leased Premises, whether or not such alteration be
structural or be required on account of any particular use to which the Leased
Premises or part thereof may be put and whether or not such requirement,
regulation, or order be of a kind now existing or within the contemplation of
the parties hereto; and shall comply with any applicable regulation,
recommendation or order of the insurers' Advisory Organization of Canada, or any
body having similar functions or of any liability or fire insurance company by
which the Landlord and/or the Tenant may be insured.
48. WINDOW COVERINGS
In order to preserve a more uniform and attractive appearance of the
Property for the benefit of all the tenants, the Tenant herein binds and obliges
itself to place vertical blinds for air porosity, over all windows which are
located in the front of the Building or on any side of the Building which faces
a public street and where such windows are for other than office areas, such
vertical blinds shall remain drawn at all times.
49. PERMITS AND LICENSES
The Tenant shall obtain all necessary permits and licenses required for
the occupancy and carrying on of its business, the Landlord making no
representations or warranties whatsoever as to whether said permits and licenses
may be obtained by Tenant. Should the Tenant fail to obtain any required permit
and/or license, it shall nevertheless remain bound to perform all of its
obligations pursuant to the present Lease including, without limitation, payment
of Minimum Net Net Rental and Additional Rental.
50. EXPIRATION OF LEASE
Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto Landlord, who shall become absolute owner
thereof, the Leased Premises together with all buildings, alterations,
additions, erections, leasehold improvements, repairs and installations,
including the air-conditioning and heating system, done or made by the Tenant,
both movable and immovable, except the equipment and furniture belonging
to Tenant which must be removed at Tenant's expense on or before the expiration
of the Lease. Tenant shall repair any and all damages caused to the Leased
Premises and/or to the Building as a result of such removal, using materials
equal in quality to that of the damaged materials, falling which Landlord may do
so at Tenant's expense.
Notwithstanding the above, Landlord may at its option advise Tenant in
writing that he does not wish the ownership of all or any part of the above
described property, in which case Tenant shall remain owner of such property
refused by Landlord and shall, at its own expense, immediately remove such
property and repair any damage to the Leased Premises and/or the Building caused
by the original installation and/or removal, using materials equal in quality to
that of the damaged materials, falling which Landlord may do so at Tenant's
expense.
If Tenant leaves any equipment or furniture in the Leased Premises
following the expiration of the Term, it is understood that Landlord may then,
at its option, either accept full and absolute ownership of same and may use it
or dispose of it as Landlord determines, without compensation payable to Tenant
and without incurring any liability to Tenant, or Landlord may dispose
<PAGE> 32
MONTREAL INDUSTRIAL LEASE
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of same as it sees fit, at Tenant's expense, without incurring any liability to
Tenant.
If the Tenant has failed to fulfil its obligations under this lease
with respect to the maintenance, repair and alteration of the Leased Premises
and removal of improvements and fixtures from the Leased Premises during or at
the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration or
sooner termination of the Term.
51. CONSTITUT OR TENURE SYSTEM ACT
The Tenant hereby renounces any rights which it may have or acquire
under the Constitut or Tenure System Act, R.S.Q., 1977, c. C-64, to purchase or
acquire the Leased Premises or the Property.
52. DOMICILE AND NOTICES
The Tenant hereby elects domicile at the Leased Premises for the
purpose of service of any writs of summons or other legal document in any action
or proceeding whatsoever by the Landlord against the Tenant.
Any notice or demand given by Landlord to Tenant or by Tenant to
Landlord pursuant to the present Lease shall be deemed to be duly given if
served upon the Tenant or Landlord personally, or if delivered or mailed by
prepaid certified or registered mail to:
(a) LANDLORD: 7405 Trans Canada Highway
St. Laurent, Quebec
(b) TENANT At the Leased Premises
Landlord may, be notice in writing to the Tenant, change the address to
which any notice or demand intended for the Landlord shall be addressed. Tenant
may, by notice in writing, require that a copy of any writ of summons or other
legal document or proceeding and a notice or demand served on the Leased
Premises be mailed by regular mail to an additional address.
53. SUCCESSORS AND ASSIGNS
This Lease shall enure to the benefit of Landlord's or Tenant's
respective heirs, executors, administrators, successors and assigns.
54. DESCRIPTIVE HEADINGS
Any descriptive headings appearing in this Lease have been inserted as
a matter of convenience and reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provisions hereof.
55. GOVERNING LAW/SEVERABILITY
The present Lease shall be construed and governed by the laws of the
Province of Quebec. Should any provision of this Lease be or become illegal or
not enforceable, it shall be considered separate and severable from the present
Lease and the remaining provisions shall continue in full force and effect and
be binding upon the parties hereto as though said provisions had never been
included. In this Lease, singular words shall be interpreted as including the
plural and vice versa and the words of masculine gender shall be interpreted as
including the feminine gender. Where more than one landlord or tenant is
referred to or when Tenant shall be of feminine gender or a corporation, all the
proper grammatical changes shall be inferred.
<PAGE> 33
MONTREAL INDUSTRIAL LEASE
Page 30
56. COST OF PREPARATION, REGISTRATION AND RADIATION
Tenant shall be permitted at it own cost to register the Lease by
memorial only, upon obtaining Landlord's prior written consent as to the form
and content of the memorial.
In addition, Tenant shall, at its own cost, at the expiration of the
Term, radiate the registration of the Lease from the Index of immovables.
In the event the said registration is not radiated within thirty (30)
days from the expiration of the Term, Tenant hereby irrevocably appoints the
Landlord as the Tenant's attorney with full power and authority to execute in
the name of the Tenant any documents and instruments required to effect the said
radiation of the registration of the Lease from the Index of Immovables and
Tenant further authorizes Landlord to deliver the said instruments and documents
to the appropriate Registry Office for the purpose of effecting all the
appropriate registrations and radiations. The cost of the preparation of said
documents and instruments as well as the cost of registering said documents and
instruments shall be borne by Tenant.
57. BROKERAGE COMMISSION
The Landlord and Tenant hereby guarantee that no brokerage commission
or charges are owing to any broker or brokerage company with respect to the
present transaction.
Tenant shall indemnify and hold Landlord harmless from any and all
brokerage claims as described above.
58. SCHEDULES
Schedules "B" and "E" hereto form an integral part of this Lease.
59. CERTIFICATE OF INCORPORATION
Where Tenant is a corporation, Tenant undertakes to remit to Landlord
upon the signing of the Lease, a copy of its Certificate of Incorporation.
60. ENTIRE AGREEMENT
Tenant acknowledges that there are no covenants, representations,
agreements, warranties or conditions in any way relating to the subject matter
of this Lease, whether expressed or implied, collateral or otherwise, either
oral or written, including promotional material, except those set forth in this
Lease; the Tenant agrees that he has not relied upon any representation in any
brochures, and the Tenant expressly declares that this Lease constitutes the
entire agreement between the Landlord and the Tenant. Except as otherwise
provided herein, no subsequent alteration, amendment, change or addition to this
Lease shall be binding upon the Landlord or the Tenant unless agreed to in
writing by the parties.
61. LANGUAGE
Each of the parties does hereby confirm that it has expressly required
that this contract, as well as any document related hereto, be drawn up in the
English language. Chacune des parties confirme par les presentes avoir
expressement demande que le present contrat, ainsi que tous les documents y
afferent, solent rediges en anglais.
<PAGE> 34
MONTREAL INDUSTRIAL LEASE
Page 31
IN WITNESS WHEREOF THE LANDLORD HAS SIGNED
AT ST. LAURENT, QUEBEC, THIS 27th DAY OF JANUARY, 1995.
ZMD SPORTS INVESTMENTS INC.
Per:
--------------------------
------------------------------
Witness
------------------------------
Witness
IN WITNESS WHEREOF THE TENANT HAS SIGNED AT ST. LAURENT
THIS 27th DAY OF JANUARY, 1995.
SPORT MASKA, INC.
Per:
--------------------------
------------------------------
Witness
------------------------------
Witness
<PAGE> 35
SCHEDUEL "B"
EXTRACT OF A CERTIFICATE OF LOCATION DATED MAY 21, 1985:
Toute cette propriete est designee comme etant les lots:
-Le lot numero QUATRE, de la subdivision C, de la subdivision du lot
originaire QUATRE CENT VINGT-DEUX (422-C-4)
-Le lot numero DEUX, de la subdivision du lot TRENTE-SIX, de la
subdivision du lot originaire QUATRE CENT VINGT-TROIS (423-36-2).
-Le lot numero SOIXANTE-SEIZE, de la subdivision du lot originaire
QUATRE CENT VINGT-TROIS (423-76).
Les lots sont tous du Cadastre de la Paroisse de Cap-de-la-Madeleine,
en la division d'enregistrement de Champlain
<PAGE> 36
SCHEDULE "E"
RULES AND REGULATIONS
1. The Landlord reserves entire control of the sidewalks, entries,
corridors and passages; washrooms and lavoratories; fan rooms,
janitor's closets, electrical closets and other closets; stairs, flues,
stacks, pipe shafts, and ducts; the whole not within the Leased
Premises, and of all parts of the Building employed for the common
benefit of the Tenants, and shall have the right to place such signs
and appliances therein, as they may deem advisable, provided that
ingress to and egress from the Leased Premises is not impaired thereby.
2. The Landlord shall have the exclusive right to prescribe the weight and
proper positions of metal safes or machinery as well as the right to
prescribe the weight and position of any floor load. All damage done to
the Building or the Leased Premises by moving or using heavy equipment
of any description or furniture contrary to the Landlords'
prescriptions shall be repaired at the expense of the Tenant. No such
equipment or furniture shall be moved unless a time therefor has been
arranged with and consented to by the Landlord.
3. Than Tenant shall not permit the introduction into the Leased Premises
of the Building of any machine or mechanical device of any nature
whatsoever which may be liable to cause objectionable noise or
vibration or be injurious to the Leased Premises or Building.
4. Canvassing, soliciting and peddling in the Building are prohibited.
5. Furniture, bulky articles and construction materials which the Tenant
may require from time to time for the construction of internal
partitions or for the purpose of effecting alterations or improvements,
the whole provided Tenant has obtained Landlord's approval pursuant to
the Article of this Lease entitled "Improvements and Alterations",
shall be carried to the Leased Premises at such hour and in such
manner as the Landlord may reasonably designate. Any damage which
may be caused to the Building or the Leased Premises by the carrying
of such furniture, bulky articles or construction materials to or
from the Leased Premises shall be at the responsibility and cost of
the Tenant.
6. Any hand trucks, carryalls, or similar appliances used for the delivery
or receipt of merchandise or equipment shall be equipped with rubber
tires, side guards and such other safeguards as the Landlord shall
require.
7. If any apparatus used or installed by the Tenant requires a permit as a
condition for its installation, the Tenant must file a copy of such
permit with the Landlord.
8. The Tenant shall give the Landlord prompt written notice of any
accident to or defect in water or gas pipes, heating or sprinkler
system in the demised Leased Premises, of which he is aware.
9. The Tenant shall not place any additional locks upon any doors of the
Leased Premises or the Building without the written consent of the
Landlord.
10. No animals or birds shall be brought or kept in or about the Leased
Premises or the Building.
11. No auction sales shall be allowed in the Leased Premises or the
Building.
12. The water closets and other water apparatus of the Building or Leased
Premises shall not be used for any purpose but those for which they are
constructed, and no sweepings, rubbish, rags, ashes, chemicals or other
substances shall be thrown therein.
13. The Tenant shall not permit any employees to smoke or congregate in the
halls (if any) of the said Building.
14. The Tenant, when closing the premises, during the day or evening, shall
have all windows closed, to avoid possible damage from fire, storms,
rain or freezing, and will not shut off the radiators and/or baseboard
heaters when the premises are locked.
<PAGE> 37
MONTREAL INDUSTRIAL LEASE
SCHEDULE "E"
Page 2
15. The Tenant shall follow such instructions, if any, as Tenant may from
time to time receive from Landlord relating to the maintenance and care
of the heating, ventilating and air-conditioning equipment installed
within the Leased Premises.
16. Front Signage
The Tenant may identify his business with a front sign, the whole
provided Tenant complies with the conditions stipulated hereunder:
(a) Letter: individual to the Tenant's style.
(b) Height: 24".
(c) Permitted materials - plastic, composite or solid
- rustproof metal, composite or
solid
(d) Lighting (optional) - integrated
- halo-lit (back-lighting)
(e) Lighting control - dedicated circuit
- photo-cell switch, timer switch or
manual switch
Before the fabrication of any signage, the Tenant must obtain the
written approval of the Landlord. A request for approval must be accompanied by
the following information:
(a) Elevation plan indicating the proposed sign -- (Scale -3/8" =
1).
(b) Sign dimensions: height, length, thickness, and distance from
wall.
(c) Construction and installation details.
(d) Material and finish specifications (use of styrofoam is
prohibited).
(e) Colour specifications.
(f) Lighting specifications: number of amperes, volts and
circuits.
(g) Name of designer and of fabrication and installation
contractors.
(h) Request for Municipal permit.
(i) Any other additional information that the Landlord may require
to study a particular sign request.
Furthermore, Tenant shall only be entitled to purchase any signage
approved from the following suppliers which may be changed by Landlord from time
to time:
Enseignes Trans Canada Signs, Inc.
9310 Parkway
Ville d'Anjou, Quebec
H1J 1W7
Claude Neon Limitee
1855 Hymus Boulevard
Dorval, Quebec
H9P 1J8
Enseicom Inc.
1700 Claire Crescent
Lachine, Quebec
H8S 1A2
17. Facade and secondary windows
(a) All front windows must have off-white vertical blinds.
(b) Adjustment of vertical blinds of front windows of storage
space must be half closed.
(c) All windows, including secondary windows, must be washed by
Tenant at its cost, at least twice a year on both the interior
and exterior faces.
<PAGE> 38
MONTREAL INDUSTRIAL LEASE
SCHEDULE "E"
Page 3
18. Miscellaneous signage
Miscellaneous traffic and "no parking" signs are supplied and installed
by the Landlord.
19. Garbage container
(a) The Tenant must provide the garbage container which best
satisfies its business activity so that the size and water
tightness retain all garbage without affecting the
environment.
(b) The Tenant must assure that the container is neatly located on
the designated area and that the lids are kept closed.
20. Exterior storage
(a) It is strictly forbidden to store anything outside the
Building, even on a temporary basis.
(b) Used boxes, pallets must be kept inside the Building
until collected for disposal.
21. Special Installations
Tenant must obtain Landlord's approval prior to the installation of any
equipment, machinery, fixtures and furniture which have to be attached
to, mounted to or pierced through any element of the Leased Premises
and/or the building. Furthermore, Tenant must obtain Landlord's
approval prior to the installation of any equipment, tank and any other
item that Tenant wants to install outside the Building (hereinafter the
"Special installation").
Any request for the approval of a Special Installation must be
submitted in writing along with the technical drawings or pertinent
data which can easily identify the specific nature of the installation.
Furthermore, Special Installation must conform to terms and conditions
stipulated in the lease.
Following completion of a Special Installation which conforms to
preceding authorization, the Landlord will proceed, at Tenant's cost,
with the inspection of the installation for final acceptance.
<PAGE> 1
Exhibit 10.39
<PAGE> 2
File No. Sportmaska.5
D E E D O F L E A S E
BETWEEN
ZMD SPORTS INVESTMENTS INC.
(the "Landlord")
AND
SPORT MASKA INC.
(the "Tenant")
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION ZMD SPORTS INVESTMENTS INC. PAGE
------- --------------------------- ----
<S> <C> <C>
1. CERTAIN BASIC LEASE PROVISIONS............................... 1
2. DEFINITIONS.................................................. 1
3. TERM......................................................... 5
4. OCCUPANCY.................................................... 6
5. MINIMUM NET NET RENTAL....................................... 6
6. RENTAL ON NET NET RETURN BASIS............................... 6
7. ADDITIONAL RENTAL............................................ 7
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE...................... 7
9. CONTESTATION OF TAXES........................................ 8
10. UTILITIES AND EQUIPMENT...................................... 8
11. USE OF PREMISES.............................................. 8
12. PLATE GLASS AND DOOR SIGNS................................... 8
13. PROHIBITED ACTIVITIES........................................ 9
14. CONDITION OF PREMISES........................................ 9
15. RELOCATION................................................... 9
16. MAINTENANCE AND REPAIRS...................................... 10
17. INSPECTION AND REPAIR........................................ 10
18. ODOURS, DUST OR NOISE........................................ 10
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION.................... 11
20. ACCESS....................................................... 11
21. PARKING...................................................... 11
22. SIGNS OF LANDLORD............................................ 12
23. SIGNS OF TENANT.............................................. 12
24. LANDLORD'S WORK.............................................. 12
25. IMPROVEMENTS AND ALTERATIONS................................. 13
26. CSST......................................................... 16
27. INSURANCE REQUIREMENTS....................................... 16
28. CANCELLATION OF INSURANCE.................................... 16
29. DAMAGE OR DESTRUCTION........................................ 17
30. TRANSFER CONSENT REQUIRED.................................... 19
31. PRIVILEGE OF LANDLORD........................................ 21
32. ASSIGNMENT BY LANDLORD....................................... 21
33. EXPROPRIATION................................................ 22
34. EXTENSIONS................................................... 22
35. DEFAULT...................................................... 23
36. FAILURE OF TENANT TO PERFORM................................. 24
37. BANKRUPTCY AND INSOLVENCY.................................... 24
38. INDEMNIFICATION.............................................. 24
39. DISTURBANCE.................................................. 25
40. NONWAIVER.................................................... 25
41. WAIVER OF COMPENSATION....................................... 25
42. IMPUTATION OF PAYMENTS....................................... 26
43. CUMULATIVE REMEDIES.......................................... 26
44. UNAVOIDABLE DELAY............................................ 26
45. MANAGEMENT OF THE PROPERTY................................... 26
46. RULES AND REGULATIONS........................................ 27
47. COMPLIANCE WITH LAWS AND REGULATIONS......................... 27
48. WINDOW COVERINGS............................................. 27
49. PERMITS AND LICENSES......................................... 27
50. EXPIRATION OF LEASE.......................................... 28
51. CONSTITUT OR TENURE SYSTEM ACT............................... 28
52. DOMICILE AND NOTICES......................................... 28
53. SUCCESSORS AND ASSIGNS....................................... 29
54. DESCRIPTIVE HEADINGS......................................... 29
55. GOVERNING LAW/SEVERABILITY................................... 29
56. COST OF PREPARATION, REGISTRATION AND RADIATION.............. 29
57. BROKERAGE COMMISSION......................................... 29
58. SCHEDULES.................................................... 29
59. CERTIFICATE OF INCORPORATION................................. 30
60. ENTIRE AGREEMENT............................................. 30
61. LANGUAGE..................................................... 30
</TABLE>
<PAGE> 4
DEED OF LEASE
BETWEEN: ZMD SPORTS INVESTMENTS INC., a body politic and corporate,
duly incorporated, having its head office and principal place
of business in Montreal, Quebec herein acting and represented
by JEAN-PIERRE CARETTE its authorized representative
(hereinafter the "Landlord")
PARTY OF THE FIRST PART
AND: SPORT MASKA INC., a body politic and corporate, duly
incorporated, having its head office and principal place of
business in Montreal, Quebec, herein acting through and
represented by __________________________________________ its
Secretary hereunto duly authorized as he so declares.
(hereinafter the "Tenant")
PARTY OF THE SECOND PART
1. CERTAIN BASIC LEASE PROVISIONS
The following are certain basic Lease provisions of this Lease.
1.1 Addresses for purposes of notice:
Landlord: 7405 Trans Canada Highway
St. Laurent, Quebec
H4T 1Z2
Tenant: 2245 St. Paul
St. Hyacinthe, Quebec
1.2 Location of Premises: Leased Premises comprising of the Building and
the property found on the land described in Schedule "B" annexed
hereto.
1.3 Property: 2245 St. Paul
-------- St. Hyacinthe, Quebec
1.4 Area: Approximately thirty-six thousand (36,000)
---- square feet.
1.5 Term: ten (10) years
----
1.6 Commencement Date: February 1, 1995
-----------------
1.7 Termination Date: January 31, 2005
----------------
1.8 Minimum Net Net Rental: An amount equal to $38,739.96 during the first
Lease Year, an amount equal to $41,720.04 during the second Lease Year,
an amount equal to $44,700.00 during the third Lease Year, an amount
equal to $47,679.96 during the fourth Lease Year, an amount equal to
$50,660.04 during the fifth Lease Year and an amount equal to
$59,660.04 per annum during the last five Lease Years, the whole
payable pursuant to the Article entitled "Minimum Net Net Rental."
1.9 Schedules:
"B" - Cadastral Description
"E" - Rules and Regulations
<PAGE> 5
Montreal Industrial Lease
Page 2
2. DEFINITIONS
2.1 Additional Rental means: Any and all amounts due or becoming payable to
the Landlord pursuant to this Lease other than the Minimum Net Net
Rental, whether such amounts are specifically referred to as Additional
Rental or not, the whole payable pursuant to the Article entitled
"Additional Rental".
2.2 Architect means: The independent architect, engineer, or land surveyor
named by Landlord from time to time.
2.3 Area means: The area of the Leased Premises as calculated in the
manner stipulated in Schedule "D".
2.4 Building means: The building or buildings, as these may be added or
modified from time to time, found on parcel of land described in
Schedule "B".
2.5 Capital Tax means: For the purpose of this lease, "Capital Tax" means
the capital tax liability of the Landlord for each of the Landlord's
fiscal years during the Term or any renewal thereof as per the
Landlord's tax returns multiplied by the proportion that the net book
value of the Property is of the net book value of the total assets of
the Landlord, as determined in accordance with the Landlord's audited
financial statements.
2.6 Commencement Date means: The first day of the Term.
2.7 Common Areas and Facilities means:
(a) Those areas, facilities, utilities, improvements, equipment
and installations in the Property which, from time to time,
are not designated or intended by the Landlord to be used
exclusively for the benefit of any individual tenant of the
Property; and
(b) Those areas, facilities, utilities, improvements, equipment
and installations which serve or are for the benefit of the
Property, whether or not located within, adjacent to, or near
the Property and which are not designated from time to time by
the Landlord as part of the Common Areas and Facilities of the
Property. Common Areas and Facilities include, without
limitation, all areas, facilities, utilities, improvements,
equipment and installations which are provided or designated
(and which may be changed from time to time) by the Landlord
for the use or benefit of the tenants, their employees,
customers and other Persons for whom Landlord shall permit the
use or benefit thereof, in the manner and for the purpose
permitted by the Lease.
(C) Without limiting the generality of (a) and (b) above, Common
Areas and Facilities include the roof, exterior wall
assemblies including weather walls, exterior and interior
structural elements and bearing walls in the buildings and
improvements comprising the Property; parking areas and
parking garages, all entrances and exits thereto and all
structural elements thereof, employee parking areas, truck
courts, access roads, driveways, truckways, delivery
passages, package pickup stations; loading docks and related
areas; pedestrian sidewalks, covered walkways and sidewalks;
roadways; landscaped and planted areas; courts and arcades;
public seating and service areas; corridors; bus kiosk, if
any; roadways and stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways, ramps, moving
sidewalks, and other transportation equipment and
<PAGE> 6
Montreal Industrial Lease
Page 3
systems; electrical, telephone, meter, valve, mechanical,
mail, storage, service and janitor rooms and galleries;
communication, security and fire prevention and protection
systems; general signs; columns, pipes, electrical, plumbing,
drainage, mechanical and all other installations, equipment or
services located therein or related thereto, as well as the
structures housing the same.
2.8 CPI means: The Consumer Price Index, all Items Montreal, established by
Statistics Canada or any index in substitution and/or replacement
thereof, published by Statistics Canada or any other federal or
provincial governmental agency. In the case of any required
substitution, Landlord shall be entitled to make all necessary
conversions for comparison purposes.
2.9 Date of Occupancy means: The date on which Landlord is ready to give
possession of the Leased Premises to the Tenant, subject to the terms
stipulated in the Article entitled "Occupancy".
2.10 Deposit means: The amount(s) stipulated in the Article entitled
"Deposit".
2.11 Landlord means: The party first hereinabove described or its successors
and assigns.
2.12 Landlord's Work means: The work to be executed by Landlord as
stipulated in the Articles entitled "Landlord's Work" and "Landlord's
Work at Tenant's Expense".
2.13 Lease means: This agreement and all attached Schedules.
2.14 Leased Premises means: The premises described in paragraph 1.2, the
location of which is outlined in red on Schedule "A".
2.15 Lease Year means: In the case of the first Lease Year, a period
commencing on the Commencement Date and terminating on the last day of
the twelfth month thereafter and shall also refer to any succeeding
twelve (12) month period thereafter.
2.16 Minimum Net Net Rental means: The amount stipulated in the Article
entitled "Minimum Net Net Rental".
2.17 Operating Costs means: The aggregate of Landlord's annual costs and
expenses incurred in insuring, operating, administering and if
applicable, maintaining the Property and shall include, without
duplication or limitation, the cost of:
(i) all expenses incurred by Landlord in obtaining or attempting
to obtain a reduction of real estate taxes, the whole subject
to the Article of this Lease entitled "Contestation of Taxes";
(ii) the cost of insuring the Property (including such insurance as
the Landlord shall effect or shall be required to effect by
<PAGE> 7
Montreal Industrial Lease
Page 4
any secured creditor) against fire and any other perils which
presently are or hereafter may be, from time to time, embraced
by or defined in a standard fire insurance policy with
extensive coverage, comprehensive general liability,
insurance, boiler and pressure vessel insurance, business
interruption and/or loss of rentals insurance and such other
insurance as the Landlord, acting reasonably, may deem
necessary or advisable.
(iii) Capital Tax as defined herein.
(iv) Debt Service in accordance with the Article entitled "Rental
on the Net Net Return Basis".
2.18 Person means, depending on context: Any person, firm, company,
corporation, partnership, association, or any group or combination
thereof.
2.19 Property means: The lands and buildings found on the lots described in
Schedule "B" as these may be varied, from time to time, by adding or
subtracting land or Buildings or by any other means as Landlord
considers necessary or advisable, even if parts of the said lands or
Buildings may be separated from others by lanes, streets, highways or
any other means of passage in or upon which others may have rights. The
said lands or Buildings shall include all buildings, construction and
Common Areas and Facilities on the lands and/or Buildings as each of
the foregoing exists from time to time.
2.20 Proportionate Share means: 100% of the Operating Costs and Taxes of the
property and of the Leased Premises.
2.21 Sales Tax means: Any goods and services tax, business transfer tax,
value-added tax, multi-stage sales tax, sales tax or any other tax
imposed with respect to Minimum Net Net Rental and Additional Rental
payable under this Lease, whatever name such tax may bear and whether
such tax is in force at the date hereof or whether it is adopted
subsequently. The amount of the Sales Tax so payable by Tenant shall be
calculated by Landlord in accordance with the applicable legislation
and shall be paid to Landlord at the same time as the amounts to which
such Sales Tax apply or at such other time as Landlord may from time to
time determine. Landlord shall have the same remedies for and rights of
recovery of such amounts as it has for the recovery of Additional
Rental.
2.22 Security means: Any hypothec, trust deed, debenture or other security
to be placed from time to time on the Property or any part thereof for
the purpose of securing any indebtedness of Landlord.
2.23 Taxes means: All taxes, whether special or general, including, without
limitation, property taxes, municipal taxes, school taxes, levies,
charges, rates including local improvement rates, duties and
assessments that may now or in the future be levied, rated, charged
<PAGE> 8
Montreal Industrial Lease
Page 5
or assessed against the Property, and/or all equipment and facilities
thereon or therein and/or the land described in Schedule "B" attached
hereto, and/or any property on or in the Building owned or brought
thereon or therein by the Landlord and/or against Landlord
or Tenant and/or its Transferees in respect thereof, whether such
taxes, rates, duties or assessments are charged by a municipal,
parliamentary, school or any other body of competent jurisdiction. If
the system of real estate taxation shall be altered or varied and any
new tax shall be levied or imposed on the Property and/or the revenues
therefrom and/or the Landlord in substitution for and/or in addition to
real estate taxes presently levied or imposed on immovables in the
City, Region, Province or Country in which the Property is situated,
then any such new tax or levy shall be included within the present
definition of Taxes. However, Tenant shall not be responsible for any
income tax or corporation taxes of the Landlord, save and except for
its Proportionate Share of Capital Tax and Tenants shall be solely
responsible for any Sales Tax.
2.24 Tenant means: The person executing this Lease as Tenant. Tenant also
includes all employees, mandatories and contractors of Tenant, as well
as any Person under Tenant's control or for whom Tenant is responsible.
2.25 Tenant Security means: Any trust deed, bond, debenture, pledge,
commercial pledge, warehouse receipt, conditional sales contract,
privilege, hypothec, charge or any other form of encumbrance or
security granted by or agreed to by Tenant or any other Person (other
than Landlord) with respect to its rights in this Lease, the Leased
Premises, or any property, whether movable or immovable, located in or
forming part of the Leased Premises, to secure, in whole or in part,
any loan, indebtedness, credit line, or other obligation.
2.26 Tenant's Work means: The work to be executed by Tenant as stipulated in
the Article entitled "Tenant's Work".
2.27 Term means: The period specified in the Article entitled "Term" and
includes all renewals or extensions agreed to in writing by the
Landlord.
2.28 Termination Date means: The last day of the Term as herein defined or
any renewal thereof, or the last day of the Term or renewal thereof
which is terminated prior to the Termination Date.
2.29 Transfer means: Any assignment or transfer of this Lease (other than as
Tenant Security), any sublease or permitted occupation of all or any
part of the Leased Premises to any Person (hereinafter the
"Transferee") and any amalgamation or change in the effective control
of the voting shares of Tenant if Tenant is a corporation, or any
change in the partners constituting the partnership or any change in
the interest of the partners in the partnership if Tenant is a
partnership, from conditions existing on the date the corporation or
the partnership first incurs any obligations to Landlord pursuant to
this Lease, the whole whether effected by sale, by assignment, by
operation of law or otherwise.
3. TERM
Landlord hereby leases the Leased Premises to Tenant for a Term of ten
(10) years, commencing on the first day of February 1995 and terminating on the
last day of January 2005 unless sooner terminated under the provisions hereof.
<PAGE> 9
Montreal Industrial Lease
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Should the Tenant continue to occupy the Leased Premises after the
expiry of the Term, without a written agreement there shall be no tacit renewal
and the Tenant shall pay to the Landlord, as liquidated damages, the highest
Minimum Net Net Rental payable during the Term and Additional Rental for the
period of occupancy plus fifty percent (50%) thereof, without prejudice to any
of Landlord's other rights and recourses including Landlord's right to obtain
vacant possession of the Leased Premises. Tenant acknowledges that it is not to
have the right to occupy the Leased Premises beyond the expiry of the Term.
4. OCCUPANCY
Tenant shall be allowed to occupy the Leased Premises on February 1,
1995 (hereinafter referred to as the "Date of Occupancy").
If the Landlord is unable to give possession of the Leased Premises to
the Tenant on the Commencement Date, the Lease shall not be void or voidable nor
shall the Landlord be liable for any loss or damage resulting therefrom.
However, any postponement of the Date of Occupancy by Landlord shall have the
effect of delaying the Commencement Date and the Termination Date for a number
of days equal to the number of days such postponement, the whole without any
liability on the part of the Landlord.
5. MINIMUM NET NET RENTAL
Tenant covenants and agrees to pay to Landlord in lawful money of
Canada without deduction, abatement or setoff, a Minimum Net Net Rental as
follows:
a) during the period from February 1, 1995 to January 31, 1996, the
amount of thirty-eight thousand seven hundred thirty-nine dollars and
ninety-six cents ($38,739.96) per annum, net, net, payable in equal
consecutive monthly instalments, each in advance, on the first day of
each month during the said period of three thousand two hundred
twenty-eight dollars and thirty-three cents ($3,228.33) each;
b) during the period from February 1, 1996 to January 31, 1997, the
amount of forty-one thousand seven hundred twenty dollars and four
cents ($41,720.04) per annum, net, net, payable in equal consecutive
monthly instalments, each in advance, on the first day of each month
during the said period of three thousand four hundred seventy-six
dollars and sixty-seven cents ($3,476.67) each.
c) during the period from February 1, 1997 to January 31, 1998, the
amount of forty-four thousand seven hundred dollars ($44,700.00) per
annum, net, net, payable in equal consecutive monthly instalments,
each in advance, on the first day of each month during the said period
of three thousand seven hundred twenty-five dollars ($3,725.00) each;
d) during the period from February 1, 1998 to January 31, 1999, the
amount of forty-seven thousand six hundred seventy-nine dollars and
ninety-six cents ($47,679.96) per annum, net, net, payable in equal
consecutive monthly instalments, each in advance, on the first day of
each month during the said period of three thousand nine hundred
seventy-three dollars and thirty-three cents ($3,973.33) each.
e) during the period from February 1, 1999 to January 31, 2000, the
amount of fifty thousand six hundred sixty dollars and four cents
($50,660.04) per annum, net, net, payable in equal consecutive monthly
instalments, each in advance, on the first day of each month during
the said period of four thousand two hundred twenty-one dollars and
sixty-seven cents ($4,221.67) each;
f) during the period from February 1, 2000 to January 31, 2005, the
amount of fifty-nine thousand six hundred dollars and four cents
($59,600.04) per annum, net, net, payable in equal consecutive
<PAGE> 10
Montreal Industrial Lease
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monthly instalments, each in advance, on the first day of each month
during the said period of four thousand nine hundred sixty-six dollars
and sixty-seven cents ($4,966.67) each.
Any Minimum Net Net Rental due for any period of time during the Term
which is less than a month shall be paid for on a pro-rated basis.
The Minimum Net Net Rental shall be considered as annual and accruing
from day to day and where it becomes necessary for any reason to calculate such
rental for an irregular period of less than one (1) Lease Year, an appropriate
apportionment and adjustment shall be made.
The Minimum Net Net Rental as herein provided shall be paid to Landlord
and/or its nominee at the Head Office of the Landlord, at 7405 Trans Canada
Highway, St. Laurent, Quebec, H4T 1Z2, or at such other place in Canada as shall
be designated by Landlord in writing to Tenant.
6. RENTAL ON NET NET RETURN BASIS
It is agreed and understood between the parties that the Minimum Net
Net Rental herein shall be a revenue absolutely net, net to the Landlord, free
of any and all costs and expenses of any nature whatsoever. Tenant shall pay on
its own account, to the complete exoneration of Landlord, all taxes and expenses
of whatsoever nature, its Proportionate Share of Operating Costs and Taxes and
any Additional Rental with respect to the Leased Premises unless otherwise
stipulated in this Lease. It is understood that Tenant shall be responsible for
the payment of any increase in the interest and capital repayments of Landlord
with respect to mortgages or other security that Landlord may be subjected to
after the Commencement Date of the Term of this Lease (hereinafter "Debt
Service"). The Landlord shall be responsible for any income tax or corporation
taxes due by Landlord. Tenant shall pay is Proportionate Share of Capital Tax
and Tenant shall be solely responsible for any Sales Tax.
Without limiting the generality of the foregoing, Tenant shall, in each
and every Lease Year, pay and discharge or cause to be paid and discharged all
license fees, public utility charges, water rates, sewer rates and other like
fees, charges, rates and assessments that may be levied, charged, rated or
assessed against the Leased Premises and/or all equipment and facilities thereon
or therein and/or any property on the Leased Premises owned or brought thereon
by Tenant, and any and every of its Transferees or visitors and/or against
Landlord or Tenant in respect thereof, and every tax and license fee in respect
of any and every business carried on therein, or with respect to the occupancy
of the Leased Premises by Tenant (and any and every of its Transferees), whether
such license fees, charges, rates, assessments and taxes are charged by
municipal, parliamentary, school or any other body of competent jurisdiction,
and all charges for public utilities including electric current, gas, water,
steam or hot water used upon or in respect of the Leased Premises and for
fittings, machines, apparatus, meters or other things leased in respect thereof
and for all work or services performed by a corporation or commission in
connection with such public utilities. Tenant shall indemnify and hold the
Landlord harmless from and against payment of all losses, costs, charges and
expenses occasioned by and arising from any and every such duty, license fee,
charge, rate, assessment and tax. If such tax, rate, charge, assessment, duty or
license fee should be assessed or charged to Landlord for all or a substantial
number of the tenants of the Property. Tenant shall, at Landlord's discretion
and upon demand in the manner determined by Landlord, pay its Proportionate
Share of such duty, license fee, charge, rate, assessment and tax.
It is further agreed and understood that any amount and any obligation
which is not expressly declared in this Lease to be that of the Landlord shall
be deemed to be the obligation of the Tenant. Without limiting the
generality of the foregoing, should at any time the taxation authorities
directly attribute any part of the Taxes to the Leased Premises or the
Improvements
<PAGE> 11
Montreal Industrial Lease
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therein, Tenant shall pay for same in addition to Tenant's Proportionate Share
of the remainder of the Taxes.
Tenant shall furnish to Landlord, immediately upon Landlord's request,
a receipt or other appropriate evidence satisfactory to Landlord as to the
payment of any amounts payable by Tenant pursuant to the present Article.
7. ADDITIONAL RENTAL
It is agreed and understood that Additional Rental other than Tenant's
Proportionate Share, shall be payable on the first day of the month immediately
following the date the said amount is claimed, or on such date as the Landlord
may designate. Where the calculation of any Additional Rental is not made until
after the Termination Date, the obligation of the Tenant to pay such Additional
Rental shall survive the termination of this Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
8. PAYMENT OF TENANT'S PROPORTIONATE SHARE
On the first day of each and every month, Tenant shall pay to the
Landlord throughout the Term or any renewals, its Proportionate Share of the
Operating Costs and Taxes, as well as an administration fee equal to the three
percent (3%) of the said Operating Costs and Taxes and of the Minimum Net Net
Rental as well as three percent (3%) of the total costs and expenses incurred by
the Tenant, for the month immediately preceding, in maintaining, repairing and
operating the Property, (the said costs and expenses incurred by Tenant being
hereinafter referred to as "Tenant's Costs"). Upon Landlord's request, the
Tenant shall furnish the Landlord with a statement in writing showing in
reasonable detail and in such a form as Landlord may require the Tenant's Costs.
Furthermore, Tenant shall furnish to Landlord, immediately upon Landlord's
request, receipts or other appropriate evidence satisfactory to Landlord as to
the payment of Tenant's Costs and shall make available to Landlord for
Landlord's inspection and audit Tenant's books and records relating to Tenant's
Costs.
Notwithstanding anything to the contrary herein contained, the Landlord
may, prior to the commencement of each calendar year or as soon thereafter as is
reasonably possible, furnish to the Tenant an estimate of the Operating Costs
and Taxes for such calendar year, and the Tenant shall pay to the Landlord, in
advance, on the first day of each month during the year in question, Additional
Rental equal to one twelfth (1/12) of the Tenant's Proportionate Share of the
estimated Operating Costs and Taxes. Should the first Lease Year of the Term not
commence on the first (1st) day of January or should the last Lease Year of the
Term not terminate on the thirty-first (31st) day of December, then prior to the
Commencement Date of the Term or prior to the anniversary of the Commencement
Date in the last Lease Year of the Term, as the case may be, or as soon
thereafter as is reasonably possible, Landlord shall furnish to Tenant an
estimate of the Operating Costs and Taxes for the part of the Lease Year in
question, and the Tenant shall pay to the Landlord, in advance, on the first day
of each month during the part of the Lease Year in question. Additional Rental
equal to the Tenant's Proportionate Share of the estimated Operating Costs and
Taxes divided by the number of months for that part of the Lease Year in
question.
After the end of each calendar year, or after the end of the Term in
the case of the final Lease Year, the Landlord shall furnish the Tenant with
financial statements setting forth the actual Operating Costs and Taxes for such
calendar year (or part of the Lease Year, as the case may be) and the Tenant
shall pay to the Landlord forthwith an amount equal to its Proportionate Share
of the excess in of the actual Operating Costs and Taxes over the estimated
Operating Costs and Taxes. Should the estimated Operating Costs and Taxes exceed
the actual Operating Costs and Taxes, the Tenant shall receive credit for its
Proportionate Share of the excess. The appropriate adjustments shall be made
between the parties hereto within thirty (30) days
<PAGE> 12
Montreal Industrial Lease
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opinion, hinders or interrupts the flow of traffic to, in or
from the Property and shall not do, nor suffer or permit
anything to be done, which in the Landlord's opinion, in any
way obstructs the free movement of people doing business in
the Property;
(iv) not to bring upon the Leased Premises or any part thereof any
machinery, equipment, article or thing that by reason of its
weight, function or size might damage the Leased Premises and
not to overload the floors of the Leased Premises at any time
and if any damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by overloading or by
any act, neglect or misuse on the part of Tenant, Tenant will
forthwith pay to Landlord the cost of restoring the Leased
Premises to their original condition;
(v) not to obstruct the sidewalks, entries, passage corridors and
stairways, or use same for purposes other than for ingress and
egress to or from the Leased Premises, and the Tenant shall
save the Landlord harmless from damages to persons or property
because of any articles thrown by the Tenant out of the
windows or doors or down the passages of the Building.
14. CONDITION OF PREMISES
The Tenant represents that the Leased Premises have been examined by
the Tenant and that the Tenant accepts the same, in the condition or state in
which they are at the Date of Occupancy by Tenant, without representation or
warranty, expressed or implied, oral or written, in fact or in law, by the
Landlord, and without recourse to the Landlord as to the nature, condition or
usability thereof or as to the use or uses to which the Leased Premises or any
part thereof may be put.
15. RELOCATION
Landlord shall have the right at any time either during the Term or
prior to the Commencement Date thereof, to change the location of the Leased
Premises as set forth in Article 1.2 hereof to comparable premises in the
Building or in any of Landlord's other buildings or in any other building in
which Landlord has an interest. Should Landlord desire to move Tenant after the
Commencement Date, Landlord shall pay all reasonable transportation, telephone
installation and reasonable printing costs relating to letterheads and business
cards in stock, as well as reasonable printing costs of notice of change of
address to Tenant's customers, provided Tenant submits proof of payment of said
costs.
16. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of Articles 1604(2), 1605 and 1627 of
the Civil Code of Lower Canada, the Tenant shall, at its own expense, operate,
maintain and keep the Leased Premises including all facilities, equipment and
services, both inside and outside, available to the Tenant exclusively, in such
good order and condition as they would be kept by a prudent owner and Tenant
shall promptly make all needed repairs and replacements to the Leased Premises
(save and except for those structural repairs and replacements that are
exceptional, nonrecurring and result from latent defects ) which a careful owner
would make, including without limitation, the water, gas, drain and sewer
connections, pipes and mains, electrical wiring, water closets, sinks and
accessories thereof, and all equipment belonging to or connected with the Leased
Premises or used in its operation.
<PAGE> 13
Montreal Industrial Lease
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17. INSPECTION AND REPAIR
Landlord and its representatives shall have the right, during all
reasonable business hours during the Term, to enter the Leased Premises to
examine the condition thereof and to ascertain whether Tenant is performing its
obligations hereunder, and Tenant shall make any repairs which Tenant is obliged
to make pursuant to the terms of this Lease. If Tenant fails to make any such
repairs within thirty (30) days after written notice from Landlord requesting
Tenant to do so, provided that such repairs may reasonably be made within the
said period, Landlord may, without prejudice to any other rights or remedies it
may have, make such repairs and charge the cost thereof to Tenant. Nothing in
this Lease shall be construed to obligate or require Landlord to make any
repairs for which the Tenant is responsible hereunder but Landlord shall have
the right at any time to make emergency or urgent repairs without prior notice
to Tenant and charge the cost thereof to Tenant. Any costs chargeable to Tenant
hereinabove shall be payable forthwith on demand as Additional Rent and shall
bear interest from the date of such demand at the prime lending rate as
determined by the Royal Bank of Canada on a daily basis plus four percent (4%)
until paid to Landlord in full.
18. ODOURS, DUST OR NOISE
The Tenant warrants that no noxious/obnoxious odours, dust or noise
will emanate from the Leased Premises as a result of the operations conducted by
the Tenant therein and Tenant further covenants that it will not cause or
maintain any nuisance in, at or on the Leased Premises and/or the Property and
Tenant further warrants that it will not use the Leased Premises for any purpose
or in any manner notwithstanding anything stated in this Lease which may cause
noise, disturbance or noxious/obnoxious odours to the discomfort of other
tenants, neighbors, or to the public in general. Accordingly, the Tenant agrees
that should such noxious/obnoxious odour, dust or noise conditions
exist, or should Landlord receive any complaint of odours, dust, noise or any
other nuisance, Tenant will, at its own cost and expense, take such steps as may
be necessary to rectify the same, including any expertise Landlord may require,
which expertise must be acceptable to Landlord, provided further that if the
Tenant shall fail to commence to do so within forty-eight (48) hours and
complete the same within a reasonable time after notice is received by the
Tenant from the Landlord, then the Landlord may at its option and without
prejudice to its other rights and recourses:
(a) notify Tenant that it must shut down all of its operations in
the Leased Premises; and
(b) Landlord may proceed forthwith to take reasonable measures to
correct the same, at Tenant's cost as Additional Rental.
19. GARBAGE, DEBRIS, REFUSE AND EXTERMINATION
The Tenant shall not place or leave or permit to be placed or left in
or upon any part of the Property outside of the Leased Premises any debris or
refuse except as allowed by the Landlord at specific times and deposited in
areas indicated by the Landlord in proper receptacles provided and placed for
that purpose by the Tenant and Tenant shall furthermore comply with any of
Landlord's rules and regulations with respect to garbage containers. The Tenant
shall arrange and pay for the cost of those services required to remove
diligently and efficiently all of Tenant's garbage and refuse of any nature
whatsoever.
Tenant, at its sole cost shall keep, the Leased Premises shall be kept
in a clean and sanitary condition and in accordance with the laws of the
municipality in which the Property is located and in accordance with all other
<PAGE> 14
Montreal Industrial Lease
Page 12
regulations of any agency having jurisdiction over the Property and in
accordance with the instructions, policies and recommendations of Landlord's
insurers. If any such laws, instructions, policies and recommendations by
Landlord's insurers require any changes whatsoever to the Leased Premises, the
Tenant shall effect such changes at its own expense but subject to the approval
of the Landlord. The Tenant agrees to provide strict measures for rat prevention
and pest control and shall, if the Landlord deems the same to be necessary,
enter into a regular contract with a firm of exterminators acceptable to
Landlord. In the event that the Tenant fails to comply with the foregoing
provisions, then Landlord, without prejudice to all of its other rights and
recourses, shall have the right, without prior notice to the Tenant, to engage a
firm of exterminators and to enter the Leased Premises with representatives of
said firm in order to rectify the situation, the whole at Tenant's cost as
Additional Rental.
20. ACCESS
The Landlord shall have the right of access to the Leased Premises only
during reasonable business hours (except in the case of an emergency when
Landlord shall have access at all times), and the right to perform such work as
it chooses to do upon the Leased Premises, the Tenant renouncing any claim to
any indemnity or reduction in rental provided such work be carried out with
reasonable diligence.
21. PARKING
Parking shall be regulated by the Landlord in a reasonable manner and
the Tenant and its customers shall abide by such regulations as may from time to
time be established by the Landlord. If requested by the Landlord, the Tenant
shall supply its employees' automobile licence numbers to the Landlord. Tenant
shall indemnify and hold Landlord harmless from any claims should Landlord find
it necessary to tow away from a restricted area any vehicle belonging to Tenant
or to its customers.
The Tenant acknowledges that the parking of its vehicle(s) and those of
its customers in the parking facilities shall be at the risk and peril of Tenant
and/or its customers, and that the Landlord shall not be responsible for any
damages or loss whatsoever, whether caused by theft, fire or any other cause, to
the Tenant's vehicle(s) or to those of its customers or to any property found in
Tenant's vehicle(s) or those of its customers or for any injury to Tenant or
other Persons on or in the immediate vicinity of the parking facilities and
Tenant hereby releases Landlord of all liabilities of whatsoever nature with
respect to the above.
Notwithstanding anything contained herein, Tenant agrees to participate
in a ticket validation system if one is established by the Landlord for the
parking facilities of the Property, and to pay forthwith on demand as Additional
Rental, all attributable parking charges.
22. SIGNS OF LANDLORD
Landlord shall have the right, at all times, to place upon the Property
a notice of reasonable dimensions and reasonably placed in order not to
interfere with the business of Tenant, stating that the Property is for sale
and/or rent, and Landlord shall have the right, during the last six (6) months
prior to the Termination Date, to place upon the Leased Premises a notice of
reasonable dimensions and reasonably placed stating that the Leased Premises are
for rent and Tenant will not remove any such notice or knowingly permit either
of them to be removed.
Landlord shall have the right to exhibit the Leased Premises from time
to time to any prospective tenant or hypothecary creditor during all business
hours of the Tenant and Tenant hereby renounces to Article 1645 of the Civil
Code of Lower Canada.
<PAGE> 15
Montreal Industrial Lease
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23. SIGNS OF TENANT
The Tenant shall be entitled, at its expense, to install on the Leased
Premises such signs as are normally installed in connection with its business,
as well as to identify itself on the exterior front of the Building provided
such signs comply with municipal by-laws and with the Rules and Regulations as
established from time to time by Landlord in accordance with the Article
entitled "Rules and Regulations", and provided further that the Tenant obtains
Landlord's consent for both the sign and its location. Furthermore, the
authorization to install a sign will be issued in exchange for a deposit
equivalent to the estimated cost of the repair of the supporting Building
surface following the removal of the sign and Landlord shall not pay any
interest to Tenant on said deposit. The installed sign must be subject to
inspection by the Landlord who will proceed to the inspection upon receipt of
proof of municipal permit and, in the case of electrified signs, of proof of
approval by the Canadian Standards Association or other governing body.
Except as provided above and unless specifically provided for in this
Lease, Tenant shall not be entitled to install or put up any signs or posters of
whatsoever nature on the windows of the Leased Premises and/or the Building
and/or the Property.
All civic numbers are supplied and installed at Tenant's expense by the
Landlord according to its standards. The Tenant's identification at the rear of
the Building is also supplied and installed by the Landlord at Tenant's expense
according to Belcourt's standard # 20.11.87 attached to the Rules and
Regulations in Schedule E.
In the event that Tenant installs any sign without satisfying the
requirements of this Article, Tenant shall remove such sign upon receipt of
Landlord's notice. If Tenant fails to remove such sign within twenty-four (24)
hours of receipt of Landlord's notice, then Landlord shall have the right,
without further notice or any form of legal process, to remove same at Tenant's
expense and to repair any damages caused by such removal. Landlord shall not be
responsible for damages to Tenant's property or sign resulting from such
removal. Tenant expressly waives its recourse in damages against the Landlord
and shall hold Landlord harmless of any claim by any third party with respect to
the said sign. Tenant shall immediately pay Landlord for all costs described
hereinabove, upon demand, as Additional Rental.
24. LANDLORD'S WORK
The Leased Premises shall be delivered in an "as is" basis and Tenant
accepts same in the condition in which they are at the signing of these
presents.
25. IMPROVEMENTS AND ALTERATIONS
(a) The Tenant shall not have the right to execute any
changes, alterations, additions, erections, leasehold
improvements, repairs and installations to the Leased Premises
(hereinafter the "Work"), unless it has obtained Landlord's
prior written consent. In the event Landlord consents to such
Work, then Tenant undertakes to conform to the conditions
stipulated hereunder.
(I) All Work shall be carried out with
reasonable dispatch and in a good
workmanlike manner and in compliance with
all applicable permits, authorizations,
building and zoning by-laws and with all
regulations and requirements of all
competent authorities having jurisdiction
over the Leased Premises;
<PAGE> 16
Montreal Industrial Lease
Page 14
(ii) The Property shall at all times be free of
all pledges, registered privileges and any
other encumbrances;
(iii) If the cost of any Work shall be in excess
of five thousand dollars ($5,000.00) as
reasonably estimated by Landlord, Landlord
may require Tenant to furnish security
satisfactory to Landlord guaranteeing the
completion of the Work, the payment of the
cost thereof and that the Property is free
and clear of all pledges, registered
privileges and any other encumbrances;
(iv) Tenant shall maintain workmen's compensation
insurance covering all persons employed in
connection with the Work and shall produce
evidence of such insurance to Landlord and
Tenant shall also maintain such general
liability insurance for the protection of
Landlord and Tenant upon the terms Landlord
may reasonably require, as well as
contractor's protective liability insurance.
Tenant shall further comply with all of the
stipulations of the Article entitle "CSST"
(Commission de la Sante et de la Securite au
Travail du Quebec);
(v) The Tenant shall promptly pay for all
materials supplied and work done in respect
of the Leased Premises in order to ensure
that no privilege is registered against any
portion of the Property. If a privilege is
registered or filed, the Tenant shall
forthwith discharge it as its expense,
failing which the Landlord may, at its
option, discharge the same by paying the
amount claimed to be due into court or
directly to any such privilege claimant and
the amount so paid and all expenses of the
Landlord including any judicial and
extrajudicial costs and attorney's fees
incurred by the Landlord shall be paid by
the Tenant to the Landlord within five (5)
days after demand.
It is agreed and understood that no work by
or on behalf of Tenant shall be permitted which, in
Landlord's sole judgement, may weaken or endanger the
structure or adversely affect the condition or
operation of the Leased Premises and/or the Property
or diminish the value thereof or restrict or reduce
Landlord's coverage for Insurance purposes.
(b) Notwithstanding the contents of (a) above,
Landlord may, at its sole option and discretion,
execute itself or inspect any Work approved by
landlord, in which event he Tenant shall pay for the
costs of either the Work or the inspection thereof,
and, in the event that landlord executes the Work,
Tenant shall pay an additional amount equal to twenty
percent (20%) of the costs of said Work on account of
Landlord's overhead and administration costs.
However, whether or not Landlord carries out or
inspects the Work, the Tenant shall pay the fees of
all architectural and engineering consultants and/or
the cost of all construction drawings prepared to
comply with the Tenant's requirements and for the
cost of entering the information of such drawings on
the original drawings of the Building, as well as
twenty percent (20%) of such costs on account of
administration and general expenses of Landlord.
Payment shall be effected by way of a cash deposit
and progress draws during the course of the Work, the
specifics of which shall be established by the
Landlord, acting reasonably, from time to time.
(c) Any Work by the Tenant made without the prior
written consent of the Landlord, or which is not made
in accordance with the design criteria and
specifications approved by the Landlord, shall be
removed by the Tenant immediately upon demand and the
Leased Premises shall be restored to their previous
condition by Tenant, the whole at the Tenant's cost,
failing which landlord shall have the right
<PAGE> 17
Montreal Industrial Lease
Page 15
to remove said Work at Tenant's entire cost and
Landlord shall not be responsible for damages to
Tenant's property resulting from such removal.
(d) Notwithstanding anything contained in this
Article, Tenant shall not have the right to do any
structural, mechanical or electrical Work in the
Leased Premises.
In the event that Tenant requests any
structural, mechanical or electrical Work, Landlord,
at its sole option and discretion, shall be entitled
to execute said Work. Said Work shall be governed by
the provisions of sub-paragraph (b) above.
In the event that Landlord does not choose
to execute said Work and consents to having Tenant
execute same, then Tenant shall furnish to Landlord
plans and specifications showing in reasonably
complete detail the Work proposed to be carried out
and the estimated cost thereof. Landlord shall
approve or reject such plans and specifications
within thirty (30) days after receipt of the same. If
such plans and specifications are approved, all Work
shall be carried out in compliance with the same.
Furthermore, in the case where Tenant is authorized
to carry out said Work, Tenant shall, at its cost,
provide Landlord with an engineer's certificate upon
completion of said Work. Any costs Incurred by
Landlord of any nature whatsoever in order to permit
Landlord to approve or reject Tenant's plans and
specifications shall be reimbursed by Tenant
immediately upon Landlord's request. In addition to
the above, Tenant shall comply with all the
conditions stipulated in (a) and (c) above.
It is agreed and understood that when completed, all
Work shall be comprised in and form part of the Leased
Premises and be subject to all the provisions of this Lease.
Furthermore, any authorization given by Landlord to Tenant to
do any work in accordance with this Article, shall not relieve
Tenant of its responsibility for the Work in question.
Subject to the terms and conditions of this Article,
in the event that the Tenant constructs a mezzanine in the
Leased Premises, the Tenant will pay the amount of any
increase in Taxes on the whole of the Building of which the
Leased Premises form part, if such increase is caused by the
construction or occupancy of said mezzanine. Furthermore, the
Tenant will pay for any increase Operating Costs resulting
from the construction or occupancy of the said mezzanine.
Tenant shall not make use or cause to be removed any
part or all of the ceiling system for any purposes, including
that of storage.
Moreover, Tenant shall pay to Landlord the amount of
any increase for any Taxes to the extent that such increase is
directly attributable to any action by Tenant under this
Article.
26. CSST (COMMISSION DE LA SANTE ET DE LA SECURITE AU
TRAVAIL DUE QUEBEC)
Tenant shall ensure itself that its contractor and/or
subcontractors comply with all the requirements established by
La Commission de la Sante et de la Securite au Travail due
Quebec (hereinafter the "CSST") and more specifically, Tenant
shall ensure itself that its contractor and/or subcontractors
have instituted a safety program for its employees. Tenant
shall provide proof to Landlord, upon demand, that all
requirements of the CSST have been met. It is expressly
understood that Tenant shall indemnify and hold Landlord
harmless from any proceedings, claim or demand which could be
instituted against Landlord for the failure of Tenant's
contractor and/or subcontractors to comply with CSST's
requirements and the Tenant shall pay upon demand any judicial
or extrajudicial costs so incurred by Landlord.
<PAGE> 18
Montreal Industrial Lease
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27. INSURANCE REQUIREMENTS
Tenant shall not do or commit any act upon the Leased Premises or bring
into or keep upon the Leased Premises any article which will affect the fire
risk or increase the rate of fire insurance or other insurance on the Property.
Tenant shall not commit any act upon the Leased Premises or make any
use thereof which may make void or voidable any insurance on the Leased Premises
or on the Building or Property and should any act so committed or any use so
made by Tenant, including any unauthorized vacancy thereof, result in an
increased or extra premium payable for insurance on the Leased Premises,
Building or Property, then Landlord may, in addition to all other remedies,
elect to pay the amount of such increase or extra premium, the amount so paid
becoming immediately due and payable by Tenant and collectible as Additional
Rental.
Tenant shall comply with the rules and requirements of the Insurers'
Advisory Organization of Canada or any successor body, and/or a loss prevention
firm or consultant chosen by Landlord's insurers, and with the requirements of
all insurance companies having policies of any kind whatsoever in effect
covering the Property, including policies insuring against defectual liability.
In no event shall any inflammable material, except for kinds and
quantities permitted by the insurance policies covering the Property, or any
explosives or radioactive material whatsoever, be taken into the Leased Premises
or retained therein.
Tenant shall take out and keep in force the following insurance:
(a) comprehensive general liability insurance including blanket
contractual liability and broad form property damage coverage,
with respect to the business carried on in or from the Leased
Premises and the use and occupancy thereof, for bodily injury
and death and damage to property of others in an amount of at
least two million dollars ($2,000,000.00) for each occurrence
or such greater amount as Landlord may, from time to time,
reasonably require;
(b) an "all risks" insurance with extended coverage including the
perils of fire, leakage, from sprinklers and other fire
protective devices, earthquake, collapse, flood and sewer
back-ups in respect to furniture, equipment, inventory and
stock in trade, fixtures (plate glass if appropriate) and
leasehold improvements located within the Leased Premises and
such other property located in or forming part of the Leased
Premises, including all mechanical or electrical systems (or
portions thereof) installed by Tenant in the Leased Premises,
the whole for the full replacement value thereof (without
depreciation) in each such instance;
(c) Tenant's legal liability insurance in an amount equal to the
replacement cost of the leased premises or such greater amount
as Landlord may, from time to time, reasonably require;
(d) an environmental liability policy of a coverage of at least
one million dollars ($1,000,000.00); and
(e) such additional insurance as Landlord or its insurers, acting
reasonably, may from time to time require.
All the above-mentioned policies of insurance shall (I) be in form
satisfactory to Landlord; (ii) be placed with insurers acceptable to Landlord
and (iii) provide that they will not be cancelled or permitted to laps unless
the insurer notifies Landlord in writing at least sixty (60) days prior to the
date
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Montreal Industrial Lease
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of cancellation or lapse. Each such policy shall name Landlord and any other
party required by Landlord, as an additional insured as their interest may
appear. Each liability policy will contain a provision of cross-liability and
severability of interest as between Landlord and Tenant. All other policies
referred to above shall contain a waiver of subrogation rights which Tenant's
insurers may have against Landlord, Landlord's insurers and any Persons for whom
Landlord is responsible. Notwithstanding anything to the contrary contained in
this Lease, Tenant hereby releases and waives any and all claims against
Landlord and any Persons for whom Landlord is responsible with respect to
occurrences which are or which are required to be insured against by Tenant
hereunder. Tenant shall provide Landlord with copies of each insurance policy
referred to above upon execution of said policy and at the latest fifteen (15)
days prior to the Tenant's occupation of the Leased Premises. It is understood
that no review or approval of any insurance certificate or policy by Landlord
shall derogate from or diminish Landlord's rights under this Lease.
Tenant agrees that if Tenant fails to take out or to keep in force such
insurance Landlord may, at its sole option and discretion, do so and pay the
premium thereof and in such event Tenant shall repay to Landlord the amount paid
as a premium, which repayment shall be collectible as Additional Rental.
28. CANCELLATION OF INSURANCE
If any insurance policy mentioned in the preceding Article and/or any
insurance contracted by Landlord or any part of it is cancelled and/or
threatened to be cancelled by the insurer, or if the coverage under it is
reduced in any way by the insurer because of the use or occupation of any part
of the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to the cancellation, threatened cancellation or reduction of coverage
within forty-eight (48) hours after notice from the Landlord, the Landlord may,
either:
(a) enter and take possession of the Leased Premises immediately
by leaving upon the Leased Premises a notice of its intention
to do so, upon which the Landlord will have the same rights
and remedies that are available to him under this Lease or in
virtue of the law; or,
(b) enter upon the Leased Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or reduction
of coverage and the Tenant will immediately pay the costs to
the Landlord, together with a fee of fifteen percent (15%) of
such costs representing the Landlord's overhead, which costs
may be collected by the Landlord as Additional Rental, and the
Landlord will not be liable for any damage caused to any
property of the Tenant or others located on the Leased
Premises as a result of the entry.
29. DAMAGE OR DESTRUCTION.
29.1 If the Leased Premises are at any time destroyed or damaged,
the following provisions will apply:
(I) If, in the opinion of the Landlord, the Leased
Premises are fit for tenancy in whole or in part, the
Lease shall continue in full force and effect without
abatement or diminution of any Minimum Net Net Rental
or Operating Costs and Taxes;
(ii) If, in the opinion of the Landlord, the Leased
Premises are rendered partly unfit for tenancy, this
Lease shall continue in full force and effect, except
that the Minimum Net Net Rental and Operating Costs
and Taxes will abate to the extent Landlord's
Architect determines that the Leased
<PAGE> 20
Montreal Industrial Lease
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Premises cannot reasonably be used for their intended
purposes;
(iii) if Landlord determines that the Leased Premises are
rendered wholly unfit for tenancy, this Lease shall
continue in full force and effect, except that
Minimum Net Net Rental and Operating Costs and Taxes
will fully abate;
(iv) all abatements will occur from the date of the damage
or destruction until the earlier of the date that the
Leased Premises are delivered to Tenant or the date
of termination of the period of indemnity under
Landlord's insurance policy for business interruption
and/or loss of rentals;
(v) Landlord will commence and proceed diligently to
reconstruct, rebuild or repair any damage to the
Leased Premises to meet Landlord's base building
criteria for that Property which Landlord may modify
to be consistent with the plans, specifications and
design criteria for the rebuilding of the Building
and/or the Leased Premises, chosen by
Landlord acting reasonably;
(vi) to restore the Leased Premises, Landlord will be
under no obligation to perform work other than that
stipulated in sub-paragraph (v) above;
(vii) whether or not the damage to the Leased Premises may
have been caused by Tenant's negligence or fault,
Tenant shall commence to repair, rebuild or
reconstruct, at its own cost, all leasehold
improvements, fixturing and equipment in the Leased
Premises within fifteen (15) days from Landlord's
notice that Landlord has completed its work and
Tenant shall complete said work within thirty (30)
days from Landlord's notice;
(viii) Tenant shall not be entitled to any allowance,
inducement, payment or other consideration from
Landlord in connection with Tenant's work described
in sub-paragraph (vii) above, even if such allowance,
inducement, payment or other consideration was made
at the time of original construction of the Leased
Premises.
29.2 Despite any provision to the contrary contained in this Lease and,
specifically but without limitation, anything contained in the present
Article, if the Property is totally or partially damaged or destroyed
(whether the Leased Premises are affected or not), and:
(i) in the Landlord's opinion, the damaged or destroyed
portions cannot reasonably be repaired, restored or
rebuilt within one (1) year following the occurrence
without overtime or other special arrangements; or
(ii) the cost, as estimated by the Landlord, of repairing,
restoring or rebuilding the damaged or destroyed
portions will exceed the proceeds of insurance
available to Landlord for such purpose or the damage
or destruction was caused by a peril which is not
covered by Landlord's insurance; or
(iii) less than two (2) years remain during the Term;
then in any of the above cases, Landlord may, at its option
(to be exercised by written notice to Tenant within ninety (90) days following
any such occurrence) elect to terminate this Lease.
If Landlord elects to terminate this Lease, then the following
will apply:
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Montreal Industrial Lease
Page 19
(iv) if the Leased Premises have been rendered wholly
unfit for tenancy, the termination will take effect
from the date of the damage or destruction and all
Minimum Net Net Rental and Operating Costs and Taxes
be adjusted to that date;
(v) if the Leased Premises have been rendered only partly
unfit for tenancy and Tenant has occupied or has been
reasonably capable of occupying any part of the
Leased Premises from the date of the damage or
destruction, the Lease will terminate ten (10) days
from Landlord's notice. All unabated Minimum Net Net
Rental and Operating Costs and Taxes will be adjusted
to the date of termination. Minimum Net Net Rental
and Operating Costs and Taxes will abate from the
date of the damage and destruction until the date of
termination to the extent the Leased Premises cannot
reasonably be used for their intended purposes;
(vi) if the Leased Premises were not rendered wholly or
partly unfit for tenancy, the Lease will terminate
ten (10) days from Landlord's notice and all Minimum
Net Net Rental and Operating Costs and Taxes will be
adjusted to that date;
Landlord may, at its sole option, rather than elect to
terminate this Lease, relocate Tenant to premises reasonably similar to the
Leased Premises within the same general vicinity of the Leased Premises for a
period corresponding to the unexpired Term of this Lease or until such time as
Landlord has reconstructed the Leased Premises.
If the Property is totally or partially damaged or destroyed
and Landlord does not elect to terminate this Lease, subject to paragraph (viii)
below, Landlord shall commence and proceed diligently to reconstruct, rebuild or
repair, as necessary, those portions of the Property which have been so damaged
or destroyed in accordance with Landlord's base building criteria for said
Property, exclusive of obligations of tenants in respect of the Property
pursuant to any lease. Furthermore, if the Leased Premises are being repaired,
rebuilt or reconstructed, the provisions of the present Article relating to the
Leased Premises shall apply.
(vii) Tenant acknowledges and agrees that if Landlord does
any reconstruction, rebuilding or repairing of the
Property, Landlord may do any one or more of the
following:
(a) use plans, specifications and working
drawings which differ from those applicable
to the Property in existence prior to the
damage or destruction;
(b) change the configuration, design and/or size
of the Property or any of its component
parts to suit Landlord's needs at the time,
including, without limitation, the location
and size of any court, entrance, parking
facility or any other Common Area or
Facility;
(c) redesign the tenant mix to suit Landlord's
needs at the time of reconstruction, with
respect to the kinds of uses which will be
included in the tenant mix and rearrange the
locations in the Property in which various
types of uses shall be permitted.
In the present Article, the Landlord's opinion shall be final and
binding on the parties. It is further understood and agreed that nothing herein
shall oblige Landlord, under any circumstances and in any manner whatsoever, to
spend an amount greater than the proceeds of insurance received by Landlord as a
result of the damage or destruction described in the present Article for any
reconstruction contemplated herein.
<PAGE> 22
Montreal Industrial Lease
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Tenant agrees that none of the foregoing shall constitute a change of
form or destination, nor shall the validity or enforceability of this Lease be
affected in any manner by any of the foregoing.
30. TRANSFER CONSENT REQUIRED
No Transfer of this Lease shall be effected by Tenant without the prior
written consent of the Landlord in each instance, which consent may not be
unreasonably withheld.
Landlord's refusal of consent shall be deemed reasonable (without in
any way restricting Landlord's right to refuse its consent on other reasonable
grounds) under the following circumstances:
(a) where the Transferee proposed by Tenant is then a tenant of
the Property and Landlord has or will have during the next six
(6) months suitable space for rent in the Property;
(b) where Tenant is in default under any provisions of this Lease;
(c) where the Landlord has reasonable grounds to believe that the
proposed Transferee does not possess the financial means
necessary to fulfill all its financial obligations herein;
(d) where the Transfer applies to part of the Leased Premises
only;
(e) where the proposed Transferee's use of the Leased Premises
violates any laws or rights granted to other tenants or
retained by Landlord, or where such use may be disruptive or
objectionable to other tenants or to the Landlord, or where
such use shall detract from the dignity or character of the
Property;
(f) where the Landlord has not obtained the consent of a secured
creditor or any Person who may have the right to approve the
Transfer.
(g) where a previous Transferor or guarantor does not approve the
Transfer and/or refuses to remain jointly and severally liable
towards Landlord for the execution of Tenant's obligations
under this Lease and/or refuses to sign a Transfer document to
that effect.
If the Tenant intends to effect a Transfer of all or any part
of the Leased Premises, with Landlord's consent, of this Lease or of any
interest hereunder, then the Tenant undertakes not to print, publish, post,
display or broadcast any notice or advertisement or otherwise advertise the
whole or any part of the Leased Premises for purposes of a Transfer, and shall
not permit any broker or other Person to do any of the foregoing, unless the
complete text and format of any such notice, advertisement, or offer is first
approved in writing by the Landlord. Without in any way restricting or limiting
the Landlord's right to refuse any text or format on other grounds, any text or
format proposed by the Tenant shall not contain any reference to the rental rate
of the Leased Premises. Notwithstanding anything contained herein, no sign shall
be posted, affixed, displayed or inscribed in any manner whatsoever on the
Leased Premises or the Property advertising that the Leased Premises are for
rent.
If the Tenant intends to effect a Transfer or all or any part of the
Leased Premises, of this Lease or of any interest hereunder, then, and as often
as such event shall occur, the Tenant shall give prior written notice to the
Landlord of such intent, specifying therein the proposed Transferee, providing
such information with respect thereto, including without limitation, information
concerning the principals thereof and as to any credit, financial
<PAGE> 23
Montreal Industrial Lease
Page 21
or business information relating to the proposed Transferee as the Landlord or
the hypothecary creditor requires, and shall pay Landlord in advance for the
cost of Landlord's inquiries as well as its processing fee for the examination
of Tenant's request, and the Landlord shall, within thirty (30) days following
the completion of Landlord's study of Tenant's request, notify the Tenant in
writing that:
(a) it consents or does not consent to the Transfer in accordance
with the provisions and qualifications of this Article:
(b) it elects to cancel this Lease in preference to giving such a
consent.
The mere occupation of all or part of the Leased Premises or Landlord's
tolerance thereof, the payment of any amount by the proposed Transferee to
Landlord, or the consent to any previous Transfer shall not constitute a waiver
of Tenant's obligation to obtain Landlord's consent to any Transfer, nor will
any of the foregoing be construed to constitute a consent by Landlord to the
proposed Transfer. Nevertheless, whether or not Landlord consents to any
Transfer, it may collect rent or other amounts from any proposed Transferee and
apply the said amount to the amounts payable under this Lease, without in any
manner prejudicing any of its rights. This prohibition against a Transfer is
construed in a manner to include a prohibition against any Transfer by operation
of law, and no Transfer shall take place by reason of a failure by the Landlord
to reply to a request by the Tenant for consent to a Transfer.
Notwithstanding any such Transfer consented to by the Landlord, no
acceptance by the Landlord of any payments by a Transferee shall be deemed a
waiver of the requirements contained herein or a release of the Tenant from the
further performance by the Tenant of the obligations on the part of the Tenant
herein contained and the Tenant shall be jointly and severally liable with the
Transferee for all of the Tenant's obligations stipulated in the Lease and shall
not be released from performing any of the obligations under the Lease during
the Term.
In addition to any of the requirements stipulated herein, Landlord's
consent to the Transfer is conditional upon Tenant and Transferee signing with
Landlord a document prepared by Landlord evidencing such Transfer, and Tenant
undertakes to cause the Transferee to promptly sign said document in which
Transferee shall agree to be bound directly with landlord to all of the
obligations contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. The above-mentioned document shall further
provide that the Tenant transfers to the Transferee any rights it may have with
respect to the Deposit retained by Landlord pursuant to this Lease and Tenant
renounces all of its rights thereto. In addition thereto, the Transferee may be
required by Landlord to supplement any security deposit given in this Lease.
Should the Minimum Net Net Rental per square foot to be paid by a
Transferee, whether in cash, goods, services or other consideration, exceed the
Minimum Net Net Rental per square foot payable hereunder, then Tenant shall pay
to Landlord monthly, as Additional Rental, the amount of or an amount equivalent
to such excess.
Notwithstanding anything contained in this Article, the Tenant may
sublet the Leased Premises or assign the Lease to a parent, subsidiary or
affiliate company without seeking the consent of the Landlord provided, however,
that such sub-tenant or assignee shall remain bound jointly and severally with
the Tenant for all the terms and covenants of this Lease, and provided further
that Tenant shall notify Landlord in writing prior to such sublet or assignment.
Upon the execution of this Lease and upon each succeeding anniversary
date or at any sooner time requested by the Landlord, the Tenant shall deliver
to the Landlord a statement, certified as being true and correct and verified by
the corporate secretary, showing the names of all existing
<PAGE> 24
Montreal Industrial Lease
Page 22
shareholders of record and their respective ownership interests as at
that date. The Tenant shall, at the request of the Landlord, make available to
the Landlord for inspection or copying or both, all books and records of the
Tenant which, alone or with other data, show the applicability or
inapplicability of this Article. If any shareholder of the Tenant shall, after
the request of the Landlord to do so, fail or refuse to furnish forthwith to the
Landlord any data verified by the affidavit of such shareholder or other
credible person, which data, alone or with other data show the applicability or
inapplicability of this paragraph, the Landlord may terminate this Lease by
giving the Tenant prior written notice of thirty (30) days of such termination.
31. PRIVILEGE OF LANDLORD
Tenant covenants to furnish the Leased Premises with and to maintain at
all times thereon, a sufficient quantity of furniture, fixtures and other
effects to secure the payment of at least six (6) months of Minimum Net Net
Rental and Additional Rental which shall at all times be free and clear of all
Tenant Security and shall be subject to a privilege in favour of the Landlord
for the payment of Minimum Net Net Rental and Additional Rental and the
fulfillment of all other covenants and agreements herein contained.
32. ASSIGNMENT BY LANDLORD
Landlord declares that it may assign its rights under this Lease to a
lending institution or to any Person as collateral security for a loan to
Landlord and, in the event that such an assignment is given and executed by
Landlord and notification thereof is given to Tenant by or on behalf of
Landlord. It is expressly agreed that this Lease shall not be cancelled or
modified for any reason whatsoever without the consent in writing of such
lending institution or Person if such consent is required.
This Lease and all rights of the Tenant under the Lease shall be
subject to and subordinate to any Security. Tenant hereby covenants and agrees
that it will, whenever reasonably required by Landlord and at Landlord's
expense, consent to and become a party to any instrument subordinating the Lease
to any Security. However, no subordination by the Tenant shall have the effect
of permitting the holder of any Security to disturb the Tenant's enjoyment of
the Leased Premises as long as the Tenant shall comply with the covenants to be
kept and performed by it under this Lease.
The Tenant will, upon request of the Landlord or the Person holding the
Security or any Person having an interest in the project, execute and deliver
promptly those instruments referred to herein. However, if ten (10) days after
the date of request, the Tenant has not executed and delivered them, the Tenant
hereby irrevocably appoints the the Landlord as the Tenant's attorney with full
power and authority to execute and deliver in the name of the Tenant said
instruments or the Landlord may, at its sole option and discretion, terminate
this Lease upon giving Tenant a forty-eight hour (48) notice of its intention to
do so, the whole wihtout incurring any liability whatsoever and without
prejudice to all of its other rights and recourses.
It is agreed and understood that in the event of any sale of the
Property by Landlord, then Landlord shall automatically be relieved of any and
all obligations and liabilities under this Lease accruing from and after the
date of such sale.
33. EXPROPRIATION
If the whole or any part of the Leased Premises and/or the Property
shall be condemned, expropriated or taken in any manner for any public of
quasi-public use or purpose, Landlord may, at its option, terminate this Lease
by giving notice in writing to Tenant that the Term hereof shall expire upon the
day when possession is required for such purpose and in the event of such
expiration Landlord shall have no liability of any nature to Tenant
<PAGE> 25
Montreal Industrial Lease
Page 23
resulting from said expiration.
34. EXTENSIONS
The Landlord shall have the right, at its option and from time to time,
to make extensions and/or additions and/or to add one or more additional floors
or storeys onto all or part of the building comprising the Leased Premises, or
on to any other buildings of the Property, or to add one or more buildings to
the Property. In the event that any such extensions and/or additions be made to
the building comprising the Leased Premises or to any other buildings of the
Property and/or in the event any such additional building or buildings shall be
erected on the Property, the Landlord may, at its sole option and discretion,
include in the denominator for the purpose of calculating Tenant's Proportionate
Share of Operating Costs and Taxes, the total leasable area of all or part of
the buildings erected on the Property.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add all the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings for view or light and the like and to
close all borrowed lights and the windows and openings which may be required to
be closed as a consequence of such construction, the whole without any claims
for disturbance and/or inconvenience and the like which may be caused to the
Tenant, provided always that the required work is carried out within a
reasonable delay and that this Article shall not absolve or release the Landlord
from liability in respect of any damage or loss caused to the Tenant as a
consequence of any negligence or fault of the Landlord, its employees or
representatives. If the Tenant loses the use of any part of the Leased Premises
during the making of such additions and/or extensions, the Tenant shall be
granted a proportionate reduction in Minimum Net Net Rental as compensation for
loss of use (during the period and for the area of loss of use only); all of the
foregoing without any other claims by the Tenant against the Landlord for damage
and loss of use.
Without limiting the generality of the foregoing, the Landlord hereby
reserves the right, at any time and from time to time, to make changes in,
additions to, subtractions from or rearrangements of the Building including,
without limitation, all improvements at any time thereon, all entrances and
exists thereto, and to grant, modify and terminate any servitudes or other
agreements pertaining to the use and maintenance of all or parts of the Building
and to make changes or additions to the pipes, conduits, wires, ducts, utilities
and other necessary building services in the Leased Premises which serve other
premises. The Landlord agrees that in performing such alterations, it shall do
so in such manner as to minimize any material interference with the Tenant's use
and enjoyment of the Leased Premises. The Landlord shall not however, be
responsible for any damages of whatsoever nature to Tenant except for physical
damages to the Leased Premises.
<PAGE> 26
Montreal Industrial Lease
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The Landlord shall further have the right from time to time to sever
any part or parts of The Property or any Building or improvements thereon for
purposes of sale, lease, hypothec, privilege, charge or otherwise, including the
creation of rights-of-way, servitudes and parking arrangements which the
Landlord deems necessary and the Tenant hereby consents to any such severance
and agrees to execute any documents or consents which the Landlord may request
for these purposes. If any part or parts of the Property or the Building or
improvements on the Property are so severed and are deemed by the Landlord to no
longer form part of the Property, such part or parts shall be excluded from the
Property for the purposes of this Lease at the time designated by the Landlord
and the Tenant shall, when requested by the Landlord, execute a release of any
interest in the Property so excluded.
35. DEFAULT
The following shall be considered a default under the terms of this
Lease:
(a) in the event that Tenant shall be in default under any
provision of this Lease providing for the payment of Minimum
Net Net Rental and/or Additional Rental;
(b) in the event Tenant does not take possession of the Leased
Premises or abandons or attempts to abandon the Leased
Premises before the Termination Date, with or without
Landlord's knowledge; or in the event the Leased Premises are
used by any Person other than the Person entitled to use them
hereunder; or any procedure in execution is issued pursuant to
a judgment rendered against Tenant; or if an agent, receiver
or trustee acting under a trust deed or other security, takes
possession of the Tenant's assets and/or any equipment,
fixtures, furniture or movable effects in the Leased Premises;
or if the Tenant shall make a bulk sale of its goods; or if
the Tenant should attempt to move its belongings out of the
Leased Premises;
(c) in the event that Tenant shall be in default in observing any
covenant herein contained and/or performing any of its
obligations contained in this Lease (other than a default
stipulated in sub-paragraphs (a) and (b) above) and such
default shall continue for fifteen (15) days after written
notice specifying such default shall have been given by
Landlord to Tenant, unless it is impossible for Tenant to cure
such default within the said delay of fifteen (15) days, in
which case Tenant shall, upon written request to Landlord, be
entitled to such reasonable extension of time to enable such
default to be remedied.
In the event of any default on the part of the Tenant under the terms
of this Lease, Landlord shall have the right, at its sole and absolute
discretion, to terminate this Lease and in addition, Landlord may, without
notice or any form of legal process, forthwith enter upon and take possession of
the Leased Premises and operate the business and/or assume absolute ownership of
Tenant's movable effects and/or remove the Tenant's effects therefrom, any
statute or law to the contrary notwithstanding, the whole without prejudice to
and under reserve of all other rights and recourses of Landlord to claim any and
all losses and damages of any nature whatsoever sustained by the Landlord by
reason of or arising from any default of the Tenant including, without
limitation, the expenses of reletting the Leased Premises (including the costs
of any repairs, decorating, alterations or improvements necessitated thereby),
as well as attorney's fees of fifteen percent (15%) of any amount granted by
judgment. Where Landlord shall have instituted proceedings to cancel, terminate
or confirm its cancellation or termination of this Lease, notwithstanding any
law or custom to the contrary, Tenant shall not have any right to prevent such
cancellation or termination by remedying its default or defaults subsequent to
the institution of such legal proceedings.
<PAGE> 27
Montreal Industrial Lease
Page 25
36. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay when due any taxes, rates, insurance premiums,
charges, debts or any other amounts which it owes or has herein covenanted to
pay, all such amounts shall be deemed to be and be treated as Additional Rental
and payable and recoverable as Additional Rental. Landlord may pay the same and
shall be entitled to charge the sums so paid to Tenant who shall pay them
forthwith on demand as Additional Rental.
All arrears of Minimum Net Net Rental and Additional Rental shall bear
interest at the prime lending rate as determined by the Royal Bank of Canada on
a daily basis plus four percent (4%) from the time such arrears become due until
paid to Landlord.
37. BANKRUPTCY AND INSOLVENCY
In the event that Tenant shall be adjudicated bankrupt or make any
general assignment for the benefit of its creditors, or make a proposal to its
creditors, or take or attempt to take the benefit of any insolvency or
bankruptcy law, or if a receiver or trustee be appointed for the property of the
Tenant or any part thereof, the present Lease shall automatically terminate on
the occurrence of any of the aforesaid events without further notice or delay,
and Landlord shall be entitled to recover all arrears of Minimum Net Net Rental
and Additional Rental as well as six (6) months of future Minimum Net Net Rental
and Additional Rental or such other accelerated amount that the law may at any
time provide.
38. INDEMNIFICATION
Except if caused directly by the gross negligence or fault of the
Landlord, its mandatories, employees, or representatives, or by any breach or
nonperformance by the Landlord of any covenant undertaken by virtue hereof, the
Landlord shall not be liable nor responsible in any way for any injury of any
nature whatsoever that may be suffered or sustained by the Tenant or any other
Person who may be upon the Leased Premises or for any loss of or damage to any
property belonging to the Tenant or to any other Person while such property is
on the Leased Premises and in particular (but without limiting the generality of
the foregoing), the Landlord shall not be liable for any damage or damages of
any nature whatsoever to any such property caused by the failure, by reason of a
breakdown or other cause, to supply adequate drainage, or by reason of the
interruption of any public utility or service or in the event of steam, water,
rain or snow which may leak into, issue or flow from any part of the Property or
from the water, steam, sprinkler, or drainage pipes or plumbing works of the
same, or form any other place or quarter or for any damage caused by anything
done or omitted by any tenant. The Landlord, however, shall use all reasonable
diligence to remedy such condition, failure or interruption of service when not
attributable to the Tenant, after notice of same, when it is within its power
and obligation to do so. The Tenant shall not be entitled to any abatement of
Minimum Net Net Rental and Tenant's Proportionate Share of Operating Costs
and Taxes in respect of any such condition, failure or interruption of service.
The Tenant will indemnify and hold Landlord harmless from and against
all fines, liability, damage suits, claims, demands and actions of any kind or
nature for which the Landlord shall or may become liable for or suffer by reason
of:
(a) any breach or nonperformance by the Tenant of any provision
hereof; and/or
(b) any injury (including death resulting at any time therefrom)
or damage to property occasioned to or suffered by any
<PAGE> 28
Montreal Industrial Lease
Page 26
Person including the parties hereto by reason of any such
breach or nonperformance or of any wrongful act, neglect, or
fault on the part of the Tenant, and/or
(c) any damage to the Property caused by the Tenant's use and
occupancy of the Leased Premises; and/or
(d) any injury to any Person including death, sickness and
diseases resulting at any time therefrom, whether caused by a
virus, bacteria or any substance brought upon the Leased
Premises and manipulated by Tenant and/or located on or about
the Leased Premises; and/or
(e) any injuries, damages or costs relating to any environmental
impairment arising out of the occupancy of the Leased
Premises.
Such indemnification by the Tenant for any of the above items shall
survive the termination of this Lease, anything in this Lease to the contrary
notwithstanding.
39. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present
Lease, the Tenant will not hold the Landlord in any way responsible for any
damages or annoyance which the Tenant may sustain through the fault of any
tenant who occupies any premises adjacent to, near, above or under the Leased
Premises, and renounces any claims it may have against the Landlord pursuant to
Article 1636 of the Civil Code of Lower Canada.
40. NONWAIVER
The failure of Landlord to insist upon a strict performance of any of
the terms hereof shall not be deemed a waiver of any rights or remedies that
Landlord may have and shall not be deemed a waiver of any subsequent default by
Tenant of any such terms.
41. WAIVER OF COMPENSATION
The Tenant hereby waives and renounces any and all existing and future
claims, offsets and compensation against any Minimum Net Net Rental or
Additional Rental due hereunder and agrees to pay such Minimum Net Net Rental
and Additional Rental on their respective due dates, regardless of any claim,
offset or compensation which may be asserted by the Tenant or on its behalf,
except to the extent permitted hereunder.
42. IMPUTATION OF PAYMENTS
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Net Net Rental and Additional Rental shall
be deemed to be payments on account of the earliest stipulated Minimum Net Net
Rental and Additional Rental, nor is any endorsement or statement on any cheque
or any letter accompanying any cheque or payment as rent deemed as
acknowledgment of full payment or an agreement or acquiescence of or to the
terms thereof, and the Landlord may accept and cash such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rental
or pursue any other remedy provided in this Lease. The Landlord may, at its
option, apply sums received from the Tenant against any amounts due and payable
by the Tenant under this Lease in such manner as the Landlord sees fit.
<PAGE> 29
Montreal Industrial Lease
Page 27
43. CUMULATIVE REMEDIES
No reference to or exercise of any specific right or remedy by the
Landlord shall preclude the Landlord from or prejudice the Landlord in
exercising any other right under this Lease or pursuing any other remedy or
maintaining any action to which it may otherwise be entitled at law.
44. UNAVOIDABLE DELAY
Save and except for any monetary obligation under this Lease, Landlord
and Tenant shall not be liable for failure or delays in performing any of their
obligations hereunder should such failure or delay be caused by any event
(excluding the financial conditions of either party) which is beyond the
reasonable control of either party including, without limitation, cas fortuit,
force majeure, strikes, lockouts, labour troubles, inability to procure
materials, restrictive governmental rules, regulations, orders or bankruptcy of
contractors.
Without limiting the generality of the foregoing and in particular, it
is understood and agreed that whenever and to the extent that the Landlord shall
be unable to fulfill, or shall be delayed or restricted in the fulfillment of
any obligation hereunder in respect of the supply or provision of any service or
utility or the doing of any work or the making of any repairs by reason of being
unable to obtain the material, goods, equipment, service, utility or labour
required to enable it to fulfill such obligation, or by reason of any statute,
law or order in council or any regulation or order passed or made pursuant
thereto or by reason of the order or directive of any competent authority having
jurisdiction over the Property, or inability to obtain any required
authorization therefrom, or by reason of any other cause beyond its control, the
Landlord shall be entitled to extend the time for fulfillment of such obligation
by a time equal to the duration of such delay or restriction, and the Tenant
shall not be entitled to compensation for any damages of whatsoever nature
arising therefrom.
45. MANAGEMENT OF THE PROPERTY
The Tenant hereby acknowledges to the Landlord that the Property may be
managed by any party other than the Landlord, as the Landlord from time to time
may in writing designate and, to all intents and purposes, any manager so
designated shall be the party at the Property authorized to deal with the
Tenant. All payments to Landlord in virtue of this Lease shall be made by cheque
payable to the Landlord in full unless otherwise specified in writing by
Landlord to Tenant.
46. RULES AND REGULATIONS
There is a schedule of rules and regulations annexed hereto as Schedule
"E" and the Tenant binds and obliges itself to abide by the said rules and
regulations.
The Landlord shall have the right to amend and/or rescind the rules and
regulations in Schedule "E" from time to time and to make any other reasonable
rules and regulations not contrary to the spirit and intent of this Lease as, in
its discretion, may from time to time be needful for the safety, care,
cleanliness and proper administration of the Property including the Leased
Premises, and for the preservation of good order therein, and the same shall be
observed and performed by the Tenant and by its customers, and all such rules
and regulations now or hereafter to be established by the Landlord as herein
provided shall form part of this Lease as if recited at length herein and any
such new rules and regulations shall be binding upon Tenant upon written
notification from Landlord.
Furthermore, in the event that Tenant does not comply with the rules
<PAGE> 30
Montreal Industrial Lease
Page 28
and regulations, Landlord shall have the right, without notice, to enter the
Leased Premises and execute any work necessary to rectify Tenant's
noncompliance, the cost of which shall immediately, upon Landlord's request, be
payable by Tenant as Additional Rental. It is agreed and understood that the
terms and conditions of this Lease shall prevail over any of the terms of the
rules and regulations.
47. COMPLIANCE WITH LAWS AND REGULATIONS
The Tenant shall, at its own expense, promptly comply with the
requirements of every applicable statute, law and ordinance and with every
applicable lawful regulation or order with respect to the removal of any
encroachment placed by the Tenant, or to the condition, equipment, furniture,
fixtures, maintenance, or use, or occupation of the Leased Premises, including
the making of any alteration, addition in or to any structure upon, connected
with or appurtenant to the Leased Premises, whether or not such alteration be
structural or be required on account of any particular use to which the Leased
Premises or part thereof may be put and whether or not such requirement,
regulation or order be of a kind now existing or within the contemplation of the
parties hereto; and shall comply with any applicable regulation, recommendation
or order of the insurers' Advisory Organization of Canada, or any body having
similar functions or of any liability or fire insurance company by which the
Landlord and/or the Tenant may be insured.
48. WINDOW COVERINGS
In order to preserve a more uniform and attractive appearance of the
Property for the benefit of all the tenants, the Tenant herein binds and obliges
itself to place vertical blinds for air porosity, over all windows which are
located in the front of the Building or on any side of the Building which faces
a public street and where such windows are for other than office areas, such
vertical blinds shall remain drawn at all times.
49. PERMITS AND LICENSES
The Tenant shall obtain all necessary permits and licenses required for
the occupancy and carrying on of its business, the Landlord making no
representations or warranties whatsoever as to whether said permits and licenses
may be obtained by Tenant. Should the Tenant fail to obtain any required permit
and/or license, it shall nevertheless remain bound to perform all of its
obligations pursuant to the present Lease including, without limitation, payment
of Minimum Net Net Rental and Additional Rental.
50. EXPIRATION OF LEASE
Tenant shall, at the expiration or sooner termination of the Term,
peaceably surrender and yield up unto Landlord, who shall become absolute owner
thereof, the Leased Premises together with all buildings, alterations,
additions, erections, leasehold improvements, repairs and installations,
including the air-conditioning and heating system, done or made by the Tenant,
both movable and immovable, except the equipment and furniture belonging to
Tenant which must be removed at Tenant's expense on or before the expiration of
the Lease. Tenant shall repair any and all damages caused to the Leased Premises
and/or to the Building as a result of such removal, using materials equal in
quality to that of the damaged materials, failing which Landlord may do so at
Tenant's expense.
Notwithstanding the above, Landlord may at its option advise Tenant in
writing that he does not wish the ownership of all or any part of the above
described property, in which case Tenant shall remain owner of such property
refused by landlord and shall, at its own expense, immediately remove such
property and repair any damage to the Leased Premises and/or the Building
<PAGE> 31
Montreal Industrial Lease
Page 29
caused by the original installation and/or removal, using materials
equal in quality to that of the damaged materials, failing which Landlord may do
so at Tenant's expense.
If Tenant leaves any equipment or furniture in the Leased Premises
following the expiration of the Term, it is understood that Landlord may then,
at its option, either accept full and absolute ownership of same and may use it
or dispose of it as Landlord determines, without compensation payable to Tenant
and without incurring any liability to Tenant, or Landlord may dispose of same
as it sees fit, at Tenant's expense, without incurring any liability to Tenant.
If the Tenant has failed to fulfill its obligations under this lease
with respect to the maintenance, repair and alteration of the Leased Premises
and removal of improvements and fixtures from the Leased Premises during or at
the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration or
sooner termination of the Term.
51. CONSTITUT OR TENURE SYSTEM ACT
The Tenant hereby renounces any rights which it may have or acquire
under the Constitut or Tenure System Act, R.S.Q., 1977, c. C-64, to purchase or
acquire the Leased Premises or the Property.
52. DOMICILE AND NOTICES
The Tenant hereby elects domicile at the Leased Premises for the
purpose of service of any writs of summons or other legal document in any action
or proceeding whatsoever by the Landlord against the Tenant.
Any notice or demand given by Landlord to Tenant or by Tenant to
Landlord pursuant to the present Lease shall be deemed to be duly given if
served upon the Tenant or Landlord personally, or if delivered or mailed by
prepaid certified or registered mail to:
(a) LANDLORD: 7405 Trans Canada Highway
St. Laurent, Quebec
(b) TENANT: At the Leased Premises
Landlord may, by notice in writing to the Tenant, change the address to
which any notice or demand intended for the Landlord shall be addressed. Tenant
may, by notice in writing, require that a copy of any writ of summons or other
legal document or proceeding and a notice or demand served on the Leased
Premises be mailed by regular mail to an additional address.
53. SUCCESSORS AND ASSIGNS
This Lease shall enure to the benefit of Landlord's or Tenant's
respective heirs, executors, administrators, successors and assigns.
54. DESCRIPTIVE HEADINGS
Any descriptive headings appearing in this Lease have been inserted as
a matter of convenience and reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provisions hereof.
55. GOVERNING LAW / SEVERABILITY
The present Lease shall be construed and governed by the laws of the
Province of Quebec. Should any provision of this Lease be or become
<PAGE> 32
Montreal Industrial Lease
Page 30
illegal or not enforceable, it shall be considered separate and
severable from the present Lease and the remaining provisions shall continue in
full force and effect and be binding upon the parties hereto as though said
provisions had never been included. In this Lease, singular words shall be
interpreted as including the plural and vice versa and the words of masculine
gender shall be interpreted as including the feminine gender. Where more than
one landlord or tenant is referred to or when Tenant shall be of feminine gender
or a corporation, all the proper grammatical changes shall be inferred.
56. COST OF PREPARATION, REGISTRATION AND RADIATION
Tenant shall be permitted at it own cost to register the Lease by
memorial only, upon obtaining Landlord's prior written consent as to the form
and content of the memorial.
In addition, Tenant shall, at its own cost, at the expiration of the
Term, radiate the registration of the Lease from the Index of Immoveables.
In the event the said registration is not radiated within thirty (30)
days from the expiration of the Term, Tenant hereby irrevocably appoints the
Landlord as the Tenant's attorney with full power and authority to execute in
the name of the Tenant any documents and instruments required to effect the said
radiation of the registration of the Lease from the Index of Immoveables and
Tenant further authorizes Landlord to deliver the said instruments and documents
to the appropriate Registry Office for the purpose of effecting all the
appropriate registrations and radiations. The cost of the preparation of said
documents and instruments as well as the cost of registering said documents and
instruments shall be borne by Tenant.
57. BROKERAGE COMMISSION
The Landlord and Tenant hereby guarantee that no brokerage commission
or charges are owing to any broker or brokerage company with respect to the
present transaction.
Tenant shall indemnify and hold Landlord harmless from any and all
brokerage claims as described above.
58. SCHEDULES
Schedules "B" and "E", hereto form an integral part of this Lease.
59. CERTIFICATE OF INCORPORATION
Where Tenant is a corporation, Tenant undertakes to remit to Landlord
upon the signing of the Lease, a copy of its Certificate of Incorporation.
60. ENTIRE AGREEMENT
Tenant acknowledges that there are no covenants, representations,
agreements, warranties or conditions in any way relating to the subject matter
of this Lease, whether expressed or implied, collateral or otherwise, either
oral or written, including promotional material, except those set forth in this
Lease; the Tenant agrees that he has not relied upon any representation in any
brochures, and the Tenant expressly declares that this Lease constitutes the
entire agreement between the Landlord and the Tenant. Except as otherwise
provided herein, no subsequent alteration, amendment, change or addition to this
Lease shall be binding upon the Landlord or the Tenant unless agreed to in
writing by the parties.
<PAGE> 33
Montreal Industrial Lease
Page 31
61. LANGUAGE
Each of the parties does hereby confirm that it has expressly required
that this contract, as well as any document related hereto, be drawn up in the
English language. Chacune des parties confirme par les presentes avoir
expressement demande que le present contrat, ainsi que tous les documents y
afferent, solent rediges en anglais.
IN WITNESS WHEREOF THE LANDLORD HAS SIGNED AT ST. LAURENT,
QUEBEC, THIS 27TH DAY OF JANUARY, 1995.
ZMD SPORTS INVESTMENTS INC.
Per: /s/
-------------------------------
/s/
----------------------------
Witness
/s/
----------------------------
Witness
IN WITNESS WHEREOF THE TENANT HAS SIGNED AT ST. LAURENT, QUEBEC,
THIS 27TH DAY OF JANUARY, 1995.
SPORT MASKA INC.
Per: /s/
-------------------------------
/s/
-----------------------------
Witness
/s/
-----------------------------
Witness
<PAGE> 34
SCHEDULE "B"
EXTRACT OF A CERTIFICATE OF LOCATION DATED FEBRUARY 15, 1972:
Cette propriete etant la resubdivision TROIS de la subdivision
CINQUANTE ET UN et la resubdivision DEUX de la subdivision
CINQUANATE-DEUX du lot originaire CENT HUIT (108-51-3 et 108-52-2) au
Cadastre de la Paroisse Notre-Dame de St-Hyacinthe, Division
d'Epre-gistrement de St-Hyacinthe.
<PAGE> 35
SCHEDULE "E"
RULES AND REGULATIONS
1. The Landlord reserves entire control of the sidewalks, entries,
corridors and passages; washrooms and lavoratories; fan rooms,
janitor's closets, electrical closets and other closets; stairs, flues,
stacks, pipe shafts, and ducts; the whole not within the Leased
Premises, and of all parts of the Building employed for the common
benefit of the Tenants, and shall have the right to place such signs
and appliances therein, as they may deem advisable, provided that
ingress to and egress from the Leased Premises is not impaired thereby.
2. The Landlord shall have the exclusive right to prescribe the weight and
and proper positions of metal safes or machinery as well as the right
to prescribe the weight and position of any floor load. All damage
done to the Building or the Leased Premises by moving or using heavy
equipment of any description or furniture contrary to the Landlords'
prescriptions shall be repaired at the expense of the Tenant. No such
equipment or furniture shall be moved unless a time therefor has been
arranged with and consented to by the Landlord.
3. The Tenant shall not permit the introduction into the Leased Premises
or the Building of any machine or mechanical device of any nature
whatsoever which may be liable to cause objectionable noise or
vibration or be injurious to the Leased Premises or Building.
4. Canvassing, soliciting and peddling in the Building are prohibited.
5. Furniture, bulky articles and construction materials which the Tenant
may require from time to time for the construction of internal
partitions or for the purpose of effecting alterations or improvements,
the whole provided Tenant has obtained Landlord's approval pursuant to
the Article of this Lease entitled "Improvements and Alterations",
shall be carried to the Leased Premises at such hour and in such manner
as the Landlord may reasonably designate. Any damage which may be
caused to the Building or the Leased Premises by the carrying of such
furniture, bulky articles or construction materials to or from the
Leased Premises shall be at the responsibility and cost of the Tenant.
6. Any hand trucks, carryalls, or similar appliances used for the delivery
or receipt of merchandise or equipment shall be equipped with rubber
tires, side guards and such other safeguards as the Landlord shall
require.
7. If any apparatus used or installed by the Tenant requires a permit as a
condition for its installation, the Tenant must file a copy of such
permit with the landlord.
8. The Tenant shall give the Landlord prompt written notice of any
accident to or defect in water or gas pipes, heating or sprinkler
system in the demised Leased Premises, of which he is aware.
9. The Tenant shall not place any additional locks upon any doors of the
Leased Premises or the Building without the written consent of the
Landlord.
10. No animals or birds shall be brought or kept in or about the Leased
Premises or the Building.
11. No auction sales shall be allowed in the Leased Premises or the
Building.
12. The water closets and other water apparatus of the Building or Leased
Premises shall not be used for any purpose but those for which they are
constructed, and no sweepings, rubbish, rags, ashes, chemicals or other
substances shall be thrown therein.
13. The Tenant shall not permit any employees to smoke or congregate in the
halls (if any) of the said Building.
<PAGE> 36
Montreal Industrial Lease
Schedule "E"
Page 2
14. The Tenant, when closing the premises, during the day or evening, shall
have all windows closed, to avoid possible damage from fire, storms,
rain or freezing, and will not shut off the radiators and/or baseboard
heaters when the premises are locked.
15. The Tenant shall follow such instructions, if any, as Tenant may from
time to time receive from landlord relating to the maintenance and care
of the heating, ventilating and air-conditioning equipment installed
within the Leased Premises.
16. Front Signage
The Tenant may identify his business with a front sign, the whole
provided Tenant complies with the conditions stipulated hereunder:
(a) Letter: individual to the Tenant's style.
(b) Height: 24".
(c) Permitted materials - plastic, composite or
solid
- rustproof metal, composite
or solid
(d) Lighting (optional) - integrated
- halo-lit (back-lighting)
(e) Lighting control - dedicated circuit
- photo-cell switch,
timer switch or manual
switch
Before the fabrication of any signage, the Tenant must obtain the
written approval of the Landlord. A request for approval must be accompanied by
the following information:
(a) Elevation plan indicating the proposed sign - (Scale -
3/8" = 1').
(b) Sign dimensions: height, length, thickness, and
distance from wall.
(c) Construction and installation details.
(d) Material and finish specifications (use of styrofoam is
prohibited).
(e) Color specifications.
(f) Lighting specifications: number of amperes, volts and
circuits.
(g) Name of designer and of fabrication and installation
contractors.
(h) Request for Municipal permit.
(i) Any other additional information that the Landlord
may require to study a particular sign request.
Furthermore, Tenant shall only be entitled to purchase any signage
approved from the following suppliers which may be changed by Landlord from time
to time:
Enseignes Trans Canada Signs Inc.
9310 Parkway
Ville d'Anjou, Quebec
H1J 1W7
Claude Neon Limitee
1855 Hymus Boulevard
Dorval, Quebec
H9P 1J8
Enseicom Inc.
1700 Claire Crescent
Lachine, Quebec
H8S 1A2
17. Facade and secondary windows
(a) All front windows must have off-white vertical blinds.
(b) Adjustment of vertical blinds of front windows of
storage space must be half closed.
(c) All windows, including secondary windows, must be
washed by Tenant at its cost, at least twice a year on both
the interior and exterior faces.
<PAGE> 37
Montreal Industrial Lease
Schedule "E"
Page 3
18. Miscellaneous signage
Miscellaneous traffic and "no parking" signs are supplied and installed
by the Landlord.
19. Garbage container
(a) The Tenant must provide the garbage container which best
satisfies its business activity so that the size and water
tightness retain all garbage without affecting the
environment.
(b) The Tenant must assure that the container is neatly
located on the designated area and that the lids are
kept closed.
20. Exterior storage
(a) It is strictly forbidden to store anything outside the
Building, even on a temporary basis.
(b) Used boxes, pallets must be kept inside the Building
until collected for disposal.
21. Special Installations
Tenant must obtain Landlord's approval prior to the installation of any
equipment, machinery, fixtures and furniture which have to be attached
to, mounted to or pierced through any element of the Leased Premises
and/or the Building. Furthermore, Tenant must obtain Landlord's
approval prior to the installation of any equipment, tank and any other
item that Tenant wants to install outside the Building (hereinafter the
"Special Installation").
Any request for the approval of a Special Installation must be
submitted in writing along with the technical drawings or pertinent
data which can easily identify the specific nature of the installation.
Furthermore, Special Installation must conform to terms and conditions
stipulated in the lease.
Following completion of a Special Installation which conforms to
preceding authorization, the Landlord will proceed, at Tenant's cost,
with the inspection of the Installation for final acceptance.
<PAGE> 1
Exhibit 10.40
<PAGE> 2
STATE OF VERMONT ORANGE SUPERIOR COURT
ORANGE COUNTY, SS. DOCKET NO. S118-92 OeC
T. COPELAND AND SONS, INC.; and )
COPELAND PROPERTIES, INC., )
)
Plaintiffs, )
)
v. )
)
MASKA U.S., INC.; and HOWARD J. )
ZUNENSHINE, )
)
Defendants, )
)
SETTLEMENT AGREEMENT
In consideration of the following terms and conditions, T. Copeland and
Sons, Inc., and Copeland Properties, Inc., (collectively "Plaintiffs") and
Howard J. Zunenshine and Maska U.S., Inc., (collectively "Defendants") hereby
agree to settle the litigation between them now pending in the Orange Superior
Court, Docket No. S118-92 OeC.
1. Judgment by stipulation shall enter against Maska U.S., Inc. On
Plaintiffs' claim for negligence, nuisance and trespass in the amount
of 7 million dollars in compensatory damages.
2. Plaintiffs' other claims, including all claims that defendants acted
intentionally, knowingly, recklessly, wantonly or maliciously against
both Defendants shall be dismissed with prejudice against both
Defendants.
1
<PAGE> 3
3. Maska U.S., Inc., shall pay one (1) million dollars to Plaintiffs in
cash as follows:
(a) Two hundred and fifty thousand ($250,000) on June 28, 1995;
(b) Two hundred and fifty thousand ($250,000) on July 7, 1995; and
(c) Five hundred thousand ($500,000) on July 14, 1995.
These payments will be wired directly to the Plaintiffs' bank account.
Plaintiffs agree to give Maska U.S., Inc. a two day grace period within
which to make the payments required by paragraphs 3 (b) and (c) before
Defendants are considered to be in default under their obligations
under those subparagraphs.
4. No later than July 5, 1995, Defendant Maska U.S., Inc. Shall execute a
promissory note in substantially the form attached as Exhibit A in favor of
Plaintiffs in the amount of six million dollars at an interest rate of 10
percent per annum on a 20 year amortization schedule with a balloon payment of
all principal and interest due on the anniversary of the 5th year of this
Agreement. Payments of interest and principal shall be made quarterly commencing
on September 30, 1995. There shall be a 30-day grace period on defaults of the
quarterly payment obligation. Upon such default
(a) One half million dollars in principal will be added as a
penalty to the note obligation; and
(b) The interest rate shall increase to 12 percent commencing at
the end of the 30 day grace period until such default and accrued
interest payments have been satisfied in full.
Further, if Defendants or SLM International, Inc. ("SLM") recover any
money from their
2
<PAGE> 4
insurance carriers as a result of the litigation now pending in the United
States District Court for the District Court of Vermont, Docket No. 5:93-CV-309,
Defendants and SLM agree to immediately shall pay over to Plaintiffs any and all
monies recovered until the note obligation is fully satisfied.
Further, If Maska U.S., Inc., or SLM or substantially al of either of
their assets are sold or transferred before the note is fully satisfied, Maska
U.S., Inc. and SLM agree that the obligation to pay the note shall be
immediately accelerated. However, if Maska U.S., Inc. or SLM wish to transfer or
sell substantially all of or either of their assets to an affiliated entity,
they shall obtain prior approval in writing from plaintiff, and plaintiffs agree
to not unreasonably withhold such approval.
Further, if SLM or Maska refinance their $75 million in long term
financing obligations to their senior unsecured creditors a/k/a the insurance
company lenders, the obligation to pay the note shall be immediately accelerated
to the extent of any additional borrowing as set forth in the note.
5. Defendants agree to indemnify and hold harmless T. Copeland & Sons, Inc.,
Copeland Properties, Inc., Timothy Copeland, Sr., and Jenny Copeland
(collectively the "indemnitees") jointly, severally and individually for any
liability they may suffer or claims that may be asserted against them as a
result of claims by any entity arising from the presence of perchlorethylene on
or migration of perchlorethylene from the T. Copeland and Sons, Inc. property in
the Pierson Industrial Park, Bradford, Vermont. In the event of any payment by
Maska U.S., Inc. or on Maska U.S., Inc.'s behalf, under this paragraph, Maska
U.S., Inc. shall be subrogated to all of the indemnitee's rights of recovery
therefore against any person or organization and the indemnitees
3
<PAGE> 5
shall execute and deliver instruments and papers and do whatever else is
reasonably necessary to secure such rights. The indemnitees shall reasonably
cooperate with Maska U.S., Inc. in assisting in make its settlements: in the
conduct of suits and in enforcing any right of contribution or indemnity against
any person or organization who may be liable to the indemnitees for damages
covered by this paragraph 5. Maska will have the right to control the defense of
any action filed against the indemnitees covered by this paragraph, including
the right to choose legal counsel. Indemnitees shall give Maska notice of any
claim covered by this paragraph within 30 days of notice to the indemnitees.
6. The parties agree cooperatively to resolve any outstanding costs or
obligations for compensation of experts or photocopying as previously agreed
upon or ordered by the Court. Under no circumstances shall Defendant's withhold
any monies owed under other paragraphs of this Agreement to secure any payments
under this paragraph.
7. Maska U.S., Inc. And SLM shall provide evidence by corporate seal by no later
than July 10, 1995 that the terms of this Agreement and the Note are duly
authorized by those corporations respective Boards of Directors.
8. Plaintiffs shall execute a release in Defendants' favor in substantially the
same form as in Exhibit B no later than July 10, 1995.
COPELAND PROPERTIES, INC.
6/28/95 /s/
-------------- ------------------------------------
4
<PAGE> 6
Date By: Timothy Copeland, Sr.
Its duly authorized President
T. COPELAND & SONS, INC.
June 28, 1995 /s/ Timothy Copeland, Sr.
-------------- ------------------------------------
Date By: Timothy Copeland, Sr.
Its duly authorized President
HOWARD J. ZUNENSHINE
June 28, 1995 /s/
-------------- ------------------------------------
Date By:
MASKA U.S., INC.
June 28, 1995 /s/
-------------- ------------------------------------
Date By:
Its duly authorized Chief Executive
Officer
SLM INTERNATIONAL, INC.
June 28, 1995 /s/
-------------- -------------------------------------
Date By:
Its duly authorized Chief Executive
Officer
5
<PAGE> 7
EXHIBIT A
STATE OF VERMONT ORANGE SUPERIOR COURT
ORANGE COUNTY, SS. DOCKET NO. S118-92OeC
T. COPELAND AND SONS, INC.; and )
COPELAND PROPERTIES, INC., )
)
Plaintiffs, )
)
v. )
)
MASKA U.S., INC.; and HOWARD J. )
ZUNENSHINE, )
)
Defendants, )
)
ORDER AND ENTRY OF JUDGMENT
This matter having come before this Court for trial on June 26, 1995,
and following the stipulation of the parties, it is hereby ordered that judgment
is entered against defendant Maska U.S., Inc. for 7 million dollars in
compensatory damages on the Plaintiffs' First Count of negligence, Fourth Count
of nuisance and Fifth Count of trespass. It is also ordered that Plaintiffs'
remaining claims, including those for punitive damages and intentional conduct,
as set forth in their Complaint are dismissed with prejudice against both
Defendants.
Stipulated and agreed to by:
COPELAND PROPERTIES, INC.
6/28/95 /s/ Timothy Copeland, Sr.
-------------- ------------------------------------
Date By: Timothy Copeland, Sr.
Its duly authorized President
<PAGE> 8
T. COPELAND & SONS, INC.
6/28/95 /s/ Timothy Copeland, Sr.
-------------- ------------------------------------
Date By: Timothy Copeland, Sr.
Its duly authorized President
HOWARD J. ZUNENSHINE
6/28/95 /s/ John R. Hughes
-------------- ------------------------------------
Date By: John R. Hughes
MASKA U.S., INC.
6/28/95 /s/
-------------- ------------------------------------
Date By:
Its duly authorized
SO ORDERED AND JUDGMENT ENTERED, at Chelsea, Vermont, this 28th day of June,
1995.
/s/ Stephen B. Martin
------------------------------------
HON. STEPHEN B. MARTIN
7-10-95
------------------------------
CERTIFIED TO BE A TRUE COPY
of the original as the same
appears on file in this office
/s/ Mary Kennedy
------------------------------
MARY KENNEDY
Clerk
ORANGE SUPERIOR COURT
Chelsea, VT 05038
<PAGE> 9
[STAMP]
<PAGE> 1
Exhibit 10.49
<PAGE> 2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT MADE AS OF THE 30th DAY OF JANUARY, 1995.
BY AND BETWEEN: SLM International, Inc. a corporation duly incorporated under
the laws of Delaware, having an office and place of business
at 7405 Trans Canada Highway, Suite 300, St. Laurent, Quebec
H4T 1Z2 (hereinafter referred to as the "Company").
PARTY OF THE FIRST PART
AND: Richard S. Levy, Executive, resident at 5910 Beethoven, Cote
St. Luc, Quebec H4W 3H9 (hereinafter referred to as
"Employee").
PARTY OF THE SECOND PART
THIS AGREEMENT WITNESSES that in consideration of the mutual covenants
and agreements hereinafter contained and the mutual benefit to be derived
therefrom, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
parties hereto hereby covenant and agree as follows:
SECTION 1 - EMPLOYMENT
1.01 The Company hereby agrees to employ Employee as the Vice-President, Legal
Affairs of the Company and General Counsel and Employee hereby accepts such
employment with the Company and agrees to work for the Company as an executive
employee upon the terms and conditions hereinafter set forth.
SECTION 2 - TERM
2.01 Unless Employee's employment is terminated by the Company for cause or
otherwise hereunder, this agreement and Employee's employment by the Company
shall remain in effect for the term (the "Term") as outlined in Schedule A. The
employment of Employee may be renewed after the Term on such terms and
conditions as the parties may then agree upon. This agreement shall thereafter
be automatically renewed for additional twelve (12) month periods (the "Renewal
Terms") commencing the 1st day of January and terminating the 31st day of
December of each year, under the same terms and conditions as existed in the
last year of the agreement or as otherwise agreed upon between the parties in
writing, unless the COMPANY shall have exercised its right to cancel this
agreement not later than October 1st of the previous expiring term.
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2
SECTION 3 - COMPENSATION
3.01 In consideration of the services to be rendered by Employee to the Company
under this agreement, the Company shall pay to Employee the salary and
additional benefits ("Compensation") set out in Schedules B and C.
SECTION 4 - DUTIES
4.01 Employee is engaged for the term of this agreement as an executive employee
of the Company and does hereby covenant and agree to perform and discharge well
and faithfully the duties which may be assigned to him from time to time by the
Board or the Chief Executive Officer of the Company in connection with the
conduct of its business. Employee will be based in St. Laurent, Quebec or
elsewhere on the island of Montreal. Employee shall deal at all times in good
faith with the Company and shall conduct himself at all times in the best
interests of the Company. Employee's responsibilities shall include, without
limitation, those listed in Schedule D, said responsibilities being within the
range of responsibilities normally associated with the position of General
Counsel of a company in the business of manufacturing and distributing sports
equipment and apparel.
4.02 The Company shall indemnify Employee from any and all claims, losses or
other liabilities (including, without limitation, reasonable attorneys' fees and
court costs) relating to any activities which Employee performs or intends in
good faith for the benefit of the Company.
SECTION 5 - EXTENT OF SERVICES
5.01 Employee shall devote his entire working time, attention and energy to the
business of the Company. Employee shall not, during the term of this agreement,
directly or indirectly be engaged in any other business whether or not such
business activity is pursued for gain, profit or other pecuniary advantages with
the exception of the businesses listed in Schedule E. However, this shall not be
construed as preventing Employee from investing his personal assets in
businesses which do not compete with the Company provided such investment will
not require any substantial services on the part of Employee and that the
services he does provide do not impair his ability to comply with the terms of
this Section 5.01.
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3
SECTION 6 - DISCLOSURE OF INFORMATION
6.01 Employee acknowledges that in the course of his employment with the
Company, he has acquired and will acquire access to and knowledge of many of its
trade secrets and proprietary information and processes as may, from time to
time, exist ("Proprietary Information"), including but not limited to business
plans, product development, licensors, manufacturers and agents, and costing and
other financial information, and acknowledges that the said Proprietary
Information is a valuable, special and unique asset of the business. Employee
does hereby covenant and agree that he will not, during the term of his
employment and thereafter, in whole or in part, disclose any of the Proprietary
Information to any person, firm, corporation, association or other entity for
any purpose whatsoever, nor shall he make use of any such Proprietary
Information for his own purposes or for the benefit of any other party under any
circumstances whatsoever. Proprietary Information shall not include any
information which is or becomes part of the public domain through no fault of
the Employee.
SECTION 7 - EARLY TERMINATION CLAUSE
7.01 The Company may, at its sole option and discretion, elect to terminate this
agreement, without cause, by so notifying Employee in writing and in such event
the Company agrees to pay Employee, as liquidated damages for such termination,
in the regular periodic intervals then in effect, a payment which is equal to
the greater of (i) the aggregate base salary, car allowance and medical
insurance benefits then remaining during the Term or (ii) eighteen (18) months
base salary, car allowance and medical insurance benefits. In addition, the
Employee shall also be entitled to receive from the Company an amount equal to
the average bonus paid to the Employee for the two years immediately prior to
the year in which such termination occurs, such bonus to be paid in full in the
manner set forth in Schedule C. Employee shall also be entitled to such other
benefits and compensation which have accrued to him pursuant to Schedules B and
C at the time of such termination and not forfeited by such termination but
which have not been paid to Employee as at the time of such termination.
In addition, in the event (i) Employee elects to terminate his
employment with the Company within six (6) months following the date on which a
Change of Control or Total Liquidation occurs, or (ii) Employee's employment by
the Company is terminated, other than for Cause, at any time (in either case,
the "Termination Date"), then on the date three months after the Termination
Date (the "Grant Date") Employee shall receive options (the "Severance Options")
to purchase the same number of shares of the Company's Common Stock as Employee
was otherwise entitled to purchase on the Termination Date, less the number of
shares of the Company's Common Stock that Employee purchases pursuant to the
exercise of such options after the Termination Date and prior to the Grant Date,
pursuant to outstanding options that had been granted to Employee prior to the
Termination Date, whether those options are vested or
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<PAGE> 5
4
unvested on the Termination Date and whether those options were granted pursuant
to this Agreement or otherwise (the "Pre-Termination Options"), at exercise
prices per share equal to the exercise prices for the same number of
Pre-Termination Options. In exchange for the grant of the Severance Options, all
unexercised Pre-Termination Options shall be forfeited by Employee without
further action. All of the Severance Options shall vest immediately on the Grant
Date and shall be exercisable for a period of one year and nine months
thereafter. The number of shares that may be purchased pursuant to the Severance
Options shall be subject to adjustment as provided in Schedule C.
Employee acknowledges and understands that the Severance Options will not be
issued under the Company's 1991 Stock Option Plan. The Company hereby agrees to
take all reasonable actions following the Termination Date to cause the
Severance Options to be registered under the Company's Registration/Statement on
Form S-8, or to file and cause to become effective a new Registration Statement
on Form S-8 covering the Severance Options, no later than the Grant Date. The
Company further agrees to take all reasonable actions to cause such registration
to remain effective until the expiration of the Severance Options. The Company
shall be responsible for all reasonable costs and expenses related to the
registration of the Severance Options.
7.02 The Company may terminate this Agreement for cause at any time, in which
case no compensation or damages are payable from the date of termination, even
if effected during the Term. For purposes of this agreement, "for cause" shall
mean: (i) the wrongful and material breach of any provision of this agreement by
Employee, (ii) the conviction of Employee for a felony or a crime punishable by
one (1) year or more in prison, (iii) the misappropriation or embezzlement of
funds by Employee, (iv) Employee's material impairment from performing his
duties hereunder because of alcohol, drug or any substance abuse, (v) the
inability of Employee to perform his duties and responsibilities under this
agreement for a period of at least six (6) consecutive months or for any nine
(9) months during any twelve (12) month period for any reason whatsoever other
than a health-related reason which renders Employee "disabled" pursuant to
relevant human rights and employment legislation, or (vi) the substantial breach
of any material law or rule of any government or government agency, commission
or other entity pertaining to securities trading, including, without limitation,
the rules of the U.S. Securities and Exchange Commission ("S.E.C.") by Employee,
e.g. insider trading regulations.
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Employee
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<PAGE> 6
5
SECTION 8 - SPECIAL TERMINATION CLAUSE
8.01 In the event of a Change of Control, or a Total Liquidation (as hereinafter
defined) of the Company, Employee, at his sole option, shall have the right upon
written notice to the Company to terminate this agreement within six (6) months
of the date on which such event occurs and, in such event, Employee shall be
entitled to immediate payment by the Company of the greater of (i) two (2) times
his then-current annual base salary together with an amount equal to two times
the average bonus paid to him for the two years immediately prior to the year in
which such event occurs or (ii) his aggregate base salary and car allowance then
remaining during the Term.
8.02 For the purposes of this agreement, a "Change of Control" shall mean either
of the following:
(a) the acquisition by any person, entity or "group" within the meaning
of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (excluding for this purpose, the Company and any
employee benefit plan of the Company), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent
(30%) or more of the then-outstanding shares of common stock of the Company
("Common Stock"), provided that such number of Common Stock constitutes a larger
number of Common Stock then held by members of the families of David and Michael
Zunenshine or any trust, corporation, partnership or other entity controlled by
those families; or
(b) the reconstitution of the board of directors of the Company to the
extent that individuals who, as of the date hereof, constitute the board of
directors of the Company (the "Incumbent Board Members") cease for any reason to
constitute at least a majority of the said board; provided, that any person
becoming a director subsequent to the date hereof whose election or nomination
for election by the Company stockholders or by the directors was approved by a
vote of at least a majority of the total number of the Incumbent Board Members
shall be considered to be an Incumbent Board Member; or
(c) approval by the stockholders of the Company of any reorganization,
merger, consolidation or other business combination, in each case with respect
to which persons who were the stockholders of the Company immediately prior to
such reorganization, merger, consolidation or other business combination do not,
immediately thereafter, own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the surviving corporation, or
the sale or lease of all or substantially all of the assets of the Company.
For purposes of this Agreement, a "Total Liquidation" shall mean the
dissolution or liquidation of the Company, whether in one or a series of related
transactions, involving in the aggregate more than 60% of its total assets, with
the total assets being measured immediately prior to the commencement, and after
the completion, of any such transaction or series of related transactions. The
assets and the sale of the assets of Buddy L Inc. and the fitness division of
Buddy L Inc. Shall not be included in the calculation of assets for the purposes
of this definition.
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<PAGE> 7
6
SECTION 9 - RESTRICTIVE COVENANT
9.01 Employee does hereby covenant and agree that upon termination or expiry of
this agreement other than pursuant to the Special Termination Clause - Section 8
of this agreement, he shall not for that period of time which is equal to the
greater of one (1) year or the length of the applicable Severance Period (as
calculated pursuant to the Early Termination Clause - Section 7 of this
agreement) commencing on the effective date of termination or expiry:
(a) directly or indirectly, in any matter whatsoever engage or
assist in the operation of, become involved in the financing
of, become employed by, act as a consultant to, or acquire any
interest in (except as shareholder of not more than 5% of the
voting shares of a publicly traded corporation) any business
that is listed in Schedule F, or any corporation or entity
affiliated with any business listed in Schedule F, or permit
his name to be used by any such business.
(b) entice away or otherwise attempt to obtain the withdrawal of
or solicit for employment or consultation any employee of the
Company or its affiliates.
SECTION 10 - WAIVER OF DEFENCES
10.01 Employee hereby acknowledges and agrees that the scope, territorial and
time limitations set forth in the Disclosure of Information provision - Section
6 and in the Restrictive Covenant provision - Section 9 hereof are reasonable
and properly required for the adequate protection of the business of the
Company.
SECTION 11 - GENERAL
11.01 Any notice or other communication to be given under or pursuant to the
provisions of this agreement or in any way concerning this agreement shall be
sufficiently given if reduced to writing and delivered to the person to whom
such communication is to be given or sent to the persons at his place of
business or last known address by facsimile transmission, personal delivery or
registered mail prepaid with a receipt requested. In the case of registered
mail, receipt is presumed three business days of uninterrupted postal service
following the date of mailing.
11.02 This agreement shall be governed by and construed in accordance with the
laws of New York.
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<PAGE> 8
7
11.03 Employee shall be required to personally fulfill all his obligations under
this agreement and shall have no right whatsoever to transfer, assign or convert
any of his rights or obligations hereunder. This agreement shall ensure to the
benefit of and be binding upon the Company and their respective successors and
assigns.
11.04 This agreement contains the whole understanding of the parties hereto with
respect to the subject matter hereof, and supersedes all other agreements and
communications, oral or written with respect thereto. This agreement shall not
be amended except by instrument in writing executed by each of the parties
hereto.
11.05 In the event any provision of this agreement should be held to be void,
voidable, unlawful or, for any reason, unenforceable, the void, voidable,
unlawful or unenforceable provision shall be severed from this agreement and the
remaining portions hereof shall remain in full force and effect.
11.06 The parties declare that they have requested, and do hereby confirm their
request, that the Agreement and related documents be in English. Les parties
declarent qu'elle ont exige et, par les presentes, confirment leur demande que
la presente convention ainsi que les documents s'y rattachant soient redige en
anglais.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
this 30 day of January, 1995.
SLM INTERNATIONAL, INC.
PER: /s/ Howard Zunenshine
-----------------------------
NAME: Howard Zunenshine
TITLE: Chief Executive Officer
/s/ Richard S. Levy
----------------------------------
RICHARD S. LEVY
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<PAGE> 9
8
INDEX OF SCHEDULES
A: Term D: Duties
B: Compensation E: Involvement In Other Businesses
C: Bonus Plan F: Businesses Included in the
Restrictive Covenant
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<PAGE> 10
9
SCHEDULE A
TERM
Three (3) years, beginning January 1, 1995 and terminating December 31,
1997.
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<PAGE> 11
10
SCHEDULE B
COMPENSATION AND BENEFITS IN U.S. DOLLARS (UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
A. PERIOD ANNUAL BASE SALARY (U.S. $)
<S> <C>
Term of three (3) years ending 1995 - $160,000.00
December 31, 1997 1996 - $160,000.00
1997 - $160,000.00
</TABLE>
B. The Employee shall receive a monthly car allowance of Canadian $800.00
(adjusted annually using the Consumer Price Index as at the end of the
previous calendar year) plus a Company gas card and regular maintenance
and repairs and vehicle insurance.
C. The Employee shall be covered by the Company's existing MEDICAL PLAN
including group medical, disability and life insurance.
D. The Employee shall be covered by the Company's directors' and officers'
LIABILITY INSURANCE policy.
E. The Employee shall receive paid VACATION TIME equal to 3 weeks per
year. Such vacation, to the extent not used in any calendar year, may
not be carried over to subsequent calendar years.
F. The Employee shall be reimbursed for all REASONABLE EXPENSES incurred
in the conduct or development of the Company's business.
G. The Employee shall be granted any BONUSES AND APPLICABLE COMMON STOCK
OPTIONS in accordance with the bonus plan attached as Schedule C;
however, the Company shall have the right to modify such bonus plan as
part of a Company-wide bonus plan being installed.
H. The Employee shall be entitled to participate in any RETIREMENT PLANS
which shall be put into effect for executives.
I. At the end of 1995, at Employee's sole option, the Company shall reopen
discussion of an increase in the compensation provisions for the period
of the Term extending from January 1, 1996 to December 31, 1997 to take
into consideration changing circumstances.
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11
SCHEDULE C
BONUS PLAN*
<TABLE>
<CAPTION>
If EPS for the then-recently Your bonus for the then- Number of Options you shall
completed fiscal year recently completed fiscal year receive at the average Closing
increased over the Base as % of Base Salary (Schedule price of common stock on the last
EPS (as defined below) by: B) shall be 5 business days in December
<S> <C> <C>
EPS + 9.99% 0% 0
EPS + (10% to 19.99%) 12.5% 2,500
EPS + (20% to 29.99%) 25.0% 5,000
EPS + (30% to 39.99%) 37.5% 7,500
EPS + (40% to 49.99%) 50.0% 10,000
EPS + (50% to 74.99%) 75.0% 15,000
EPS + 75% 100.0% 20,000
</TABLE>
* The bonus plan shall be in effect for each fiscal years 1995, 1996
and 1997 unless amended upon written notice to Employee.
1) The Employee shall be entitled to receive an annual bonus and an
allotment of options to purchase shares of Common Stock as set out in
the chart above and hereinafter explained. The Employee's eligibility
for receipt of a bonus and options in respect of any fiscal year shall
be based on whether the Net Income Per Share ("EPS") of the Company for
such year increased over the Base EPS, as defined below, and on the
percentage of such increase, as shown on the Company's audited
consolidated financial statements filed with the S.E.C. In the
calculation of the EPS, there shall be omitted all extraordinary items,
as defined by the United States G.A.A.P., as well as all material
non-recurring items, such as, without limiting the generality of the
foregoing, payments made or received pursuant to an award or settlement
of litigation or pursuant to a ruling by or a settlement with a
government agency, or pursuant to casualty losses above the amount of
coverage, restructuring charges associated with acquisitions, and
mandated changes in accounting practices (e.g. accruing post retirement
health benefits). For each fiscal year of the company, the Base
EPS for the purpose of calculating any increase therein shall be the
EPS of the previous year or the average EPS of the previous 3 years,
whichever is greater. (e.g. if the EPS of the Company in 1992 is $1.50,
in 1993 is $1.55 and in 1994 is $1.45, the Base EPS for the purpose of
calculating any increase in 1995 shall be $1.50, the 3 year average).
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12
2) Any option granted to the Employee with respect to the Company's shares
of Common Stock in respect of any fiscal year shall be made by the
Company's Stock Option Committee pursuant to the Company's 1991 Stock
Option Plan (the "Plan"). In the event that an insufficient number of
shares of Common Stock are available for grant under the Plan, then the
Company shall use its best efforts to amend the Plan (including
obtaining stockholder approval) to increase the number of shares of
Common Stock available thereunder. In the event that the Company is
unable to so increase the number of shares so available, then the
Employee shall be granted phantom units, or another award, that shall
entitle him to the same appreciation in the Company's Common Stock as
if he or she had received options to purchase shares of Common Stock.
The Company shall use its best efforts to cause the Stock Option
Committee to grant options as provided for herein.
3) Vesting of any options granted pursuant to Section 1 hereof shall be
over five (5) years at 20% per year, commencing on the last day of the
fiscal year in which the options were earned by the Employee (such date
being considered the "Date of Grant"). Any options granted pursuant to
Section 1 shall be exercisable at a price equal to the average closing
price of the Common Stock on the five last business days in December of
the year in which the options were earned.
4) The bonus granted to the Employee in respect of any fiscal year in
accordance with the provisions of Section 1 hereof shall be payable in
full by the Company to the Employee not later than fifteen (15) days
after the day on which the Company files its Annual Report on Form 10-K
with the S.E.C. containing its audited consolidated financial
statements for such year. The bonus granted shall be calculated as a
percentage of the Employee's base salary for that year, which
percentage shall increase in prescribed steps in accordance with
stepped increases in the EPS for such year, as set out in the chart
above.
5) If any change is made to the Company's Common Stock (whether by reason
of merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares, or exchange of shares or
any other change in capital structure made without receipt of
consideration), then the Company shall preserve the value of all shares
of Common Stock referred to herein by adjusting the number and class of
shares issuable to reflect the effect of such event or change upon the
Company's capital structure and by making appropriate adjustments to
the number and class of shares.
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<PAGE> 14
13
SCHEDULE D
DUTIES
1. The functions performed as General Counsel and Vice-President Legal
Affairs.
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<PAGE> 15
14
SCHEDULE E
INVOLVEMENT IN OTHER BUSINESS ACTIVITIES
Performing trade-mark services for a private client.
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<PAGE> 16
15
SCHEDULE F
BUSINESSES INCLUDED IN THE RESTRICTIVE COVENANT
Canstar Sports Group and all its successors in title to its hockey and in-line
skate businesses Karhu and its successors in title to its hockey business.
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<PAGE> 1
Exhibit 10.50
<PAGE> 2
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the "Amendment"),
dated as of the 1st day of September, 1995, between SLM International, Inc., a
Delaware corporation (the "Company"), and Richard S. Levy ("Employee").
WHEREAS, the parties hereto are party to that certain
Executive Employment Agreement dated as of January 30, 1995 (the "Employment
Agreement");
WHEREAS, Section 11.04 of the Employment Agreement provides
that the Employment Agreement can only be modified by written agreement signed
by the parties; and
WHEREAS, the parties desire to modify the terms of their
relationship and amend the Employment Agreement in order to reflect such
modifications.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. Capitalized terms used in this Amendment and
not otherwise defined herein shall have the meanings assigned to such terms in
the Employment Agreement.
2. Change of Control. (a) Section 8.02 of the Employment
Agreement is hereby amended so that the second paragraph thereof reads as
follows:
"For the purposes of this Agreement, a "Change of
Control" shall mean any event that is required to be reported
by the Company as a change of control on a Form 8-K or any
other report filed with the Securities and Exchange
Commission, including any of the following:"
(b) Section 8.02 of the Employment Agreement is hereby further amended
to change the period to "; or" at the end of subparagraph (c) thereof and to add
the following new subparagraph (d) after subparagraph (c) of the definition of
"Change of Control".
"(d) a member of the families of David or Michael Zunenshine
cease to be Chief Executive Officer of the Company."
<PAGE> 3
(c) Section 8.01 of the Employment Agreement is hereby further
amended by adding a sentence at the end of the first paragraph thereof to read
as follows:
"In addition, in the event of a Change of Control, Employee
shall be entitled to (A) immediate payment of his monthly car
allowance, in the same amount as then in effect, such immediate payment
to be made in one lump sum in an amount equal to the greater of (i) 24
times the monthly car allowance and (ii) the remainder of the monthly
car payments that would be paid through the Term or the Renewal Term,
as the case may be, and (B) either continuation of all other benefits
(i.e. group medical, disability and term life insurance) through the
longer of (x) 24 months from the date of termination or (y) the Term or
the Renewal Term, as the case may be, or payment of the value of such
benefits in one lump sum payment upon the date of termination of
employment."
3. Continuing Effect. All provisions of the Employment
Agreement not otherwise amended by this Amendment shall continue in full force
and effect.
4. Miscellaneous.
(a) No changes, modifications or amendments shall be made to
this Amendment, except in writing and signed by the parties hereto.
(b) This Amendment shall be binding upon and shall inure to
the benefit of the respective successors and assigns of the parties hereto.
(c) This Amendment shall be governed by the laws of the State
of New York.
(d) This Amendment may be signed in counterparts, each of
which shall be deemed an original and, when taken together, shall be deemed but
one instrument.
IN WITNESS WHEREOF, the parties hereto have signed this
Amendment as of the date first hereinabove written.
SLM INTERNATIONAL, INC.
By: /s/ Howard Zunenshine /s/ Richard S. Levy
---------------------- -------------------------
Name: Howard Zunenshine Richard S. Levy
Title:
<PAGE> 1
Exhibit 21
<PAGE> 2
Subsidiaries
Name
----
Mitchell & King States Limited
Maska U.S., Inc.
Smedley Industries Inc.
Smedley Industries (Hong Kong) Ltd.
Sport Maska Inc.
Sport Maska Europe S.A.R.L.
Maska H.K. Ltd.
#1 Apparel Canada Inc.
#1 Apparel Inc.
SLM Trademark Acquisition Corp.
SLM Trademark Acquisition Canada Corporation
Consumer Info Marketing Inc.
The Toy Factory, Inc.
Buddy L St. Thomas, Inc.
St. Lawrence Manufacturing Canada Inc.
<PAGE> 1
Exhibit 23.1
<PAGE> 2
[RAYMOND, CHABOT, MARTIN, PARE LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement Report of SLM
International, Inc. on Form S-8 of our reports which include an explanatory
paragraph regarding uncertainties as to the ability of the companies to continue
as a going concern, dated April 25, 1996 on St. Lawrence Manufacturing Canda
Inc. (Formerly Buddy L. Canada Inc.), on Sport Maska Inc., on #1 Apparel Canada
Inc., dated April 14, 1995 on Buddy L Canada Inc., on Sport Maska Inc., on #1
Apparel Canada Inc., our report dated February 2, 1994 on Buddy L Canada Inc.
(Formerly SLM Canada Inc.), and our report dated January 28, 1994 on Sport Maska
Inc.
/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants
Montreal, Canada
May 8, 1996
<PAGE> 1
Exhibit 23.2
<PAGE> 2
[COOPERS & LYBRAND LETTERHEAD]
Consent Of Independent Accountants
We consent to the incorporation by reference in the registration statement of
SLM International, Inc. on Form S-8 (File No. 33-53996) of our report, which
includes an explanatory paragraph regarding uncertainties as to the ability of
the Company to continue as a going concern, dated April 26, 1996, on our audits
of the consolidated financial statements and financial statement schedule of SLM
International, Inc. As of December 31, 1995 and 1994, and for the years ended
December 31, 1995, 1994 and 1993, which report is included in this Annual Report
on Form 10-K.
/s/ COOPERS & LYBRAND
Albany, New York
May 8, 1996
