As filed with the Securities and Exchange Commission on May 30, 1997
File No. 33-55254-47
SECURITIES AND EXCHANGE COMMISSION
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TECHNICAL MAINTENANCE CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Nevada 3670 87-0485304
- ----------------- ------------------- --------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classi- Identification No.)
incorporation or fication Code
organization) Number)
TECHNICAL MAINTENANCE CORPORATION
One Commerce Place - Suite 330
Montreal (Nun's Island)
Quebec, Canada H3E 1A2
(514) 762-6244
----------------------------------------------------
(Address, including zip code, and telephone
number of registrant's principal executive offices)
Tony Mastronardi, President
TECHNICAL MAINTENANCE CORPORATION
c/o Touchtunes Digital Jukebox Inc.
One Commerce Place - Suite 330
Montreal (Nun's Island)
Quebec, Canada H3E 1A2
(514) 762-6244
--------------------------------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Jacques Bourque, Esq. Aaron Karp, Esq.
Guy & Gilbert Karp and Sommers
770 Sherbrooke Street West 950 Third Avenue
Suite 2200 9th Floor
Montreal (Quebec) H3A 1A2 New York, New York 10022
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this
Registration Statement
------------------------------
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the box. [X]
CALCULATION OF REGISTRATION FEE
========================================================================
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Offering Aggregate Amount of
to be Amount to be Price Per Offering Registration
Registered Registered Share Price Fee
- ------------------------------------------------------------------------
Class A
Common Stock
($.001 par
value) 2,000,000 $3.00 $6,000,000 $1,200
========================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a) may determine.
ii<PAGE>
TECHNICAL MAINTENANCE CORPORATION
Cross Reference Sheet
Pursuant to Rule 404(a)
Item Number of Form SB-2 Location or Caption in Prospectus
- ---------------------------- ----------------------------------
1. Front of Registration Outside Front Cover Page
Statement and Outside Front
Cover of Prospectus
2. Inside Front and Outside Back Inside Front and Outside
Cover Pages of Prospectus Back Cover Pages
3. Summary Information and Prospectus Summary and
Risk Factors Risk Factors
4. Use of Proceeds Prospectus Summary; Use of Proceeds and
Business
5. Determination of Offering Price Outside Front Cover Page
6. Dilution Not Applicable
7. Selling Security Holders Principal Shareholders and
Selling Shareholders
8. Plan of Distribution Outside Front Cover Page
9. Legal Proceedings Business - Legal Proceedings
10. Directors, Executive Officers, Management - Directors and
Promoters and Control Persons Executive Officers
11. Security Ownership of Certain Principal Shareholders and
Beneficial Owners and Management Selling Shareholders
12. Description of Securities Outside Front Cover Page; Description
of Capital Stock
13. Interest of Named Experts Legal Matters; Experts
14. Disclosure of Commission Part II
Position on Indemnification
for Securities Act Liabilities
15. Organization Within Last Prospectus Summary; Business and
Five Years Management's Discussion and Analysis of
Financial Conditions and Results of
Operations
iii<PAGE>
16. Description of Business Prospectus Summary; Business
17. Management's Discussion and Prospectus Summary; Business;
Analysis or Plan of Operation Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property Business - Property
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity Risk Factors; Price Range of
and Related Stockholder Common Stock; Dividend Policy
Matters and Description of Capital Stock
21. Executive Compensation Management - Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
24. Indemnification of Directors Part II
and Officers
25. Other Expenses of Issuance Part II
and Distribution
26. Recent Sales of Unregistered Part II
Securities
27. Exhibits Part II; Exhibits
28. Undertakings Part II
29. Financial Statements Not Applicable
iv<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
Subject to Completion, Dated May 30, 1997
TECHNICAL MAINTENANCE CORPORATION
2,000,000 SHARES OF CLASS A COMMON STOCK
(Par Value $.001 Per Share)
This Prospectus relates to the offering of 2,000,000 shares of the
Class A Common Stock ("Common Stock") of Technical Maintenance Corporation (the
"Company"), which may be sold from time to time by selling shareholders named
herein (the "Selling Shareholders"). The Company will receive no part of the
proceeds of such sales (see "Use of Proceeds"). All expenses incurred in
connection with this offering will be borne by the Company.
The Company has been advised by the Selling Shareholders that they
intend to sell all or a portion of the shares offered hereby from time to time
in the over-the-counter market. Such sales will be made through brokers at
prices prevailing at the time the sales are made. The Selling Shareholders and
any brokers executing sell orders on behalf of the Selling Share-holders, may
be deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended, and any commissions received by such brokers may be deemed underwrit-
ing commissions under such Act.
The Company's Common Stock is traded in the over-the-counter market
on the "OTC Bulletin Board" under the symbol TCMN. On May 27, 1997, the last
reported sales price of the Common Stock was $2.125 per share.
______________________________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE RISK FACTORS (Pages 6-10)
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________
No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering described herein. The Prospectus does not constitute an
offer to sell securities in any state to any person to whom such offer would be
unlawful.<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files annual and quarterly reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information may be
inspected and copied at the Commission's Public Reference Section, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, as well as at the Commission's
Regional Offices at 7 World Trade Centre, 13th Floor, New York, New York 10048;
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N. W., Washington, D.C. 20549.
DOCUMENTS INCORPORATED BY REFERENCE
The Company has filed with the Commission a registration statement on
Form SB-2 (the "Registration Statement") under the Securities Act with respect
to the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto,
as permitted by the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed as an exhibit
to the Registration Statement are qualified in their entirety by reference to
such exhibits for a complete statement of their terms and conditions.
The following documents which have also been or will be filed by the
Company with the Commission pursuant to the Securities Exchange Act of 1934
are incorporated herein by reference: (1) Annual Reports on Forms 10-K for the
fiscal years ended December 31, 1994; December 31, 1995; and December 31, 1996;
(2) quarterly reports on Forms 10-Q for the fiscal quarters ended March 31,
1995; June 30, 1995; September 30, 1995; March 31, 1996; June 30, 1996;
September 30, 1996; and March 31, 1997; (3) current reports on Forms 8-K dated
March 31, 1995; November 10, 1995; December 21, 1995; January 19, 1996; and
April 18, 1997; (4) Information Statement dated June -- 1997 for the annual
meeting of shareholders to be held on July -- 1997; and (5) all documents
subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934. Prior to the filing of a post
effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, all such
documents shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents.
2<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere or
incorporated by reference in this Prospectus.
The Company
The Company was incorporated under the laws of Nevada on August 9,
1990, by persons who are no longer principals. Present management took
control of the Company in December 1994. (See "CERTAIN TRANSACTIONS".) Prior
thereto, the Company did not engage in any business activities. The Company is
still in the development stage and has not generated any revenues. The Company
has a mailing office at 1800 E. Sahara, Suite 107, Las Vegas, Nevada 89104.
Its principal business offices are located at One Commerce Place, Suite 330,
Montreal (Nun's Island), Quebec H3E 1A2, Canada, where it operates its business
through Touchtunes Digital Jukebox Inc. ("Touchtunes"), an affiliated Canadian
corporation. (See "BUSINESS - Properties"). The Company's telephone number is
514-762-6244.
Business
Since December 8, 1994, the Company has concentrated its efforts on
raising funds for the development and promotion of the technology for a
patented digital jukebox, combining the latest computer systems, telecommunica-
tion peripherals and multimedia hardware (the "Digital Jukebox"). The Digital
Jukebox is a state-of-the-art high tech unit, capable of storing, in compressed
digital format, a minimum of 500 songs, with almost unlimited capacity. The
Company's Digital Jukebox is believed by management to be capable of replacing
present conventional jukeboxes which use loading mechanisms, laser and other
high maintenance parts, with a low maintenance, high powered digital computer
system, able to store and reproduce in digital format, a virtually unlimited
selection of music, at its original level of quality. (See "BUSINESS - Patent
Technology".)
Initial Funding
Since taking control of the Company in December 1994, the officers
and principal shareholders of the Company have financed its operations
primarily through their own resources and efforts. (See "CERTAIN TRANSACTIONS"
and "PRINCIPAL SHARE-HOLDERS".) On March 21, 1997, two independent Canadian
investors, Societe Innovatech du Grand Montreal and Sofinov Societe Financiere
d'Innovation Inc. (the "Selling Shareholders"), agreed to invest $4,000,000
Canadian Dollars (CDN) for the further development and promotion of the Digital
Jukebox, upon certain terms and conditions described below. To accomplish
this, the Canadian Investors agreed to invest $4,000,000 CDN in Touchtunes
Digital Jukebox Inc. ("Touchtunes"), a Canadian subsidiary organized by the
Company specifically for that purpose. The Company entered an agreement by
which Touchtunes agreed to carry out the research and development work for the
Digital Jukeboxes and all such additional services as may be reasonably
requested by the Company in connection with implementation of the Digital
Jukebox project. (See "USE OF PROCEEDS", "BUSINESS" and "CERTAIN
TRANSACTIONS".)
3<PAGE>
The Selling Shareholders purchased 100 Class B shares and 20 Class C
shares of Touchtunes, at a price of $5,000 CDN per share, for an immediate cash
consideration of $600,000 CDN. The Selling Shareholders also subscribed to an
additional 680 Class C shares of Touchtunes, at a price of $5,000 CDN per
share, for a total consideration of $3,400,000 CDN. Both the Class C shares
and the funds were deposited in escrow. The Class B and the Class C shares of
Touchtunes may be exchanged at the option of the Selling Shareholders, into
2,000,000 shares of Series A Preferred Stock of the Company and then converted
share for share into Common Stock. On May 9, 1997, the Selling Shareholders
released an additional $750,000 CDN against delivery of 150 Class C shares,
leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow. Payment
of the remaining $2,650,000 CDN to Touchtunes is subject to this Prospectus
becoming effective under the Securities Act of 1933 ("Securities Act") by July
1, 1997. Once the Prospectus becomes effective, the $2,650,000 CDN will be
delivered to Touchtunes for use in implementing the start-up business
activities of the Company. (See "BUSINESS - Marketing Strategy".)
Business Start-Up Activities
The Company estimates that it will require capital of approximately
$4,000,000 CDN to complete its start-up business activities. The initial
$1,350,000 CDN received by Touchtunes in March and May 1997 from the sale of
its Class B and Class C shares to the Selling Shareholders, will provide
working capital only for the next several months. The additional $2,650,000
CDN to be obtained on the effective date of this Prospectus will be used by
Touchtunes to: (i) conduct a market trial test; (ii) register the Company's
patents in the United States, Japan, Canada and member countries of the
European patent office organization; (iii) continue research and development of
the Digital Jukebox; (iv) establish a national sales network; and (v) negoti-
ate long term contracts with major music label companies for non-exclusive
music rights. That will be sufficient capital for the next twelve months. (See
"USE OF PROCEEDS".) Thereafter, the Company estimates it will require
additional capital of $24,000,000 U.S. to commence full scale commercial
operations. (See "BUSINESS - Future Capital".)
4<PAGE>
The Company estimates that its start-up business activities will
continue over the course of the next twelve months, at which time the Company
will be ready to manufacture Digital Jukeboxes. In order to rapidly penetrate
the existing jukebox market, the Company plans to pay the manufacturing costs
of the Digital Jukeboxes and provide them for use by current jukebox operators
without cost. (See "BUSINESS - Jukebox Manufacturers".) The jukebox operators
are expected to install the Digital Jukeboxes in lieu of their existing
conventional units, at their present locations, or in new locations, and
provide the necessary maintenance to keep the Digital Jukeboxes in good working
order. The Company plans to enter jukebox operator agreements with such
operators, to be negotiated individually with each, whereby the Company and the
operator will share in the income generated by each Digital Jukebox. (See
"BUSINESS - Marketing Strategy".)
The Company estimates that manufacturing and distribution costs for
the number of Digital Jukeboxes needed to operate on a commercially profitable
basis, will require additional capital estimated at approximately $24,000,000
U.S. (See "BUSINESS - Future Capital".) The Company has no present commit-
ments for raising such additional funds and no assurances can be given that
such funds will be available, when and if needed by the Company. (See "RISK
FACTORS".)
The Offering
The Company is the owner of 800 Class A shares of Touchtunes. Class
A shares entitle the holder to one vote per share. The Selling Shareholders
own 100 Class B shares and 170 Class C shares of Touchtunes. Class B shares
entitle the holder to eight votes per share and Class C shares are non-voting.
At present, the Company and the Selling Shareholders have equal voting rights
in Touchtunes.
The Class B and Class C shares of Touchtunes are exchangeable at the
option of the Selling Shareholders into 2,000,000 Series A Preferred shares of
the Company which, in turn, are convertible share for share into 2,000,000
shares of Common Stock of the Company. Once the Selling Shareholders exercise
their exchange rights for Series A Preferred shares of the Company and convert
them into Common Stock, the Company will become the sole remaining shareholder
of Touchtunes. It is anticipated that this will take place on the effective
date of this Prospectus. (See "CERTAIN TRANSACTIONS" and "SELLING
SHAREHOLDERS".)
5<PAGE>
This Prospectus is intended to register the sale by the Selling
Shareholders of a maximum of 2,000,000 shares of the Company's Common Stock
reserved for issuance to them, upon exercise of their rights to exchange 100
Class B shares and 700 Class C shares of Touchtunes into 2,000,000 of the Com-
pany's Series A Preferred shares and their conversion of such Series A Pre-
ferred shares (plus 100 shares of Series A Preferred Stock which they already
own) into 2,000,100 shares of the Company's Common Stock. Once the Prospectus
becomes effective, Touchtunes will receive the additional $2,650,000 CDN needed
to complete the Company's start-up business operations. (See "USE OF PROCEEDS"
and "CERTAIN TRANSACTIONS".)
Summary Financial Data
Statement of Operations Data:
<TABLE>
<CAPTION>
Three
Months Ended
Year ended December 31, March 31,
(Unaudited)
1994 1995 1996 1996 1997
-------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ - $ - $ - $ -
Depreciation
and amortization $ - $ 114,776 $ 189,243 $ 32,025 $ 104,138
Operating loss $ - $ (785,063) $ (991,970) $ (146,290) $(419,690)
Net loss $ - $ (785,063) $ (991,970) $ (164,290) $(419,690)
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
As At December 31, March 31,
(Unaudited)
1994 1995 1996 1996 1997
-------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Current assets - - 21,402 - -
Total assets 63,539 780,767 1,714,272 829,482 1,721,224
Working Capital
(deficiency) - (123,901) (2,027,974) (318,906) (2,197,723)
Stockholders' equity
(deficiency) 63,539 656,866 ( 335,104) 510,576 ( 754,644)
</TABLE>
Use of Proceeds
The Company will receive no part of the proceeds from the sale of the
2,000,000 shares of Common Stock by the Selling Shareholders. All expenses
incurred in connection with this offering will be borne by the Company.
However, the Company will receive $2,650,000 CDN when this Prospectus becomes
effective. (See "USE OF PROCEEDS" and "SELLING SHAREHOLDERS".)
RISK FACTORS
The shares of Common Stock being offered hereby are speculative.
They involve a very high degree of risk. Before considering the purchase of
any shares of Common Stock, a prospective investor should carefully consider,
in addition to the other information contained in this Prospectus, the
following risk factors. No person should purchase any of the shares of Common
Stock if they cannot afford to lose their entire investment.
6<PAGE>
1. Limited Operating Experience. The Company was incorporated in August
1990. It did not commence business activities until December 1994, when
present management took control. The Company's Digital Jukebox is still in its
development stage and must still undergo a market trial test. No revenues have
been generated from the sale of Digital Jukeboxes, the Company's only current
product. The Company believes that revenues from the Digital Jukeboxes will
constitute a significant portion of its revenues for the foreseeable future.
Accordingly, any factor adversely affecting the introduction, promotion and
revenues from the Digital Jukeboxes would have a material adverse effect on the
Company's business and the results of its operations. (See "BUSINESS".)
2. No Financial History. The Company has received no revenues from
operations and has no significant financial history. Future financial perform-
ance will depend on the successful development, promotion and customer
acceptance of its patented Digital Jukebox. There can be no assurance that the
Company will be successful in promoting and marketing any present or enhanced
versions of the Digital Jukebox. At March 31, 1997, the Company had an Accumu-
lated Deficit of $754,644. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources" and "BUSINESS".)
3. Dependence on Key Personnel. The Company will be dependent for its
success on the personal, day-to-day efforts and abilities of its two key execu-
tive officers, Tony Mastronardi and Guy Nathan. (See "MANAGEMENT" and
"PRINCIPAL SHAREHOLDERS".) In addition, the Company must employ a chief
financial officer to monitor its finances. Its success will also depend to a
significant extent upon a number of key technical employees. Competition for
such technical personnel is intense. The failure of the Company to hire and
retain talented adminstrative and technical personnel or the loss of one or
more key employees could have an adverse effect on the Company's business and
results of operations.
4. New Product Development. The Company's future success will depend upon
its ability to complete the development of its Digital Jukebox and introduce
features and enhancements which meet changing customer requirements on a timely
basis. (See "BUSINESS - Patented Technology".) Once developed, there can be
no assurance that the Digital Jukebox will achieve market acceptance. In addi-
tion, there can be no assurance that other products or technologies will not
render the Digital Jukebox non-competitive or obsolete. (See "BUSINESS -
Industry Background".)
7<PAGE>
5. Competition. The market for jukeboxes is extremely competitive. There
are substantial barriers to entry in this market due to the large amount of
capital required. The Company expects such competition to intensify in the
future. The Company's potential competitors have significantly greater
financial and other resources than the Company. (See "BUSINESS - Jukebox
Manufacturers".) The Company's ability to compete successfully in this market
will depend upon a number of factors, including: the success of its test
marketing plan; the willingness of jukebox operators to work with the Company;
access to capital; the capacity, reliability and security of the telecommuni-
cations network used; the pricing policy of competitors and suppliers; the
timing of the introduction of new products and services; and industry and
general economic trends. There can be no assurance that the Company will be
successful in introducing its Digital Jukeboxes into this market or that the
revenues generated will prove profitable. (See "BUSINESS - Marketing
Strategy".)
6. Future Capital Requirements. To date, the Company has not generated any
revenues from its operations. Management estimates that start-up costs for the
development and promotion of the Digital Jukebox over the next twelve months,
to the point of commercial manufacturing, will approximate $4,000,000 CDN. Of
this, the Company has received only $1,350,000 CDN. The Company expects that
its capital resources, including the $2,650,000 CDN to be received upon the
effective date of this Prospectus, will enable it to maintain its start-up
business operations through May 1998. At that time, the Company will need
approximately $24,000,000 U.S. in order to manufacture and ship its Digital
Jukeboxes on a commercial basis. For that purpose, the Company must seek
additional funding through public or private equity or debt financing. There
can be no assurance that such financing will be available on terms favorable to
the Company, or at all. If adequate funds are not available or are not
available on acceptable terms, the Company may not be able to commercialize its
Digital Jukeboxes. (See "BUSINESS".)
7. Technological Changes. Although the Company's Digital Jukebox is believed
to be technologically more advanced than any other jukebox on the market today,
there can be no assurance that this technological lead will remain. The
Company's future success will depend, in part, on its ability to effectively
use leading technologies, to continue to develop its technical expertise, to
enhance its current Digital Jukebox and develop new features which will meet
changing customer needs on a timely and cost effective basis. There can be no
assurance that the Company can do this. (See "BUSINESS - Patented Techno-
logy".)
8. Limited Patent Protection. The Company has filed eight international
patent applications under the Patent Cooperation Treaty, a worldwide
organization, in order to protect its Digital Jukebox's technology. It will
continue its efforts to protect such patent claims during its start-up business
operations and thereafter. Nevertheless, there can be no assurances concerning
the scope, validity or value of such patents and patent applications; nor as to
freedom from infringement, by the manufacture, use or sale of Digital
Jukeboxes, of patents held by others, although the Company is not aware of any
infringing patents. (See "BUSINESS - Patented Technology".)
8<PAGE>
9. No Manufacturing Facilities or Experience. The Company has no
manufacturing facilities. The Digital Jukebox has never been manufactured on a
commercial scale. Although the Company believes that an original equipment
manufacturer will be able to manufacture its Digital Jukeboxes commercially,
there can be no assurance that the Digital Jukeboxes can be manufactured at a
cost or in quantities necessary to make them profitable. If the Company is not
able to contract with a manufacturer for a sufficient number of Digital
Jukeboxes on acceptable terms, or if it should encounter delays or difficulties
in its relationship with the manufacturer, the introduction of the Digital
Jukeboxes would be delayed, which would have a material adverse affect on the
Company. (See "BUSINESS -Jukebox Manufacturers".)
10. No Marketing Experience. The Company currently has no sales, marketing or
distribution capability. To market its Digital Jukeboxes, the Company must
develop a marketing and sales force with technical expertise and with
supporting distribution capability. There can be no assurance that the Company
will be able to establish in-house sales and distribution capabilities or that
it will be successful in gaining market acceptance for its Digital Jukebox.
The Company is presently attempting to attract suitable personnel to develop
the Company's marketing strategy and sales force. There can be no assurance
that it will be able to attract such individuals on acceptable terms or at all.
(See "BUSINESS - Marketing Strategy".)
11. Sole Equipment Manufacturer. The Company will be dependent upon a single
equipment manufacturer for its Digital Jukeboxes. It is presently negotiating
with Bose Corporation and Pioneer Electronics Corporation and is in the process
of choosing a sole equipment manufacturer. Once the Company chooses the
manufacturer, it will become subject to that manufacturer's performance and may
also be subject to increases in costs which could adversely affect the
Company's business and results of operations. ("BUSINESS - Jukebox
Manufacturers".)
12. No Market for Common Stock. As of April 22, 1997, there were 510 holders
of the Company's Common Stock. Over the past two years, there has been rela-
tively little activity in the Common Stock, which is traded over-the-counter on
the "OTC Bulletin Board". There can be no assurance that an active public
market will develop or be sustained after the sale of the Common Stock by the
Selling Shareholders. (See "PRICE RANGE OF COMMON STOCK".)
9<PAGE>
13. Shares Eligible For Future Sale. Future sales by existing shareholders
could have a material adverse effect on the price of the Common Stock. Upon
exercise by the Selling Shareholders of their exchange rights and their
conversion rights, the Company will have 16,584,807 shares of Common Stock
issued and outstanding. Of this, 11,415,049 shares (68.83%) are owned by
present management. (See "PRINCIPAL SHAREHOLDERS".) No assurance can be given
as to the effect that future sales of shares held by present shareholders will
have on the market price prevailing from time to time.
14. Control of the Company. Upon completion of this offering, the Company's
officers and directors will own approximately 68.83% of the outstanding shares
of Common Stock, assuming the sale of all 2,000,000 shares by the Selling
Shareholders. As such, they will have the power to elect all of the Company's
directors, to approve or disapprove all matters requiring stockholders' ap-
proval (regardless of the vote of any other stockholders) and to control the
Company's management, policies and operations. (See "PRINCIPAL SHAREHOLDERS".)
15. No Dividends. The Company has never declared or paid dividends on its
Common Stock. It intends to retain future earnings, if any, to support the
growth of its business and does not anticipate paying cash dividends in the
foreseeable future. (See "DIVIDEND POLICY.")
16. Securities Not Listed on NASDAQ. The Company's Common Stock is not listed
for quotation on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or on any securities exchange. The Common Stock is
subject to certain "Penny Stock Rules" adopted by the Securities Exchange
Commission, relative to transactions in securities with a market price of less
than $5.00. These require a broker to provide his customer with, among other
things: (1) detailed information about the nature and risks of "penny" stocks,
prior to executing a transaction; (2) make a written determination that the
stock is a suitable investment for the purchaser; and (3) receive the
purchaser's prior written agreement to execute the transaction. These
disclosure requirements may have the effect of reducing the level of trading in
the Company's Common Stock. In that event, investors in this offering may find
it more difficult to sell their securities.
For all the foregoing reasons, an investment in the Company's Common
Stock involves a high degree of risk. Any person considering such an
investment should be aware of these and other risk factors discussed throughout
this Prospectus.
10<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Shareholders. However, on the effective date of this
Prospectus, the Company will receive an additional $2,650,000 CDN which has
been placed in escrow by the Selling Shareholders. (See "CERTAIN
TRANSACTIONS".) This is needed by the Company to complete the remaining
activities of its business start-up including:
1. Conducting a market trial test for its Digital Jukebox (approximately
$100,000 CDN);
2. Continuing the registration of the Company's patents and applications
in the United States, Japan, Canada and the member countries of the European
patent office organization (approximately $100,000 CDN);
3. Continuing the research and development work on the Digital Jukebox
(approximately $1,400,000 CDN);
4. Establishing a national sales network (approximately $800,000 CDN);
and
5. Negotiating contracts with major music label companies for
non-exclusive music rights and payment of royalties (approximately $250,000
CDN).
The Company estimates that its business start-up activities will
continue over the course of the next 12 months, at which time the Company will
be ready to commence manufacturing the Digital Jukeboxes. These manufacturing
activities will require an additional $24,000,000 U.S. in capital. The Company
has no present arrangement for raising such funds. (See "BUSINESS-Future
Financing".)
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded in the over-the-counter market
on the "OTC Bulletin Board" since June 7, 1995, under the symbol TCMN. The
quotations below from the National Quotation Bureau, Inc. represent the high
and low, bid and asked prices, by quarters, since that date. These do not
include retail markups, markdowns or commissions. Nor do they represent actual
transactions.
11<PAGE>
Bid Prices Asked Prices
High Low High Low
1995
- ------------ ------- ------- ------- -------
June 7
through
June 30 unpriced unpriced
July 3
through
September 29 $4.50 $1.125 $4.75 $1.875
October 2
through
December 29 $4.50 $.875 $4.875 $1.375
1996
- ------------
January 2
through
March 29 $1.625 $.875 $2.25 $1.125
April 1
through
June 28 $3.25 $1.1875 $5.00 $1.375
July 1
through
September 30 $3.75 $1.875 $4.25 $3.00
October 1
through
December 31 $2.00 $1.00 $3.00 $2.00
1997
- ------------
January 2
through
March 31 $2.75 $1.00 $4.00 $1.50
On May 27, 1997, the last reported sales price of the Common Stock on
the OTC Bulletin Board was $2.125 per share. On that date, there were
approximately 510 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common
Stock. It intends to retain future earnings, if any, to support the growth of
its business and does not anticipate paying cash dividends in the foreseeable
future.
12<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization at March
31, 1997.
March 31, 1997
-------------
Short term debt ...................... $ 2,475,868
Long term debt ...................... -
-------------
Stockholders Equity:
Preferred Stock - $.001 par value,
authorized - 10,000,000 shares,
100 shares issued and outstanding -
-------------
Common Stock - $.001 par value,
authorized - 35,000,000 shares,
12,909,000 shares issued and
outstanding 12,909
-------------
Capital in excess of par value 1,430,170
-------------
Retained earnings (deficit) (2,179,723)
-------------
Total stockholders equity ( 754,644)
-------------
SELECTED FINANCIAL DATA
The following selected financial data for the Company's fiscal year
ended December 31, 1994 has been derived from the financial statements of the
Company audited by Perelson Weiner, Certified Public Accountants and for the
Company's fiscal years ended December 31, 1995 and December 31, 1996 they have
been derived from the financial statements of the Company audited by Armstrong
and Gilmour, Certified Public Accountants. Their respective reports appear
elsewhere herein. The Company's operating results for the three months ended
March 31, 1997 may not be indicative of the operating results to be expected
for the full year.
Summary Financial Data
<TABLE>
<CAPTION>
Statement of Operations Data:
Three
Months Ended
Year ended December 31, March 31,
(Unaudited)
1994 1995 1996 1996 1997
---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ - $ - $ - $ -
Depreciation
and amortization $ - $ 114,776 $ 189,243 $ 32,025 $ 104,138
Operating loss $ - $ (785,063) $ (991,970) $ (146,290) $ (419,690)
Net loss $ - $ (785,063) $ (991,970) $ (164,290) $ (419,690)
</TABLE>
13<PAGE>
<TABLE>
<CAPTION>
Weighted average number
of Class A Common Stock:
<S> <C> <C> <C> <C> <C>
Shares outstanding,
beginning of period 1,000,000 2,000,000 12,909,000 12,909,000 12,909,000
Share issuances
during the period 1,000,000 10,909,000 - - -
Shares outstanding,
end of period 2,000,000 12,909,000 12,909,000 12,909,000 12,909,000
Weighted average
number of shares 1,065,753 10,535,844 12,909,000 12,909,000 12,909,000
Net loss per Class
A Common Stock $ - $ (0.07) $ (0.08) $ (0.01) $ (0.03)
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
As At
As At December 31, March 31,
(Unaudited)
1994 1995 1996 1996 1997
------ --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Current assets - - 21,402 - -
Total assets 63,539 780,767 1,714,272 829,482 1,721,224
Working Capital
(deficiency) - 123,901 (2,027,974) (318,906) (2,457,996)
Stockholders' equity
(deficiency) 63,539 656,866 ( 335,104) 510,576 ( 736,772)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the information set forth under "Selected Financial Data" and the
financial statements and notes thereto included elsewhere in this Prospectus.
General and Results of Operations
The Company's ongoing development of the Digital Jukebox and its
other intellectual property acquisitions provide it with several future
opportunities for financial success. To date, the Company's financial
resources have been used to fund this development as well as professional costs
relating to patent applications in connection with the Digital Jukebox and
other fees. The Company has generated no revenue to date, and none is expected
until it concludes the start-up phase for the Digital Jukebox, which is
anticipated in approximately 12 months.
Seasonality
Management is not aware of any factors or attributes relating to the
Company's business that have caused, or in the future are reasonably likely to
cause, any seasonality which would have a material effect on the Company's
financial condition or results of operations.
14<PAGE>
Liquidity and Capital Resources
On March 21, 1997, the Selling Shareholders agreed to invest
$4,000,000 CDN for the further development and promotion of the Digital
Jukebox, upon certain terms and conditions previously described. (See
"CERTAIN TRANSACTIONS - With Selling Shareholders"). By virtue of the
agreement entered into between the Company and Touchtunes, relative to work to
be rendered by Touchtunes in connection with the Digital Jukebox, the Company
should have sufficient capital resources necessary in order to conclude the
financing of its start-up activities. In order to commence full scale
commercial operations, management estimates that an additional $24,000,000 U.S.
capital will be required. It is anticipated that a combination of equity and
debt financing will be arranged by the Company.
BUSINESS
The Company was incorporated under the laws of Nevada on August 9,
1990, by persons no longer principals. Prior to December 8, 1994, the Company
did not engage in any business activities. The Company is still in the
development stage and has still not generated any revenues from the business
operations in which it has engaged and the marketing strategy which it has
developed.
In December 1994, the Company acquired the exclusive rights to a
newly patented technology, the "Digital Jukebox". (See "Patented Technology".)
Since then, the Company has concentrated all of its efforts on the development
of this Digital Jukebox, which combines in a single unit the latest computer
systems, telecommunication peripherals and multimedia hardware. Management
believes the Digital Jukebox is capable of replacing the loading mechanisms,
the laser and the high maintenance parts employed by conventional jukeboxes,
with this low maintenance, high power computer system, capable of storing and
reproducing, in digital format, any music selection at its original level of
quality.
From December 1994 until March 1997, the Company's activities have
been funded by present management through their own resources and efforts.
Subsequently, the Company received $600,000 CDN on March 27, 1997 and $750,000
CDN on May 9, 1997, to start-up its business operations. Another $2,650,000
CDN is being held in escrow for such use, to be delivered when this Prospectus
becomes effective. (See "CERTAIN TRANSACTIONS"). The Company anticipates that
these funds will provide sufficient capital over the next twelve months to
complete its start-up activities. (See "USE OF PROCEEDS".) Thereafter,
additional financing of approximately $24,000,000 U.S. will be needed for
commercial operations. No arrangements have been made as yet, to obtain such
additional funds. (See "Future Financing".)
15<PAGE>
Patented Technology
On December 8, 1994, the Company acquired the exclusive rights to a
patent-pending (PCT/FR94/01185) Digital Jukebox, developed by Touchtunes
Jukebox Joint Venture (See "CERTAIN TRANSACTIONS".) The core of the Digital
Jukebox's technology is a proprietary programming platform, optimized for high
speed sound reproduction and video animation. The Digital Jukebox is capable
of storing, in compressed digital format, a minimum of 500 songs, with an
almost unlimited maximum capacity. The Digital Jukebox is also equipped with a
telecommunication protocol allowing the down-loading of music to each
individual Digital Jukebox from a remote central library. The result is a high
performance, low maintenance, remotely configurable, computer controlled unit,
using state-of-the-art technology standards. With its integrated and flexible
software program, the Digital Jukebox outperforms any conventional jukebox on
the market today, for simultaneous sound reproduction, graphics display, video
animation and telecommunication services.
Specifically designed for use in the jukebox industry, the operating
system software will tabulate all played selections and automatically generate
detailed pay-for-play statements, indicating the royalty amounts owing for each
respective artist or record label company. This feature has enabled the
Company to obtain performance rights and recording rights from performance
rights societies and music label companies, authorizing the Company to
reproduce copyrighted music on its Digital Jukeboxes. (See "Contractual
Arrangements".)
The statistics generated by Digital Jukeboxes can be used to
determine the popularity of artists and titles, together with music preferences
and trends. This information on musical tastes is critical to the music
industry and can be made available by the Company to record label companies.
Furthermore, Digital Jukeboxes can be used to test market new songs, which can
be down-loaded on each Digital Jukebox within 24 hours. Consumer response can
be monitored on a daily basis.
To protect its technology, the Company has filed seven international
patent applications under the Patent Cooperation Treaty (PCT), a worldwide
organization. These applications have a priority date of October 12, 1994.
Recently, an eighth patent has been filed with a priority date of September 25,
1996. Four patents cover the Company's downloading network configuration,
operating system technology, title selection and system control methodology as
it applies to the jukebox industry. The other four patents, cover its
application to potential markets outside the jukebox industry, such as resi-
dential and other markets, which can be serviced by the same network
configuration. The initial seven patent applications passed preliminary inter-
national examination. Nevertheless, there can be no assurances concerning the
scope, validity or value of such patents and patent applications; nor their
freedom from infringement by others; although the Company is not aware of any
conflicting patents held by others.
16<PAGE>
Marketing Strategy
The Company's marketing and distribution strategy is aimed at
penetrating the jukebox industry through individualized arrangements made with
existing jukebox operators. The Company proposes to arrange for the renewal
and payment of licensing fees to the performing rights societies,
accountability and disbursement of royalty payments to the record label
companies, ongoing provision of music selections and for the manufacture and
delivery of the Digital Jukeboxes to the jukebox operators, all at no cost to
them, and to share with them in the revenue derived from their operation. (See
"Jukebox Manufacturers" and "Future Financing".) Initial responses from
jukebox operators to the use of the Digital Jukebox in this manner have been
favorable, primarily because of its technological advances.
The Company participated in the Amusement Showcase International
trade show held in Las Vegas from March 13 to 15, 1997, which attracts most
major players in the coin operated industry. For this, the Company arranged
for the construction of 4 prototype Digital Jukeboxes and was the only parti-
cipant in this trade show to have a fully operational Digital Jukebox. MCI
Telecommunications Corporation provided the telecommunications services. Bose
Corporation, which manufactured the 4 prototypes for the Company, supplied its
sound system. The Company together with MCI Telecommunications Corporation and
Bose Corporation hosted a seminar during which they presented the Digital
Jukebox to jukebox operators.
By April 30, 1997, the Company had delivered 18 prototype units of
the Digital Jukebox to selected jukebox operators for the purpose of conducting
a trial marketing test. In all, 17 jukebox operators in 11 states were
selected to participate in this commercial marketing test which is scheduled to
last 4 months and will be used to gauge consumer response and the practicality
of down-loading music on demand from a central music library to individual
Digital Jukeboxes. The test is being conducted in collaboration with MCI
Telecommunications Corporation which will provide the telecommunication
facilities and financial resources to cover the costs of storing music data in
a central location, transmitting the compressed music data and installing and
maintaining telephone lines to the Digital Jukeboxes on location. Bose
Corporation manufactured the 20 prototypes of the Digital Jukebox for use in
conducting this commercial market test. The sound system of the Digital
Jukeboxes was also designed and supplied by Bose Corporation.
17<PAGE>
After an analysis of the marketing test's results, including
recommendations made by the general public as well as the jukebox operators,
the Company will incorporate the suggested refinements in the final version of
the Digital Jukebox to be manufactured for commercial use. Based on early
results of this marketing test, the Company is confident that it will prove
successful and the Digital Jukebox will receive wide market exposure. The data
furnished by the test will also be used in negotiating contracts with the music
label companies. (See "Contractual Arrangements".)
Industry Background
According to industry sources, there are an estimated 312,000
conventional jukeboxes presently in use in the United States. These are owned
by approximately 2,300 operators, who own an average of 135 units each. The
locations comprising an operator's group of jukeboxes are called their
"routes". Many larger operators possess more than 300 jukeboxes in their
routes. Some routes with less than the average number of jukeboxes carry a
larger proportion of other amusement/entertainment equipment, in order to
provide an adequate revenue stream. The Company plans to distribute its
Digital Jukeboxes through arrangements made with these 2,300 operators for the
use of these units, without any initial payments. (See "Marketing Strategy".)
There can be no assuance that this strategy will be successful or profitable to
the Company.
Surveys taken of "consumer impressions", consisting of the number of
times that people hear music played on a jukebox, consistently demonstrate that
jukeboxes make 75-80 million "impressions" on a weekly basis in the United
States. Approximately 120,000 of the 312,000 conventional jukeboxes now in
use are newer CD units. Yearly sales of new CD units in 1996 are estimated at
approximately 25,000 units. These CD units can carry 100 CDs with approxi-
mately 1,000 songs. The remaining 192,000 conventional jukeboxes in use are
old 45 rpm units. These older units carry between 80-100 two-sided records for
a total of 160-200 songs. The Company's Digital Jukebox holds a minimum of 500
songs, with virtually unlimited capacity.
Each 45 rpm record is individually selected for the popularity of at
least one of its two sides. Although the newer CD jukeboxes have five times
the capacity of the older 45 rpm models, each song is not necessarily well-
known or popular. To compensate for this, compilation discs containing a
variety of songs are used to supplement the CD units. For both the old 45 rpm
units and the new CD units, releases featuring the "greatest hits" of a
particular artist, are usually available only after they have reached the
height of their popularity. By contrast, the Company's Digital Jukebox can
deliver the "greatest hits" of a particular artist, or even a brand new song,
within twenty four hours.
18<PAGE>
Inventories of CD albums and vinyl records stored in conventional
jukeboxes, must be continuously serviced by the operators, in order to keep
track of the selections within each jukebox at any given time. On a monthly
basis, operators must visit their conventional jukeboxes in order to rotate and
up-date the music selection and to make necessary changes to the title display.
The Digital Jukebox eliminates the need to change CD albums or vinyl records.
All music selections can be supplied completely by telecommunication. Jukebox
operators need not visit each Digital Jukebox to up-date the music selection.
Operators can even permit owners at the various sites where the Digital
Jukeboxes are located, to order the music titles, thereby tailoring the music
selection to the specific tastes of the owner's clientele. With the Digital
Jukebox, they need not maintain an inventory of CD albums and vinyl records.
Jukebox operators who use the Company's Digital Jukebox can order and
receive, on a 24 hour basis, individual music titles, including the newest
releases, from a remote central music library maintained by the Company, merely
by following the instructions on a touch-screen, an integral part of each
Digital Jukebox. (See "Marketing Strategy".) Their selection will be
immediately delivered to the Digital Jukebox via the Company's proprietary
telecommunications down-loading network and stored within the memory of the
Digital Jukebox at their desired location. Customers can then browse through
the music repertoire using the same touch-screen and play any selection in the
Digital Jukebox.
Jukebox Manufacturers
Manufacturers sell jukeboxes to distributors who, in turn, sell the
units to operators. They range in price from $3,500 to $4,000 per unit and the
distributors sell them in turn to jukebox operators in a price range of $4,500
to $5,000 per unit. In addition to providing warranties and replacement parts
for their units, manufacturers conduct the research and development required to
produce a quality product. The latest advances in technology, the minimization
of moving parts and the all-important aesthetics factor are critical in
producing a commercially successful jukebox. The leading manufacturers are
Rowe International Inc., NSM-America, Wurlitzer Jukebox Company and Rock-
Ola/Antique Apparatus.
The components required to assemble the Company's Digital Jukebox
consist of standard off-the-shelf products utilized to build personal
computers. The Company plans to contract out the design, manufacturing and
delivery of the Digital Jukebox. It is presently negotiating with two original
equipment manufacturers, Bose Corporation ("Bose") and Pioneer Electronics
Corporation ("Pioneer") for that purpose. Bose has agreed to manufacture the
20 prototype Digital Jukeboxes to be used by the Company in conducting its
marketing test. There can be no assurance that the market test will be
successful or that, if successful, a satisfactory agreement can be reached with
either Bose or Pioneer to manufacture Digital Jukeboxes for the Company on a
commercial basis. Nor can there be any assurance that the Company will be able
to raise the estimated $24,000,000 U.S. needed to manufacture the Digital
Jukeboxes on a commercial basis. (See "Future Financing".)
19<PAGE>
Competition
Competition in the manufacture, distribution and use of conventional
jukeboxes is intense. Some manufacturers have other lines of equipment which
they produce, in addition to conventional jukeboxes, within the
amusement/entertainment industry. However, none of the manufacturers are known
to be involved in the placement or operation of any of their jukebox units.
Through their distribution network, manufacturers sell their equipment, usually
in bulk quantities, to local distributors. All of these manufacturers have far
greater resources than the Company.
Competition for Company's Digital Jukebox can also be expected from
those who seek to design, develop and market, units similar to the Digital
Jukebox for use in the jukebox industry, with comparable or superior features,
technologies and advances. While the Company believes the Digital Jukebox is
currently far superior to any conventional jukebox on the market, there can be
no assurance that other technologically advanced jukeboxes may not be designed
and marketed by existing manufacturers or others, in competition with the
Digital Jukeboxes of the Company.
Contractual Arrangements
Under United States copyright law, the public performance of
copyrighted music in a commercial establishment is subject to royalty payments
to the writers and publishers of the material. In the case of jukebox
operations, a license must be obtained from those societies who own the
copyrights. The three "performing rights societies", who collectively own
nearly all of the world's copyrighted music material are ASCAP, BMI and SESAC.
These societies are represented by the Jukebox License Office.
The Jukebox License Office has accepted the Company's downloading
Digital Jukeboxes under its designation and issued its first-ever license for
this type of equipment. Because the downloading Digital Jukeboxes will be
linked to a single proprietary network, the Company has the right to license
its Digital Jukeboxes as if they were part of one big jukebox "route".
20<PAGE>
A recording artist's rendition of a musical number, recorded under
contract with a record company, is subject to royalty payments. Record label
companies have traditionally included royalty charges in the purchase price of
their music releases, either on CD, vinyl or cassette tape. This gives them
control over the collection and distribution of payments to the artists they
represent.
The Company is negotiating with each record label company for the
right to play their music, based on the payment of a royalty charge each time a
selection is played. To date, PolyGram Records, Capitol Records/EMI, MCA
Records Inc., Virgin Records America Inc. and Warner Music Group have granted
the Company such rights to play their music. For the four month market trial
period (see "Marketing Strategy"), the results of the market trial will be used
to negotiate long term agreements with the record label companies and establish
the amount of royalties to be paid each time a selection is played. These
record companies have also agreed to provide part of their existing music
collections, including all new future releases, free of charge for inclusion in
the Company's central music library for the market trial test. The Company may
download selections to the music repertoires of any Digital Jukebox. A
mechanical right shall be paid each time the Company downloads a selection from
its central music library to an individual jukebox. The recording companies
will rely on the Company's ability to generate pay-for-play statements,
identifying the royalty amounts owing to them.
Future Financing
The additional $2,650,000 CDN to be received when this Prospectus
becomes effective, will enable the Company to complete its remaining business
start-up activities, including: (1) conducting a market trial test; (2)
registration of the Company's patents in the United States, Japan, Canada and
the member countries of the European patent office organization; (3) continuing
research and development of the Digital Jukebox; (4) establishing a national
sales network; and (5) negotiating long term contracts with the major music
label companies. (See "USE OF PROCEEDS".) The Company estimates that these
start-up activities will continue over the course of the next 12 months, at
which time the Company will be ready to commence manufacturing the Digital
Jukeboxes. The manufacturing and delivery activities contemplated by the
Company will require an additional $24,000,000 U.S. in capital. (See "Jukebox
Manufacturers".)
The $24,000,000 U.S. additional funds will be needed by the Company
within the next twelve months, to penetrate the market rapidly. The Company
plans to pay the manufacturing costs of the Digital Jukeboxes and to provide
them to the operators. (See "Marketing Strategy".) For their part, the
operators will place the units in their present locations and provide the
maintenance needed to keep the equipment in good working order. The Company
plans to enter into agreements with the jukebox operators, to be negotiated
individually, by which the Company and the operator will share the cashbox
income generated by each Digital Jukebox. There can be no assurances that the
Company will be able to raise these funds, as and when needed, on terms
satisfactory to the Company, or at all. Nor can there be any assurances that
the Company will interest enough jukebox operators to enter into arrangements
of this nature. Finally, there can be no assurances that even if all these
events take place, the operations of the Company will prove commercially
profitable.
21<PAGE>
Properties
The Company owns no real estate. Its operations are conducted
through Touchtunes Digital Jukebox Inc. which has entered into a lease for a
term of three years commencing May 1, 1997, for 3,933 square feet of office
space at One Commerce Place, Nun's Island, Verdun (Quebec) Canada H3E 1A2. The
space is divided on two floors, 2,724 square feet in Suite 330 and 1,209 square
feet in Suite 570. The annual rent is $76,438 CDN payable in monthly
installments. The computer programmers are located in Suite 330 while
administration and secretarial services are conducted from Suite 550.
Management believes the leased premises are presently adequate for the
Company's operations.
Employees
The Company operates its business through Touchtunes Digital Jukebox
Inc., which has a total of eleven employees. These comprise: 2 executive
officers; 1 sales and marketing manager; 1 administrative manager; 1 secretary;
1 bookkeeper; 1 graphic artist; and 4 computer programmers. The Company has no
collective bargaining agreement with any union and its employee relations are
satisfactory.
Legal Proceedings
There are no legal proceedings pending against the Company.
MANAGEMENT
Directors and Executive Officers
The executive officers and directors of the Company are listed below.
22<PAGE>
Name Office Age
Tony Mastronardi President and Director 37
Guy Nathan Senior Vice-President,
Secretary and Director 53
Tonino Lattanzi Vice-president
and Director 45
Jacques Bourque Assistant-Secretary
and Director 45
Pierre Pharand Director 54
Andre Duquenne Director 62
Tony Mastronardi resides in Montreal, Canada. Since 1984, Mr. Mastronardi has
been employed by Les Pavages Samacon Inc., a Montreal-based family-owned
construction company. Since April 1993, he has also been active in the
management of Viatel Communications Inc., a Montreal-based cellular phone
distributor. His role with the Company evolved from Director of Sales to
President. He completed his post-secondary school studies at Dawson College in
1981.
Guy Nathan currently resides in France. Mr. Nathan is an inventor, having
patented over 100 intellectual property inventions since 1965. From 1982 to
1986, he worked for Elf Aquitaine, a large multi-national corporation. At the
time of his departure, he was in charge of new technological developments.
Tonino Lattanzi resides in France. Mr. Lattanzi has organized and been an
active shareholder in several European corporations since 1975. In 1975, he
organized Bennes Expres, a French corporation specializing in industrial waste
management and residential garbage collection. In 1989, he organized Neturba,
an Italian corporation which performs the same functions in Italy as Bennes
Expres does in France. In 1989, he also organized France Pressions Expres, a
French corporation specializing in construction alteration, road repairs and
cement structures. In 1992, with Guy Nathan, he organized Societe FAAM, a
French corporation which specializes in the manufacture of batteries and
electric vehicles.
Jacques Bourque resides in Montreal, Canada. Mr. Bourque is a lawyer and
senior partner of the law firm of Guy & Gilbert which has offices in Montreal,
Canada. Mr. Bourque graduated from the law faculty of the Universite de
Montreal in 1973 and was admitted to the Bar of the Province of Quebec in 1975.
He also holds a Master in Business Administration from McGill University in
1977. Mr. Bourque has had extensive experience in corporate and commercial
law, specializing in mergers and acquisitions.
23<PAGE>
Pierre Pharand resides in Montreal, Canada. Mr. Pharand was appointed Vice-
President of Sofinov, Societe Financiere d'Innovation Inc. ("Sofinov") in
September 1996. Sofinov is a venture capital fund and a wholly owned
subsidiary of Caisse de Depot et placement du Quebec, a major pension fund with
57.2 billion dollars CDN of assets under management. Mr. Pharand holds a
Bachelor's degree in industrial relations from the Universite de Montreal in
1972 and a Bachelor's degree in business administration from McGill University
in 1964. He is also a Chartered Administrator. Prior to joining Sofinov, Mr.
Pharand was President of Acero Management International Inc., a consulting firm
specializing in the corporate development of technology-related companies. He
was also Chairman of the Board as well as President and Chief Executive Officer
of Datagram Inc., a communications and technology company. Mr. Pharand has
held a number of managerial positions with the Canadian General Electric
Company, where he was in charge of different subsidiaries.
Andre Duquenne is a Vice-President of Societe Innovatech du Grand Montreal.
Mr. Duquenne has been responsible for numerous high-tech public offerings on
Canadian markets. He is the Senior Vice-President for technology placements
for Innovatech, a $300,000,000 CDN fund, specializing in high-tech and
biomedical investments.
Executive Compensation
Until January 1, 1997, the Company had no arrangement for the
remuneration of its officers and directors, except that they received
reimbursement for actual, out-of-pocket expenses, including travel expenses,
made on behalf of the Company. No remuneration was paid to the officers and
directors of the Company for the year ended December 31, 1996.
On March 11, 1997, the Company entered into an employment agreement
with Tony Mastronardi, its President. The term of his employment is for five
years and the salary for his first year of employment was fixed at $125,000
CDN. The salary is payable commencing January 1, 1997. Mr. Mastronardi
entered a non-competition and confidentiality agreement with the Company for as
long as he remains in its employ and for an additional year thereafter. The
non-competition covenant will continue for as long as Mr. Mastronardi owns any
shares, directly or indirectly, in the Company.
On March 11, 1997, the Company also negotiated an employment
agreement with Guy Nathan, its Senior Vice-president and Secretary,
determining his employment conditions. Mr. Nathan is a resident of France and
must first settle his residency status before signing this employment agreement
with the Company. The terms of the employment agreement to be entered with Mr.
Nathan, once his residency status has been settled, are identical to those of
the employment agreement entered with Mr. Mastronardi. Mr. Nathan also
executed a non-competition and confidentiality agreement in favor of the
Company on terms identical to those of the non-competition and confidentiality
agreement executed by Mr. Mastronardi.
24<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
stock ownership of the Company's executive officers and directors and each
person known by the Company to own five percent or more of the outstanding
shares of its Common Stock as of May 1, 1997.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ---------------------- --------------------- ---------
Tony Mastronardi
President, Director
4973, Felix Mclernan 10,001,920 shares (1) 68.58%
Pierrefonds QC H8Y 3L2 1,066,825 shares (2) 7.31%
Guy Nathan
Secretary, Director 10,001,920 shares (1) 68.58%
1, rue Jeanne D'Arc 1,066,825 shares (2) 7.31%
91330
Yerres France
Tonino Lattanzi
Vice President, Director 328,038 shares 2.25%
7, rue Leon Blum 10,001,920 shares (1) 68.58%
Z.I. Des Glaises, 1,066,825 shares (2) 7.31%
91120 14,666 shares (3) .001%
Palaiseau France
All officers and
directors as a group
(six persons) 11,415,049 shares 78.27%
Oraxium International Inc.
P.O. Box 159
Hibiscus Square
Pond Street, Grand Turk
Turks and Caicos Islands
British West Indies 900,000 shares (4) 6.17%
25<PAGE>
- --------------------------
(1) Messrs. Mastronardi, Nathan and Lattanzi each own 33% of the capital stock
of Techno Expres, SA, a French corporation with offices at 36, rue Du Marche,
94140 Alfort Ville France, the owner of 10,001,920 shares of the Company's
Common Stock.
(2) Messrs. Mastronardi, Nathan and Lattanzi own 50%; 16.67% and 33.33%
respectively, of the capital stock of Touchtunes Jukebox Inc., a Canadian
corporation with offices at One Commerce Place, suite 330, Nun's Island QC H3E
1A2, the owner of 1,066,825 shares of the Company's Common Stock.
(3) Mr. Lattanzi indirectly owns Neturba SRL, an Italian corporation with
offices at via Bonafica 26 63040 Malitignano, Italy the owner of 14,666 shares
of the Company's Common Stock.
(4) Oraxium International Inc. is an independent corporation which acquired
900,000 shares of Common Stock from the Company between December 1994 and April
1997 for work involving the Digital Jukebox technology and software. The
Company has been informed that Oraxium International Inc. was organized under
to laws of Turks and Caicos Islands. (See "CERTAIN TRANSACTIONS").
CERTAIN TRANSACTIONS
With Officers,
Directors and Others
On December 8, 1994, Touchtunes Jukebox Joint Venture (the "Joint
Venture"), an informal partnership comprising four corporations and two
individuals, purchased 760,400 shares of Common Stock from the persons who
organized the Company, for a cash consideration of $75,000. Such persons are
no longer affiliated with the Company. An additional 1,000,000 shares of
Common Stock was acquired at that time by the Joint Venture in consideration
for exclusive rights to the patent pending (PCT/FR94/01185) for the Digital
Jukebox. All 1,760,400 shares were acquired for investment. Subsequently, the
partners distributed these shares among themselves and dissolved the Joint
Venture. Tony Mastronardi, President of the Company, was the owner of one
corporation which received 714,950 shares. Another corporation, Touchtunes
Jukebox Inc., which received 216,666 shares, is owned 50% by Tony Mastronardi;
16.67% by Guy Nathan; and 33.33% by Tonino Lattanzi, officers and directors of
the Company. Mr. Nathan also received 180,000 shares directly. Oraxium
International Inc., which is now a principal shareholder of the Company,
received 225,000 shares. The other individual and the remaining corporation
were independent third parties, having no affiliation with the Company.
26<PAGE>
On March 6, 1995, the Company agreed to issue 10,000,000 shares of
Common Stock to S.G.R.M. Inc. ("SGRM"), a corporation incorporated under the
laws of the Turks and Caicos Islands, in exchange for patents, patents pending
and other intellectual property rights. In November 1995, this agreement was
amended and the 10,000,000 shares of Common Stock were issued to Techno Expres,
S.A., a French corporation, owned 33% each, by Messrs. Tony Mastronardi, Guy
Nathan and Tonino Lattanzi, officers and directors of the Company. The
10,000,000 shares were acquired for investment.
During December 1995, the Company issued an aggregate of 909,000
shares of Common Stock as follows: 100,000 shares to Albert Dutour, an
independent third party, in consideration of $150,000; 275,000 shares to
Oraxium International Inc. as part of the consideration for the purchase by the
Company of the "realtime modular multi-process kernel", the platform on which
the software of the Digital Jukebox is built; 300,000 shares to Tonino
Lattanzi, a director of the Company, in consideration for operating money
advanced to the Company in the amount of $300,000; 234,000 shares to Touchtunes
Jukebox Inc., for services rendered to the Company having a value of $203,337,
and for expenses incurred of $31,440. Touchtunes Jukebox Inc. is owned 50% by
Tony Mastronardi; 16.67% by Guy Nathan; and 33.33% by Tonino Lattanzi, officers
and directors of the Company. Oraxium International Inc. is a principal
shareholder of the Company. The 909,000 shares were acquired for investment by
the respective subscribers.
On September 25, 1996, the Company authorized the issuance of 900,888
shares of Common Stock to Touchtunes Jukebox Inc. for a cash consideration of
$477,470 and 75,000 shares to Giovanni D'Andrea, an independent third party,
for professional services valued at $40,000. On December 20, 1996, the Company
authorized the issuance of 400,000 shares of Common Stock to Oraxium Interna-
tional Inc. and 50,000 shares each, to Messrs. Pierre Martineau and Sylvain
Duchesne, employees of Touchtunes, in consideration for agreeing to extend the
scope and duration of non-competition covenants given to the Company. On
December 27, 1996, the Company authorized the issuance of 199,819 shares of
Common Stock to Touchtunes Jukebox Inc. for a cash consideration of $420,698.
All 1,675,707 shares were issued in April 1997 and were acquired for investment
by the respective parties. Touchtunes Jukebox Inc. is owned 50% by Tony
Mastronardi; 16.67% by Guy Nathan; and 33.33% by Tonino Lattanzi, officers and
directors of the Company. Oraxium International Inc. is a principal
shareholder of the Company.
27<PAGE>
With the Selling Shareholders
On March 21, 1997, two independent Canadian investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc.
(the "Selling Shareholders") agreed to invest $4,000,000 Canadian Dollars (CDN)
in the Company, upon certain terms and conditions. To accomplish this, they
invested $4,000,000 CDN in Touchtunes Digital Jukebox Inc. ("Touchtunes"), a
Canadian subsidiary organized by the Company specifically for that purpose, in
the manner described below.
The Selling Shareholders purchased 100 Class B shares and 20 Class C
shares of Touchtunes, at a price of $5,000 CDN per share, for an immediate cash
consideration of $600,000 CDN. They also subscribed to an additional 680
Class C shares of Touchtunes, at a price of $5,000 CDN per share, for a total
consideration of $3,400,000 CDN. Both the Class C shares and the funds were
deposited in escrow. On May 9, 1997, the Selling Shareholders released an
additional $750,000 CDN from escrow against delivery to them of 150 Class C
shares, leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow.
Payment of this $2,650,000 CDN is subject to the Company's causing this
Prospectus to become effective under the Securities Act of 1933, by July 1,
1997. The Selling Shareholders also purchased 100 shares of Series A Preferred
Stock of the Company. This Prospectus is intended to cover their sale of a
maximum of 2,000,000 shares of the Common Stock reserved for issuance to them
upon exercise of their rights to exchange their 100 Class B shares and 700
Class C shares of Touchtunes into 2,000,000 of the Company's Series A Preferred
shares and their subsequent conversion of such Series A Preferred shares (and
the 100 shares of Series A Preferred Stock which they already own) into
2,000,100 shares of Common Stock.
The Company is the owner of 800 Class A shares of Touchtunes,
acquired at a price of $1.00 CDN per share. Class A shares entitle the holder
to one vote per share. The Selling Shareholders own 100 Class B shares and 170
Class C shares of Touchtunes. Class B shares entitle the holder to eight votes
per share and Class C shares are non-voting. Thus, the Company and the Selling
Shareholders have equal voting rights in Touchtunes. The Company entered into
has an agreement by which Touchtunes agreed to carry out the research and
development work for the Digital Jukeboxes and all such additional services as
may be reasonably requested by the Company in connection with the Digital
Jukebox project.
The Company and the Selling Shareholders have also entered into a
shareholders agreement governing their relationship in Touchtunes. Each has
the right to appoint three members to the six member Board of Directors of
Touchtunes. In the event of a deadlock, the Board of Directors may be
increased to seven members. The seventh member will be chosen jointly by the
Company and the Selling Shareholders. If the Selling Shareholders exercise all
of their exchange rights, the Company will remain the sole shareholder of
Touchtunes.
28<PAGE>
All the shares in Touchtunes acquired and to be acquired by the
Selling Shareholders are exchangeable at their option, at a value of $1.50 U.S.
per share, into a maximum of 2,000,001 Series A Preferred shares of the
Company. Series A Preferred shares are convertible into Common Stock, share
for share. The Selling Shareholders have the right to exchange each of their
Class B and Class C shares of Touchtunes for a maximum of 2,500 Series A
Preferred shares of the Company, for a total of 2,000,000 Series A Preferred
shares.
Based on the present number of shares of Common Stock of the Company
issued and outstanding (14,584,707 shares), assuming the exchange of their
Class B and Class C Touchtune shares for Series A Preferred Stock of the Compa-
ny and their conversion of such Series A Preferred Stock (plus the 100 shares
of Series A Preferred Stock which they already own) into 2,000,100 shares of
Common Stock, the Selling Shareholders will own 12.06% of the 16,584,807 shares
of Common Stock which will then be outstanding. It is anticipated that this
will take place on the effective date of this Prospectus.
On March 21, 1997, the Company and the Selling Shareholders also
entered into a shareholders agreement governing their relationship as
shareholders of the Company. This provided the Selling Shareholders with the
right to appoint two members to the Company's Board of Directors. Their
designees, Pierre Pharand and Andre Duquenne, have since been elected as
Directors. (See "MANAGEMENT".)
SELLING SHAREHOLDERS
This Prospectus is intended to permit the sale by Societe Innovatech
du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc. (the
"Selling Shareholders") of a maximum of 2,000,000 shares of the Company's
Common Stock reserved for issuance to them upon exercise of their rights to
exchange their shares of Touchtunes into 2,000,000 of the Company's Series A
Preferred shares and their subsequent conversion of such Series A Preferred
shares (plus the 100 shares of Series A Preferred Stock which they already own)
into 2,000,100 shares of the Company's Common Stock. (See "CERTAIN TRANSAC-
TIONS".)
1 The conversion price of $1.50 U.S. per share was
arrived at by converting the $4,000,000 CDN investment into
United States dollars, using a conversion rate of $0.75 U.S.
The $4,000,000 CDN investment is deemed a $3,000,000 U.S.
investment. At $1.50 U.S. per share, the maximum number of
shares converted would be 2,000,000.
29<PAGE>
The following table sets forth the names of the Selling Shareholders,
the number of shares of Common Stock to be owned beneficially by each of them,
once they exercise their exchange rights and convert their Series A Preferred
shares into Common Stock, and the number of shares which may be offered
pursuant to this Prospectus. This information is based upon information
provided by the Selling Shareholders. This also assumes that the exchange
rights of the Selling Shareholders will be exercised for the maximum of
2,000,000 Series A shares on the effective date of this Prospectus and
immediately converted into Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned Number of Shares Shares Beneficially Owned
Prior to Offering (1) being Offered After Offering (1)(3)
Name Number Percent(2) Number Percent(2)
- -------------------------- ----------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Sofinov Societe-Financiere 1,200,060 7.2 1,200,000 0 0
d'Innovation Inc.
Societe Innovatech du 800,040 4.8 800,000 0 0
Grand Montreal
</TABLE>
(1) These independent Canadian entities have sole voting and investment power
with respect to all the shares beneficially owned by them.
(2) Applicable percentage of ownership is based on 16,584,807 shares of Common
Stock issued and outstanding, once their exchange rights and conversion rights
are exercised.
(3) Assumes the sale of all the shares of Common Stock offered hereby.
The Selling Shareholders have advised the Company that they intend to
sell their shares from time to time at prices prevailing in the over-the-
counter market at the time of such sales. They will not pay more than usual
brokerage commission rates.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation.
30<PAGE>
Common Stock
The Company is authorized to issue 35,000,000 shares of Class A
Common Stock ("Common Stock") par value $.001 per share, of which 16,584,707
shares are outstanding as of the date hereof, after giving effect to the
conversion of all Series A Preferred shares into Common Stock.
Holders of Common Stock are entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders. There is no
cumulative voting for elections of directors. Holders of Common Stock are
entitled to receive ratably, dividends when, as, and if declared by the Board
of Directors out of funds legally available therefore and, upon the
liquidation, dissolution, or winding up of the Company, are entitled to share
ratably in all assets remaining after the payment of liabilities.
Holders of Common Stock have no preemptive rights and have no rights
to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are validly authorized and issued, fully paid, and
nonassessable.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Series A
Preferred Stock, par value $.001 per share. Only 100 shares were issued prior
to the date hereof. An additional 2,000,000 shares will be issued and
outstanding on the effective date hereof, giving effect to the exchange by the
Selling Shareholders of their Class B and Class C shares of Touchtunes for
2,000,000 shares of Series A Preferred Stock.
The Common Stock and the Series A Preferred Stock rank equally in all
respects and have identical rights. Each Series A Preferred share can be
converted into one share of Common Stock at the option of the holder thereof.
An aggregate of 2,000,000 shares of Series A Preferred Stock have been reserved
for issuance to the Selling Shareholders on the effective date of this
Prospectus. On that date, it is anticipated that the Selling Shareholders will
convert their 2,000,100 shares of Series A Preferred Stock into Common Stock.
(See "SELLING SHAREHOLDERS" and "CERTAIN TRANSACTIONS").
Transfer Agent
The Company has appointed National Stock Transfer, Inc. as transfer
agent for the Common Stock.
31<PAGE>
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will
be passed upon for the Company by Karp and Sommers, 950 Third Avenue, New York,
New York 10022.
EXPERTS
The financial statements of Technical Maintenance Corporation as
December 31, 1996, 1995 and 1994 incorporated by reference herein, have been
audited by Perelson, Weiner, independent auditors, for the fiscal year ended
December 31, 1994, and by Armstrong, Gilmour and Associates, independent
auditors, for the fiscal years ended December 31, 1995 and 1996, as set forth
in their reports thereon included therein. Such financial statements of
Technical Maintenance Corporation are incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
32<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
-------
December 31, 1994
Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-8
December 31, 1995
Auditors' Report F-9
Balance Sheet F-10
Statement of Operations F-11
Statement of Stockholders' Equity F-11
Statement of Cash Flows F-12
Notes to Financial Statements F-13-14-15
December 31, 1996
Auditors' Report F-16
Balance Sheet F-17
Statement of Operations F-18
Statement of Stockholders' Equity F-18
Statement of Cash Flows F-19
Notes to financial Statements F-20-21-22-23
F-1
<PAGE>
PERELSON WEINER
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Technical Maintenance Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Technical
Maintenance Corporation (A Development Stage Company) as of
December 31, 1994, and the related statements of operations,
stockholders' equity and cash flows 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. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Technical Maintenance Corporation (A Development Stage
Company) as of December 31,1994, and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Perelson Weiner
New York, New York
March 24, 1995
F-2
Page 1
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
Computer equipment - at cost $28,629
Software development costs 27,996
Patent - at cost 6,914
--------
Total assets $63,539
========
STOCKHOLDERS' EQUITY
Stockholders' equity
Class A common stock, $.001 par value
Authorized: 25,000,000 shares
Issued: 2,000,000 shares $2,000
Additional paid-in capital 62,539
Deficit accumulated during the development stage (1,000)
--------
Total stockholders' equity $63,539
========
F-3
See notes to financial statements.
Page 2
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
Net sales $ -
Cost of sales -
----------
Gross profit -
Operating expenses -
----------
Net income $ -
==========
Net income per share $ -
==========
Weighted average number of shares outstanding 1,065,753
==========
F-4
See notes to financial statements.
Page 3
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31,1994
Class A Additional Accum-
Common Stock Paid-in ulated
Shares Amount Capital Deficit Total
--------- ------- --------- ------- -------
Balances, January 1, 1994 1,000,000 $ 1,000 $(1,000) $ -
Issuance of stock
pursuant to
asset acquisition 1,000,000 1,000 $ 62,539 63,539
--------- ------- --------- ------- -------
Balances, December 31, 1994 2,000,000 $2,000 $ 62,539 $(1,000)$63,539
========= ======= ========= ======= =======
F-5
See notes to financial statements.
Page 4
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
Cash flows from operating activities
Net income $ -
Adjustments to reconcile net income to net
cash from operating activities -
----------
Net cash from operating activities -
Net cash from investing activities -
Net cash from financing activities -
----------
Increase in cash -
Cash - beginning of year -
Cash - end of year $ -
==========
Noncash investing and financing transaction:
Assets were acquired in exchange for 1,000,000 shares of stock. Assets
and stock are recorded at the book value ($63,539) of the transferor
since the transferor controlled the entity immediately thereafter.
F-6
See notes to financial statements.
Page 5
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 1 - Organization and Background
Technical Maintenance Corporation (the Company) is a
development stage company formed in 1990 which has not
generated any revenue. The development of commercial
products will require additional funds. There is no
assurance that commercially successful products will be
developed or that the Company will achieve profitable
operations.
During December 1994, a Canadian company (Note 3), in an
exchange of assets for stock, acquired ownership of 88% of
the issued stock and effected a change in management.
The accumulated deficit arose from $1,000 of general and
administrative expenses incurred during 1990.
Note 2 - Summary of Significant Accounting Policies
a) Capitalized Software Costs
Capitalized software costs reflect costs to develop
software. Capitalization of such costs begin upon the
establishment of technological feasibility. The
establishment of technological feasibility and the
ongoing assessment of recoverability of those costs
requires judgment by management with respect to certain
external factors, including but not limited to
anticipated future gross revenue, estimated economic
life and changes in technology.
Amortization will start when the related pro-duct is
available for general release and will be computed
using the ratio of current pro-duct gross revenues to
the total anticipated gross revenues.
b) Patent
The patent will be amortized on a straight-line basis
over its estimated economic life of 5 years;
amortization will commence during 1995.
c) Depreciation
Computer equipment will be depreciated on a straight
line basis over its estimated useful life of 5 years;
depreciation will commence during 1995.
F-7
Page 6
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 3 - Asset Acquisition
On December 8, 1994, right, title and interest to all assets
of Touchtunes Jukebox Joint Venture (the Joint Venture) was
acquired in exchange for 1,000,000 shares of newly issued
common stock. Simultaneously, the principal stockholders sold
760,400 shares of the originally issued 1,000,000 shares to
the Joint Venture.
A proprietary software platform was the principal asset
acquired. The Joint Venture developed the platform during
1994 and by October was in possession of a working model
prototype consistent with its product design. Testing, coding
and enhancement costs incurred subsequent to this stage were
capitalized. These capitalized software costs have been
valued at the amount paid by the Joint Venture. Computer
equipment and a patent were included as part of the
acquisition and similarly are valued at the amounts paid by
the Joint Venture.
Under the terms of an agreement with an affiliate, future
research and development conducted by the affiliate related to
the platform and other related technologies will be billed at
cost plus 15%.
Note 4 - Subsequent Events
a) Purchase of Operating System
On January 30, 1995, a computer operating system was
acquired from an affiliate for approximately $360,000;
payable $198,000 in common shares (number of shares will be
based on the offering price) and $162,000 in cash. The
cash portion is payable in weekly installments of $1,440
until the completion of an intended public offering of
stock at which time the balance will be paid.
b) Purchase of Other Properties
On March 6 1995, patents and patents pending to various
properties of another affiliate were acquired for
10,000,000 common shares. Common ownership exists between
the Company, the affiliate and the Joint Venture.
F-8
Page 7
<PAGE>
Armstrong
Gilmour &
Associates
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Technical Maintenance Corporation
(A Development Stage Company).-
We have audited the accompanying balance sheet of Technical
Maintenance Corporation (A Development Stage Company) as of
December 31, 1995, and the related statements of operations,
stock-holders' equity and cash flows 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. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. Am
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation, We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the Financial position
of Technical Maintenance Corporation (A Development Stage
Company) as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Armstrong Gilmour & Assoc.
Walnut Creek, California
May 2, 1996
F-9
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Balance Sheets
December 31, 1995 and 1994
1995 1994
--------- --------
Assets
Fixed assets:
Computer equipment $28,629 28,629
Software 360,000 -
--------- --------
388,629 28,629
Less accumulated depreciation (71,726) -
--------- --------
Net fixed assets 316,903 28,629
Intangibles, net of accumulated amortization
of $43,050 in 1995 463,864 34,910
--------- --------
$780,767 63,539
========= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 32,940 -
Due to affiliate 87,861 -
Other 3,100 -
--------- --------
Total current liabilities 123,901 -
Stockholders' equity:
Class A common stock, $.001 par value
Authorized: 25,000,000 shares
Issued: 12,909,000 shares in 1995
and 2,000,000 shares in 1994 12,909 2,000
Additional paid-in capital 1,430,020 62,539
Deficit accumulated during the
development stage (786,063) (1,000)
--------- --------
Total stock-holders' equity 656,866 63,539
--------- --------
$780,767 63,539
========= ========
See accompanying notes to financial statements.
(1)
F-10
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 1995 and 1994
1995 1994
Net sales - -
---------- ---------
Operating expenses:
Research and development 318,193 -
Professional and consulting fees 238,483 -
Travel and promotion 113,070 -
Depreciation of fixed assets 71,726 -
Amortization of intangibles 43,050
Other 541 -
---------- ---------
Net loss $(785,063) -
========== =========
Net loss per share $ (0.07) -
========== =========
Number of shares used to compute net loss
per share 10,535,844 1,065,753
========== =========
Statements of Stockholders' Equity
Years Ended December 31, 1995 and 1994
Additional Accum-
Paid-in ulated
Shares Amount Capital Deficit Total
---------- ------- --------- -------- ---------
Balances,
January 1, 1994 1,000,000 $1,000 - (1,000) -
Issuance of common stock 1,000,000 1,000 62,539 - 63,539
---------- ------- --------- -------- ---------
Balances,
December 31, 1994 2,000,000 2,000 62,539 (1,000) 63,539
Issuance of common stock 10,909,000 10,909 1,367,481 - 1,378,390
Net loss for 1995 - - - (785,063) (785,063)
---------- ------- --------- -------- ---------
Balances,
December 31, 1995 12,909,000 $12,909 1,430,020 (786,063) 656,866
========== ======= ========= ======== =========
See accompanying notes to financial statements.
(2)
F-11
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statement of Cash Flows
December 31, 1995 and 1994
1995 1994
---------- ---------
Cash flows from operating activities:
Net loss $ (785,063) -
Adjustments to reconcile net loss to
net cash used by
operating activities:
Depreciation and amortization 114,776 -
Write-off of intangible software development costs 27,996 -
Changes in assets and liabilities:
Accounts payable 32,940 -
Due to affiliates 566,698 -
---------- ---------
Cash used by operations (42,653) -
---------- ---------
Cash flows from investing activities:
Purchase of software (110,447) -
---------- ---------
Cash flows from financing activities:
Increase in other liabilities 3,100 -
---------- ---------
Proceeds from sale of common stock 150,000 -
---------- ---------
Cash provided by financing activities 153,100 -
---------- ---------
Net increase in cash - -
Cash at beginning of year - -
---------- ---------
Cash at end of year $ - -
========== =========
Supplemental cash flow information,
Interest paid $ - -
========== =========
Income taxes paid $ - -
========== =========
Noncash investing and financing activities:
The following were exchanged for common stock:
Patents $500,000 6,914
Software $193,612 -
Computer equipment - 28,629
Software development costs - 27,996
Amounts due to stock-holders and/or affiliates 534,778 -
---------- ---------
$1,228,390 63,539
========== =========
See accompanying notes to financial statements.
(3)
F-12
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
Nature of Operations
Technical Maintenance Corporation (the Company) is a
development stage company which has not generated any revenue
since it commenced operations in 1994. (A $1,000 organization
expense was incurred in 1990 when the Company was formed. The
Company was inactive until 1994.) The Company's primary
efforts have been directed at the development of a digital
jukebox which will utilize digital audio transfer technology
to distribute music titles through a proprietary distribution
network. The development of the Company's commercial products
will require additional funds. There is no assurance that
commercially successful products will be developed or that the
Company will achieve profitable operations.
The Company has no employees and operating expenses have been
funded by stockholder and/or affiliate advances.
During December 1994, a Canadian joint venture, in an exchange
of assets for stock, acquired ownership of 88% of the issued
stock and effected a change in management.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Fixed Assets
Fixed assets consist of computer equipment and purchased
software which are stated at cost and depreciated on a
straight-line basis over an estimated useful life of 5 years;
depreciation commenced in 1995.
Intangibles
(i) Software Development Costs
Costs related to the conceptual formation and design of
internally developed software are expensed as research and
development as incurred. It is the Company's policy that
certain internal software development costs incurred after
technical feasibility has been demonstrated and which meet
recoverability test are capitalized and amortized over the
economic life of the product. The establishment of
technological feasibility and the ongoing assessment of
recoverability of those costs requires judgment by
management with respect to certain external factors,
including but not limited to anticipated future gross
revenue, estimated economic life and changes in
technology.
(Continued)
(4)
F-13
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies, continued
(ii) Patents
Patents consist primarily of processes and systems related to the
operation of a digital jukebox and the interactive program
distribution for telebroadcasting. As discussed in note 3, the
patents were contributed by stockholders in exchange for stock.
The exchange was valued at the stockholder's cost.
The patents and the related intellectual property are amortized on
a straight-line basis over their estimated economic lives of 5 to
10 years. Amortization commenced in 1995.
Income Taxes
The Company accounts for income taxes using the asset and liability
method. Under this method, deferred income tax assets and
liabilities are determined based on the differences, between the
financial reporting and tax basis of assets and liabilities using
currently enacted tax rates and laws.
Net Income Per Share
Net income per share is computed using the weighted-average number of
shares of common stock outstanding.
(2) Intangibles Intangible assets at December 31, 1995 and 1994 are as
follows:
1995 1994
-------- --------
Patents $506,914 6,914
Software development costs - 27,996
-------- --------
506,914 34,910
Less accumulated amortization 43,050 -
-------- --------
$463,864 34,910
======== ========
(3) Income Taxes
No provision for Income taxes is included in the financial statements
since the Company has a loss and there is no assurance that there will
be future taxable income which the current loss may offset.
(Continued)
(5)
F-14
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(3) Income Taxes, continued
Accordingly, the Company has a potential deferred tax asset
of approximately $297,000 which results from a net operating
loss carry-forward of $744,000. However, a valuation reserve
has been established to eliminate the defer-red tax assets
since the utilization of the carryforward is not assured.
The carryforward is available to offset future taxable
income, if any, through the year 2010.
(4) Related Party Transaction
The following are the transactions that occurred between the
Company and stockholders and/or affiliates.
Purchases
A computer operating system was purchased from Oraxium
International, Inc. for $360,000. Included in the
compensation was the issuance of 275,000 shares of common
stock valued at $193,612. The balance was paid in cash.
The Company exchanged 10,000,000 shares of the Company's
common stock for patents from its controlling shareholder,
Techno Expres' S.A.. The patents were recorded at $500,000
which approximated Techno Expres' cost.
In 1994, the Company acquired assets valued at $63,539 from
Touchtunes Jukebox Joint Venture in exchange for 1,000,000
shares of common stock.
Expenses
Mr. Tonino Lattanzi, a stockholder and member of the Board of
Directors, received $62,000 in fees and was reimbursed for
$125,000 in professional fees incurred and for $113,000 in
travel and promotional expenses. Mr. Lattanzi received
300,000 shares of common stock as consideration for the fees
and expenses.
Touchtunes Jukebox, Inc., a stockholder, received $290,000
for research and development reimbursements. Included in the
reimbursements was $38,000 as a 15% mark up on actual costs.
In addition, a part of the reimbursed costs included $59,000
of consulting fees paid to Oraxium International, Inc. a
stockholder of the Company. Touchtunes Jukebox, Inc.
received 234,000 shares of common stock, valued at $234,000,
as a part of the consideration.
Due to affiliate
At December 31, 1995, the Company owed Touchtunes Jukebox,
Inc., a stockholder, $87,861 For expense advances which are
due on demand.
(6)
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Technical Maintenance Corporation
(A Development Stage Company):
We have audited the accompanying balance sheets of Technical Maintenance
Corporation (A Development Stage Company) as of December 31, 1996 and 1995, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Technical Maintenance
Corporation (A Development Stage Company) as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Armstrong Gilmour Accountancy Corporation
Walnut Creek, CA
March 28, 1997
F-16
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Balance Sheets
December 31, 1996 and 1995
1996 1995
---------- -----------
Assets
Current assets:
Cash $ 96 _
Prepaid expenses 21,306 _
---------- -----------
Total current assets 21,402 _
---------- -----------
Fixed assets:
Computer equipment 28,629 28,629
Software 360,000 360,000
---------- -----------
388,629 388,629
Less accumulated depreciation (149,452) (71,726)
---------- -----------
Net fixed assets 239,177 316,903
Intangibles, net of accumulated 1,453,693 463,864
amortization ---------- -----------
$1,714,272 780,767
=========== ===========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable $ 94,415 32,940
Accrued expenses 45,930 _
Accrued non-competition agreement
obligations, including $800,000 1,000,000 _
due to a stockholder
Advances from stockholders 909,031 90,961
---------- -----------
Total current liabilities 2,049,376 123,901
---------- -----------
Stockholders' equity (deficit):
Class A common stock, $.001 par value
Authorized: 25,000,000 shares
Issued and outstanding: 12,909,000 12,909 12,909
Additional paid-in capital 1,430,020 1,430,020
Deficit accumulated during the (1,778,033) (786,063)
development stage ----------- -----------
Total stockholders' equity (335,104) 656,866
(deficit) ---------- -----------
$1,714,272 780,767
=========== ===========
See accompanying notes to financial statements.
F-17 (1)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---------- --------- ----------
Net sales $ _ _ _
Operating expenses:
Research and development 246,430 148,306 _
Professional and consulting fees 223,899 289,619 _
Travel and transportation 116,126 147,559 _
Management fees 85,847 37,762 _
Selling and promotional expenses 65,681 _ _
Office expenses 40,165 20,856 _
Rent 24,579 26,185 _
Depreciation 77,726 71,726 _
Amortization 111,517 43,050 _
---------- --------- ----------
Net loss $(991,970) (785,063) _
========== ========= ==========
Net loss per share $ (0.08) (0.07) _
========== ========= ==========
Number of shares used to compute
net loss per share 12,909,000 10,535,844 1,065,758
=========== =========== ============
Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 1996, 1995 and 1994
Class A Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- -------- -------- ----------- ----------
Balances, 1,000,000 $ 1,000 _ (1,000) _
January 1, 1994
Issuance of 1,000,000 1,000 62,539 _ 63,539
common stock --------- -------- -------- ----------- ----------
Balances, 2,000,000 2,000 62,539 (1,000) 63,539
December 31, 1994
Issuance of 10,909,000 10,909 1,367,481 _ 1,378,390
common stock
Net loss _ _ _ (785,063) (785,063)
--------- -------- -------- ----------- ----------
Balances, 12,909,000 12,909 1,430,020 (786,063) 656,866
December 31, 1995
Net loss _ _ _ (991,970) (991,970)
--------- -------- -------- ----------- ----------
Balances, 12,909,000 $ 12,909 1,430,020 (1,778,033) (335,104)
December 31, 1996 ========== ======== ========= ============ ===========
See accompanying notes to financial statements.
F-18 (2)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
December 31, 1996, 1995 and 1994
1996 1995 1994
----------- --------- --------
Cash flows from operating
activities:
Net loss $ (991,970) (785,063) _
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 189,243 114,776 _
Write-off of software _ 27,996 _
development costs
Changes in assets and
liabilities:
Prepaid expenses (21,306) _ _
Accounts payable 61,475 32,940 _
Accrued expenses 45,930 _ _
----------- --------- --------
Net cash used by operations (716,628) (609,351) _
----------- --------- --------
Cash flows from investing
activities:
Increase in costs of intangibles (101,346) _ _
Purchase of software _ (110,447) _
----------- --------- --------
Net cash used by investing (101,346) (110,447) _
activities ----------- --------- --------
Cash flows from financing
activities:
Advances from stockholders 818,070 569,798 _
Proceeds from sale of common _ 150,000 _
stock ----------- --------- --------
Net cash provided by financing 818,070 719,798 _
activities ----------- --------- --------
Net increase in cash 96 _ _
Cash at beginning of year _ _ _
----------- --------- --------
Cash at end of year $ 96 _ _
=========== ========= ========
Supplemental cash flow information:
Interest paid $ _ _ _
=========== ========= ========
Income taxes paid $ _ _ _
=========== ========= ========
Noncash investing and financing
activities:
The following were exchanged
for common stock:
Patents $ _ 500,000 6,914
Software _ 193,612 56,625
Advances from stockholders _ 534,778 _
----------- --------- --------
$ _ 1,228,390 63,539
=========== ========= ========
Accrual of non-competition $ 1,000,000 _ _
agreement =========== ========= ========
See accompanying notes to financial statements.
F-19 (3)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended December 31, 1996, 1995 and 1994
1) The Company and Its Summary of Significant Accounting Policies
Nature of Operations
Technical Maintenance Corporation (the Company) is a development stage
company, which has not generated any revenue since it commenced operations
in 1994. The Company's primary efforts have been directed at the
development of a digital jukebox, which will utilize digital audio transfer
technology to distribute music titles through a proprietary distribution
network. The development of the Company's commercial products will require
additional funds. There is no assurance that commercially successful
products will be developed or that the Company will achieve profitable
operations.
The Company has no employees and operating expenses have been funded by
stockholder advances. Substantially all of the developmental activities are
conducted through a Canadian corporate stockholder, Touchtunes Jukebox, Inc.
Touchtunes Jukebox, Inc. charges the Company for costs incurred plus the
equivalent to a 15% management fee.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Fixed Assets
Fixed assets consist of computer equipment and purchased software which are
stated at cost. Depreciation commenced in 1995 and is provided on a
straight-line basis over estimated useful lives of 5 years.
Intangibles
(i) Software Development Costs
Costs related to the conceptual formation and design of internally
developed software are expensed as research and development as incurred.
It is the Company's policy that certain internal software development
costs, incurred after technical feasibility has been demonstrated and
which meet recoverability tests, are capitalized and amortized over the
economic life of the product. The establishment of technical feasibility
and the ongoing assessment of recoverability of those costs requires
judgment by management with respect to certain external factors,
including but not limited to anticipated future gross revenue, estimated
economic life and changes in technology. No internal software
development costs have been capitalized as of December 31, 1996.
(Continued)
F-20 (4)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(1)The Company and Its Summary of Significant Accounting Policies, continued
(ii) Patents
Patents consist primarily of processes and systems related to the
operation of a digital jukebox and the interactive program distribution
for telebroadcasting. Patents contributed by stockholders in exchange
for stock are valued at the stockholder's cost, which was approximately
$507,000.
The patents and related intellectual property are amortized on a
straight-line basis over their estimated economic lives of 5 years.
Amortization commenced in 1995.
(iii) Non-Competition Agreements
The Company has non-competition agreements with the provider of computer
operating systems and several system programmers who assisted in the
development of the system. The agreements are effective January 1, 1997
and cover the succeeding five years. The costs will be amortized on a
straight line basis over the five-year life of the agreements.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax basis of
assets and liabilities using currently enacted tax rates and laws.
Net Loss Per Share
Net loss per share is computed using the weighted-average number of shares
of common stock outstanding.
Reclassification
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
2) Intangibles
Intangible assets consist of the following at December 31:
1996 1995
------------ ----------
Patents $ 608,260 506,914
Non-competition agreements 1,000,000 _
------------ ----------
1,608,260 506,914
Less accumulated amortization (154,567) (43,050)
------------ ----------
$ 1,453,693 463,864
============ ==========
(Continued)
F-21 (5)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
3) Income Taxes
No provision for income taxes is included in the financial statements
because the Company has had continuous losses and there is no assurance that
there will be future taxable income toward which the current loss
carryforward might offset.
Accordingly, the Company has a potential deferred tax asset of approximately
$602,000 (based on the 34% Federal tax rate) which results from a net
operating loss carryforward of $1,771,000, which will expire through the
year 2011. However, a valuation reserve has been established against the
deferred tax asset since the utilization of the carryforward is not assured.
The Company incorporated in the state of Nevada, which has no state income
tax.
4) Related Party Transactions
Following are transactions that occurred between the Company and its
stockholders:
Non-Competition Agreement
On December 20, 1996, the Company entered into a five year non-competition
agreement with Oraxium International, Inc., which is a stockholder and the
supplier of the Company's computer operating system. The agreement takes
effect January 1, 1997 and provides for $800,000 of consideration. The
Board of Directors has authorized the issuance of 400,000 shares of
restricted Class A common stock which it valued at $2 per share. At March
28, 1997, the shares had not been issued and the obligation is reflected as
a liability on the balance sheet.
Purchases
In 1995, the Company purchased a computer operating system from Oraxium
International, Inc. for $360,000, which was paid through the issuance of
275,000 shares of common stock valued at $193,612. The balance of the
purchase price was paid in cash.
In 1995, the Company exchanged 10,000,000 shares of its common stock for
patents from its controlling shareholder, Techno Expres S.A.. The patents
were recorded at $500,000 which approximated Techno Expres' cost.
(Continued)
F-22 (6)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
4) Related Party Transactions, continued
Expenses
Touchtunes Jukebox, Inc., a stockholder, charged the Company approximately
$647,000 in 1996 and $318,000 in 1995 for research and development and
operating expense reimbursements. Included in the reimbursements were fees
to Touchtunes of $85,847 in 1996 and $38,762 in 1995 as a 15% mark-up on
actual costs.
In 1995, Mr. Tonino Lattanzi, a stockholder and member of the Board of
Directors, received $62,000 in fees and was reimbursed $125,000 in
professional fees and $113,000 in travel and promotional expenses. Mr.
Lattanzi received 300,000 shares of common stock as consideration for the
fees and expenses.
In 1995, $59,000 of consulting fees were paid to Oraxium International,
Inc., a stockholder of the Company.
Amounts Owed to Stockholders
At December 31, 1996 and 1995, the Company owed Touchtunes Jukebox, Inc., a
stockholder, $908,031 and $87,861, respectively, for expense advances. The
advances are non-interest bearing and due on demand. In 1996, the Board of
Directors approved the issuance of 1,100,707 shares of common stock in
payment of $898,168 of advances from Touchtunes Jukebox, Inc. The shares
have not been issued as of March 28, 1997 and the amount continues to
carried as an advance from stockholder in the balance sheet. In 1995,
Touchtunes received 234,000 shares of common stock, valued at $234,000, as a
partial settlement of the then outstanding balance of advances.
Other stockholders had advances to the Company of $1,000 and $3,100 at
December 31, 1996 and 1995, respectively.
Included in accrued non-competition agreement obligations at December 31,
1996 is an $800,000 obligation to Oraxium International, Inc.
5) Common Stock
In late 1996, the Board of Directors approved the issuance of 1,675,707
Class A common stock to vendors and stockholders as consideration for
obligations totaling $1,938,168. None of the shares were actually issued in
1996 and the obligations continued to be reported as liabilities in the
balance sheet. Had the shares been issued when approved, the stockholders'
equity would have been increased by $1,938,168. Because the Board's actions
occurred in late 1996, the effect on loss per share, based on weighted-
average shares outstanding, was insignificant.
F-23 (7)<PAGE>
No dealer, salesman or other person 2,000,000 Shares
has been authorized to give any
information or to make any
representations other than those Class A Common Stock
contained in this Prospectus and, if (par value $.001)
given or made, such other information
and representations must not be
relied upon as having been authorized TECHNICAL MAINTENANCE
by the Company. This Prospectus does CORPORATION
not constitute an offer or
solicitation by anyone in any state
in which such offer or solicitation
is not authorized, or in which the
person making such offer or
solicitation is not qualified to do PROSPECTUS
so, or to any person to whom it is
unlawful to make such offer or
solicitation. The delivery of this
Prospectus at any time does not imply
that the information herein is July , 1997
correct as of any time subsequent to -------
the date hereof.
TABLE OF CONTENTS
Page Page
Available Information.............2 Business ..........................15
Documents Incorporated Patented Technology ..............16
by Reference.....................2 Marketing Strategy ...............17
Prospectus Summary................3 Industry Background ..............18
Business.........................3 Jukebox Manufacturers ............19
Initial Funding..................3 Competition ......................20
Business Start-Up Contractual Arrangements .........20
Activities......................4 Future Financing .................21
The Offering.....................5 Properties .......................22
Summary Financial Data...........6 Employees ........................22
Use of Proceeds..................6 Legal Proceedings ................22
Risk Factors......................6 Management ........................22
Use of Proceeds..................11 Directors and
Price Range of Common Stock......11 Executive Officers ...........22
Dividend Policy..................12 Executive Compensation ...........24
Capitalization...................13 Principal Shareholders ............25
Selected Financial Data..........13 Certain Transactions ..............26
Statement of Operations Data....13 With officers, Directors
Balance Sheet Data..............14 and others ...................26
Management's Discussion and With Selling Shareholders .. .....28
Analysis of Financial Selling Shareholders ..............29
Condition and Results Description of Capital Stock
of Operations...................14 Common Stock .....................30
General and Results Preferred Stock ..................31
of Operations...................14 Transfer Agent ...................31
Seasonality.....................14 Legal Matters .....................32
Liquidity and Experts ...........................32
Capital Resources..............15 Index to Financial
Statements ......................F-1<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article VIII, Sections 1, 2, 3 and 4 of Registrant's By-laws provide:
"Section 1. Indemnification. No officer or Director shall be personally
liable for any obligations of the corporation or for any duties or obligations
of the corporation or for any duties or obligations arising out of any acts or
conduct of said officer or Director performed for or on behalf of the
corporation. The corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at any time
hereafter as a Director or officer of the corporation from and against any and
all claims, judgments and liabilities to which such persons shall become
subject by reason of his having heretofore or hereafter been a Director or
officer of the corporation, or by reason of any action alleged to have
heretofore or hereafter taken or omitted to have been taken by him as such
Director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such person from all suits or claims as
provided for under the provisions of the Nevada Business Corporation Act;
provided, however, that no such person shall be indemnified against, or be
reimbursed for, any expense incurred in connection with any claim or liability
arising out of his own negligence or willful misconduct. The rights accruing
to any person under the foregoing provisions of this section shall not exclude
any other right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the corporation to indemnify or reimburse such
person in any proper case, even though not specifically herein provided for.
The corporation, its directors, officers, employees and agents shall be fully
protected in taking any action or making any payment, or in refusing so to do
in reliance upon the advice of counsel."
"Section 2. Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer or employee, and shall inure to the benefit of the heirs, executors and
administrators of such person."<PAGE>
"Section 3. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer or employee
of the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
liability under the provisions of this section or of the general Corporation
Law of Nevada."
"Section 4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the corporation by its
Board of Directors, in lieu of such indemnity, to settle any such claim,
action, suit or proceeding at the expense of the corporation by the payment of
the amount of such settlement and the costs and expenses incurred in connection
therewith."
The Nevada Business Corporation Act provides that, subject to restrictions
contained in the statute, a corporation may indemnify any person made or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the corporation or other than by or in
the right of the corporation by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. A
person, who has been successful on the merits or otherwise in any suit or
matter covered by the indemnification statute, must be indemnified against
expenses (including attorneys' fees), actually and reasonably incurred by him
in connection therewith. Indemnification must be authorized upon a
determination, as set forth by statute, that the circumstances are appropriate.
The articles of incorporation, bylaws, or an agreement made by the corporation
may provide that expenses incurred in defense must be paid in advance, as
incurred and prior to final disposition to the person to be indemnified if such
person agrees to repay the amount if it is ultimately determined he is not
entitled to indemnification. The indemnification or advancement of expenses
provided by statute is not exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled. Indemnification or
the advancement of expenses may not be made if a final adjudication establishes
that the director's acts or omissions involved intentional misconduct, fraud,
or a knowing violation of the law and was material to the cause of action.
(Sec. 78.751) Insurance may be purchased by the corporation, or other
financial arrangements made, on behalf of any person entitled to
indemnification against any liability incurred in an official capacity regard-
less of whether the person could be indemnified under the statute. (Sec.
78.752)
2<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses which will be paid by
Registrant in connection with the issuance and distribution of the securities
being registered. With the exception of the registration fee, all amounts
shown are estimates.
Registration Fee $ 1,200.00
Blue Sky Fee __________
Printing and Engraving __________
Legal fees and expenses __________
Accounting fees and expenses __________
Transfer Agent fees and expenses __________
Miscellaneous expenses __________
Total $ *
==========
- -----------------------
* To be supplied by Amendment.
Item 26. Recent Sales of Unregistered Securities
In the past three years, Registrant has made the following sales of
unregistered securities, all of which sales were exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or as
otherwise indicated herein.
1. On December 8, 1994, Touchtunes Jukebox Joint Venture (the "Joint
Venture"), an informal partnership comprising four corporations and two
individuals, purchased 760,400 shares of Common Stock from the persons who
organized Registrant, for a cash consideration of $75,000. Such persons are no
longer affiliated with Registrant. An additional 1,000,000 shares of Common
Stock was acquired from Registrant at that time by the Joint Venture in
consideration for exclusive rights to the patent pending (PCT/FR94/01185) for
the Digital Jukebox. All 1,760,000 shares were acquired for investment by such
persons, none of whom is a resident or citizen of the United States.
Subsequently, the partners dissolved the Joint Venture and distributed the
shares among themselves as follows:
Gestion Chevaux Pur-Sang Inc. 714,950 shares
3098-8026 Quebec Inc. 263,784 shares
Guy Nathan 180,000 shares
Oraxium International Inc. 225,000 shares
Edward Moore 160,000 shares
Touchtune Jukebox Inc. 216,666 shares
3<PAGE>
Tony Mastronardi, President of Registrant, was the sole shareholder of Gestion
Chevaux Pur-Sang Inc. Touchtune Jukebox Inc. is owned 50% by Mr. Mastronardi;
16.67% by Guy Nathan and 33.33% by Tonino Lattanzi, officers and directors of
Registrant. Oraxium International Inc. is a principal shareholder of
Registrant.
2. On March 6, 1995, the Company agreed to issue 10,000,000 shares of
Common Stock to S.G.R.M. Inc. ("SGRM"), a corporation incorporated under the
laws of the Turks and Caicos Islands, in exchange for patents, patents pending
and other intellectual property rights. In November 1995, this agreement was
amended and the 10,000,000 shares of Common Stock were issued to Techno Expres,
S.A., a French corporation, owned 33% each, by Messrs. Tony Mastronardi, Guy
Nathan and Tonino Lattanzi, officers and directors of the Company. The
10,000,000 shares were acquired for investment by such persons, none of whom is
a resident or citizen of the United States.
3. During December 1995, the Company issued an aggregate of 909,000
shares of Common Stock as follows: 100,000 shares to Albert Dutour, an
independent third party, in consideration of $150,000; 275,000 shares to
Oraxium International Inc., as part of the consideration paid by Registrant for
its purchase of the platform on which the software for the Digital Jukebox is
built; 300,000 shares to Tonino Lattanzi, a director of the Company, in
consideration for operating money advanced to the Company in the amount of
$300,000; 234,000 shares to Touchtunes Jukebox Inc., for services rendered to
the Company having a value of $203,337 and for expenses incurred of $31,440.
Touchtunes Jukebox Inc. is owned 50% by Tony Mastronardi; 16.66% by Guy Nathan;
and 33.33% by Tonino Lattanzi, officers and directors of the Company. Oraxium
International Inc. is a principal shareholder of Registrant. The 909,000
shares were acquired for investment by such persons, none of whom is a resident
or citizen of the United States.
4. On September 25, 1996, the Company authorized the issuance of 900,888
shares of Common Stock to Touchtunes Jukebox Inc. for a cash consideration of
$477,470 and 75,000 shares to Giovanni D'Andrea, an independent third party,
for professional services valued at $40,000. On December 20, 1996, the Company
authorized the issuance of 400,000 shares of Common Stock to Oraxium Interna-
tional Inc., in consideration for agreeing to extend the scope and duration of
a non-competition covenant given to the Company and 50,000 shares each, to
Pierre Martineau and Sylvain Duchesne, employees of Touchtunes, in
consideration for their non-compete covenants. On December 27, 1996, the
Company authorized the issuance of 199,819 shares of Common Stock to Touchtunes
Jukebox Inc. for a cash consideration of $420,698. All 1,675,707 shares were
issued in April 1997 and were acquired for investment by such persons, none of
whom (except for Mr. D'Andrea) is a resident or citizen of the United States.
4<PAGE>
5. On March 21, 1997, two independent Canadian investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc.
(the "Selling Shareholders") agreed to invest $4,000,000 Canadian Dollars (CDN)
in Registrant upon certain terms and conditions. To accomplish this, they
invested $4,000,000 CDN in Touchtunes Digital Jukebox Inc. ("Touchtunes"), a
Canadian subsidiary organized by Registrant specifically for that purpose, in
the following manner. The Selling Shareholders purchased 100 Class B shares
and 20 Class C shares of Touchtunes, at a price of $5,000 CDN per share, for an
immediate cash consideration of $600,000 CDN. They also subscribed to an
additional 680 Class C shares of Touchtunes, at a price of $5,000 CDN per
share, for a total consideration of $3,400,000 CDN. Both the Class C shares
and the funds were deposited in escrow. The Selling Shareholders also
purchased 100 shares of Series A Preferred Stock of the Registrant for $150.
On May 9, 1997, the Selling Shareholders released an additional $750,000 CDN
from escrow to Registrant against delivery to them of 150 Class C shares,
leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow. Payment
of this $2,650,000 CDN is subject to Registrant's causing this Registration
Statement to become effective by July 1, 1997. This Registration Statement is
intended to cover their sale of a maximum of 2,000,000 shares of the Common
Stock reserved for issuance to them upon exercise of their rights to exchange
their 100 Class B shares and 700 Class C shares of Touchtunes into 2,000,000
shares of Registrant's Series A Preferred shares and their subsequent conver-
sion of such Series A Preferred shares (with the 100 shares they already own)
into 2,000,100 shares of Registrant's Common Stock. All such shares were
acquired for investment by these two Canadian investors, neither of whom is a
resident or citizen of the United States.
5<PAGE>
Item 27. Exhibits.
(a) The following exhibits are filed herewith:
3. (i) Registrant's Amended and Restated Articles of Incorporation.
Reference is made to Exhibit 8 of Registrant's Form 8-K for the month
of March 1997, which Exhibit is incorporated herein by reference.
3. (ii) Registrant's Bylaws.
4. Form of Registrant's Common Stock certificates.
5. Opinion of Karp and Sommers.1
9. Shareholder Agreement between Techno Expres S.A. the majority
shareholder of Registrant and the Selling Shareholders dated March
21, 1997, relative to their shares of Registrant. Reference is made
to Exhibit 7 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
10. (i) Agreement of Sale between Touchtunes Jukebox Joint Venture and
Registrant, dated December 9, 1994, relative to transfer of patent
rights in exchange for 1,000,000 shares of Common Stock of
Registrant. Reference is made to Exhibit A of Registrant's Form 10-K
for the fiscal year ended December 31, 1994, which Exhibit is
incorporated herein by reference.
10. (ii) Summary of International Patent Application for the Digital Jukebox.
Reference is made to Exhibit B of Registrant's Form 10-K for the
fiscal year ended December 31, 1994, which Exhibit is incorporated
herein by reference.
10. (iii) Development Agreement between Touchtunes Jukebox Inc. and Registrant,
dated March 8, 1995. Reference is made to Exhibit C of Registrant's
Form 10-K for the fiscal year ended December 31, 1994, which Exhibit
is incorporated herein by reference.
10. (iv) Agreement between Oraxium International, Inc. and Registrant, dated
January 30, 1995, relative to the acquisition of a computer operating
system. Reference is made to Exhibit A of Registrant's Form 8-K for
the month of March 1995, which Exhibit is incorporated herein by
reference.
1 To be filed by Amendment.
6<PAGE>
10. (v) Agreement between S.G.R.M. Inc. and Registrant, dated March 6, 1995,
relative to the acquisition of patent rights in exchange for
10,000,000 shares of Common Stock. Reference is made to Exhibit B of
Registrant's Form 10-K for the fiscal year ended December 31, 1994,
which Exhibit is incorporated herein by reference.
10. (vi) Amended Agreement between S.G.R.M. Inc., Techno Expres, S.A. and
Registrant, dated November 30, 1995, relative to the acquisition of
patent rights in exchange for 10,000,000 shares of Common Stock.
Reference is made to Exhibit C annexed to Registrant's Form 8-K for
the month of November 1995, which Exhibit is incorporated herein by
reference.
10. (vii) Subscription Agreement for the purchase of 100 Class B shares and 20
Class C shares of Touchtunes Digital Jukeboxes Inc. ("Touchtunes"),
dated March 21, 1997. Reference is made to Exhibit 1 of Registrant's
Form 8-K for the month of March 1997, which Exhibit is incorporated
herein by reference.
10. (viii) Escrow Agreement for the deposit of $3,400,000 CDN
and 680 Class C shares of Touchtunes by the Selling Shareholders,
dated March 21, 1997. Reference is made to Exhibit 2 of Registrant's
Form 8-K for the month of March 1997, which Exhibit is incorporated
herein by reference.
10. (ix) Agreement between Touchtunes and Registrant, relative to work to be
rendered in connection with Registrant's Digital Jukebox project.
Reference is made to Exhibit 4 of Registrant's Form 8-K for the month
of March 1997, which Exhibit is incorporated herein by reference.
10. (x) Stock Exchange Agreement between Registrant and Selling Shareholders
for the exchange by the Selling Shareholders of their Class B and
Class C shares of Touchtunes for Series A Preferred shares of Regis-
trant. Reference is made to Exhibit 5 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xi) Subscription Agreement for the purchase of 100 Series A Preferred
shares of Registrant by the Selling Shareholders. Reference is made
to Exhibit 6 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
7<PAGE>
10. (xii) Shareholder Agreement between Techno Expres S.A., the majority
shareholder of Registrant and the Selling Shareholders, relative to
their shares of Common Stock of Registrant. Reference is made to
Exhibit 7 of Registrant's Form 8-K for the month of March 1997, which
Exhibit is incorporated herein by reference.
10. (xiii) Employment and Non-Competition Agreement between
Registrant and Tony Mastronardi. Reference is made to Exhibit 9 of
Registrant's Form 8-K for the month of March 1997, which Exhibit is
incorporated herein by reference.
10. (xiv) Employment and Non-Competition Agreement between
Registrant and Guy Nathan. Reference is made to Exhibit 10 of
Registrant's Form 8-K for the month of March 1997, which Exhibit is
incorporated herein by reference.
10. (xv) Lease for premises at One Commerce Place, Nun's Island, Verdun
(Quebec), Canada, H3E 1A2 between Touchtunes Digital Jukebox Inc. and
landlord of said premises.
21. Registrant has no subsidiaries. On the effective date of this
Registration Statement, it is anticipated that Touchtunes Digital
Jukebox Inc. will become a wholly owned subsidiary of Registrant.
23. (i) Consent of Perelson Weiner, independent certified public
accountants.1
23. (ii) Consent of Armstrong, Gilmour and Associates, independent certified
public accountants.1
23. (iii) Consent of Karp and Sommers, attorneys at law.1
Item 28. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
8<PAGE>
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) To include any additional or changed material information on
the plan of distribution;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated
as a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(d) The Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A under the
Securities Act and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time
the Securities and Exchange Commission declared it effective.
9<PAGE>
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time as the initial bona
fide offering thereof.
10<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Montreal, Canada on May 28, 1997.
TECHNICAL MAINTENANCE CORPORATION
By: /s/ TONY MASTRONARDI
-----------------------------
Tony Mastronardi, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- -------------------- ----------------------- ------------
/s/ TONY MASTRONARDI President and Director
- -------------------- (Principal Executive, May 28, 1997
Tony Mastronardi Accounting and Financial
Officer)
/s/ GUY NATHAN Senior Vice-President,
- -------------------- Secretary and Director May 28, 1997
Guy Nathan
/s/ TONINO LATTANZI 1 Vice-President
- -------------------- and Director May 28, 1997
Tonino Lattanzi
/s/ JACQUES BOURQUE Assistant-Secretary
- -------------------- and Director May 28, 1997
Jacques Bourque
- --------------------
Pierre Pharand Director _______
- --------------------
Andre Duquenne Director _______
- -----------
1 Signed by Aaron Karp, Esq as attorney in fact for Tonino Lattanzi
<PAGE>
Exhibit 3. (ii) Registrant's Bylaws<PAGE>
BYLAWS
OF
TECHNICAL MAINTENANCE CORPORATION
ARTICLE I
OFFICE
The Board of Directors shall designate and the Corporation shall maintain
a principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation may also have offices in such other places
as the Board may from time to time designate.
The location of the principal office of the Corporation shall be: 216
South Fourth Street, Las Vegas, Nevada, 89101.
ARTICLE II
SHAREHOLDERS MEETING
Section 1. Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the State of Nevada
as shall be set forth in compliance with these Bylaws. The meeting shall be
held on the 9th day of August of each year beginning at 10:00. if such day is a
legal holiday, the meeting shall be on the next business day. This meeting
shall be for the election of Directors and for the transaction of such other
business as may properly come before it.
Section 2. Special Meetings. Special meetings of shareholders, other than
those regulated by statute, may be called at any time by the President, or a
majority of the Directors, and must be called by the President upon written
request of the holders of 50% of the outstanding shares entitled to vote at
such special meeting. Written notice of such meeting stating the place, the
date and hour of the meeting, the purpose or purposes for which it is called,
and the name of the person by whom or at whose direction the meeting is called
shall be given. The notice shall be given to each shareholder of record in the
same manner as notice of the annual meeting. No business other than that
specified in the notice of the meeting shall be transacted at any such special
meeting.
1<PAGE>
Section 3. Notice of Shareholder Meetings. The Secretary shall give
written notice stating the place, day, and hour of" the meeting, and in the
case of a special meeting, the purpose or purposes for which the meeting is
called, which shall be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the books of the
Corporation, with postage thereon prepaid.
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Nevada,
as the place for the holding of such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the Corporation.
Section 5. Record Date. The Board of Directors may fix a date not less
than ten nor more than fifty days prior to any meeting as the record date the
purpose of determining shareholders entitled to notice of and to vote at such
meetings of the shareholders. The transfer books may be closed by the Board of
Directors for a stated period not to exceed fifty days for the purpose of
determining shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose.
2<PAGE>
Section 6. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding
shares are represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of shareholders in such number that less than a
quorum remain.
Section 7. Voting. A holder of an outstanding share, entitled to vote at a
meeting, may vote at such meeting in person or by proxy. Except may otherwise
be provided in the Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing in his name on the record of
shareholders. Except as herein or in the Articles of Incorporation otherwise
provided, all corporate action shall be determined by 50% of the votes cast at
a meeting of shareholders by the holders of share entitled to vote thereon.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the Secretary
of the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy.
3<PAGE>
Section 9. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any action which may be taken a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors may adopt
such rules and regulations for the conduct of their meetings and the management
of the Corporation as they deem proper.
Section 2. Number, Tenure and Qualifications. The number of Directors of
the Corporation shall be three. Each Director shall hold office until the next
annual meeting of shareholders and until his successor shall have been elected
and qualified. Directors need not be residents of the State of Nevada or
shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than by this Bylaw, immediately following
after and at the same place as the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than this resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by order of the Chairman of the Board, the President, or by one-
third of the Directors. The Secretary shall give notice of the time, place and
purpose or purposes of each special meeting by mailing the same at least two
days before the meeting or by telephoning or telegraphing the same at least one
day before the meeting to each Director.
4<PAGE>
Section 5. Quorum. A majority of the members of the Board of
Directors shall constitute a quorum for the transaction of business, but less
than a quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. At any meeting at which every Director shall be present, even though
without any notice, any business may be transacted.
Section 6. Manner of Acting. At all meetings of the Board of Directors,
each Director shall have one vote. The act of a majority present at a meeting
shall be the act of the Board of Directors, provided a quorum is present.
Section 7. Vacancies. A vacancy in the Board of Directors shall be deemed
to exist in case of death, resignation, or removal of any Director, or if the
authorized number of Directors be increased, or if the shareholders fail at any
meeting of shareholders at which any Director is to be elected, to elect the
full authorized number to be elected at that meeting.
Section 8. Removals. Directors may be removed at any time by a vote of
the shareholders holding 50% of the shares outstanding and entitled to vote.
Such vacancy shall be filled by the Directors then in office, though less than
a quorum, to hold office until the next annual meeting or until his successor
is duly elected and qualified, except that any directorship to be filled by
reason of removal by the shareholders may be filled by election by the
shareholders at the meeting at which the Director is removed. No reduction of
the authorized number of Directors shall have the effect of removing any
Director prior to the expiration of his term of office.
Section 9. Resignation. A Director may resign at any time by delivering
written notification thereof to the President or Secretary of the Corporation.
Resignation shall become effective upon its acceptance by the Board of
Directors; provided, however, that if the Board of Directors has not acted
thereon within ten days from the date of its delivery, the resignation upon the
tenth day be deemed accepted.
5<PAGE>
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 11. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefore.
Section 12. Emergency Power. When, due to a national disaster or death,
a majority of the Directors are incapacitated or otherwise unable to attend the
meetings and function as Directors, the remaining members of the Board of
Directors shall have all the powers necessary to function as a complete Board,
and for the purpose of doing business and filling vacancies shall constitute a
quorum, until such time as all Directors can attend or vacancies can be filled
pursuant to these Bylaws.
Section 13. Chairman. The Board of Directors may elect from its own
number a Chairman of the Board, who shall preside at all meetings of the Board
of Directors, and shall perform such other duties as may be prescribed from
time to time by the Board of Directors.
6<PAGE>
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a President,
one or more Vice-Presidents, a Secretary, a Treasurer, a General Manager, and a
General Counsel, each of whom shall be elected by a majority of the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. In its
discretion, the Board of Directors may leave unfilled for any such period as it
may determine any office except those of President and Secretary. Any two or
more offices may be held by the same person, except the offices of President
and Secretary. Officers may or may not be directors or shareholders of the
Corporation.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annual by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held as
soon thereafter as convenient. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 3. Resignation. Any officer may resign at any time by delivering
a written resignation either to the President or to the Secretary. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an
officer or agent shall require 50% vote of the Board of Directors, exclusive of
the officer in question if he is also a Director.
7<PAGE>
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office shall
be created, such vacancy may be filled by the Board of Directors for the
unexpired portion of the term.
Section 6. President. The President shall be the chief executive and
administrative officer of the company. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board, at meetings of
the Board of Directors. He shall exercise such duties as customarily pertain
to the office of President and shall have general and active supervision over
the property, business, and affairs of the company and over its several
officers. He may appoint officers, agents, or employees other than those
appointed by the Board of Directors. He may sign, execute and deliver in the
name of the company powers of attorney, contracts, bonds and other obligations,
and shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
Section 7. Vice-President. The Vice-President shall have such powers and
perform such duties as may be assigned to him by the Board of Directors or the
President. In the absence or disability of the President, the Vice-President
designated by the Board or the President shall perform the duties and exercise
the powers of the President. A Vice-President may sign and execute contracts
and other obligations pertaining to the regular course of his duties.
8<PAGE>
Section 8. Secretary. The Secretary shall, subject to the direction of a
designated Vice-President, keep the minutes of all meetings of the stockholders
and of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meetings of all committees. He
shall cause notice to be given of meetings of stockholders, of the Board of
Directors, and of any committee appointed by the Board. He shall have custody
of the corporate seal and general charge of the records, documents and papers
of the company not pertaining to the performance of the duties vested in other
officers, which shall at all reasonable times be open to the examination of any
Director. He may sign or execute contracts with the President or Vice-
President thereunto authorized in the name of the company and affix the seal of
the company thereto. He shall perform such other duties as may be prescribed
from time to time by the Board of Directors or by the Bylaws. He shall be
sworn to the faithful discharge of his duties. Assistant Secretaries shall
assist the Secretary and shall keen and record such minutes of meetings as
shall be directed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall, subject to the direction of a
designated Vice-President, have general custody of the collection and
disbursement of funds of the company. He shall endorse on behalf of the
company for collection checks, notes and other obligations, and shall deposit
the same to the credit of the company in such bank or banks or depositories as
the Board of Directors may designate. He may sign, with the President or such
other persons as may be designated for the purpose by the Board of Directors,
all bills of exchange or promissory notes of the company. He shall enter or
cause to be entered regularly in the books of the company full and accurate
account of all monies received and paid by him on account of the company; shall
at all reasonable times exhibit his books and accounts to any Director of the
company upon application at the office of the company during business hours;
and, whenever required by the Board of Directors or President, shall render a
statement of his accounts. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws. He
shall give bond for the faithful performance of his duties in such sum and with
or without such surety as shall be approved by the Board of Directors.
9<PAGE>
Section 10. General Counsel. The General Counsel shall advise and
represent the company generally in all legal matters and proceedings, and shall
act as counsel to the Board of Directors and the Executive Committee. The
General Counsel may sign and execute pleadings, powers of attorney pertaining
to legal matters, and any other contracts and documents in the regular course
of his duties.
Section 11. General Manager. The Board of Directors may employ and
appoint a General Manager who may, or may not, be one of the officers Or
Directors of the corporation. He shall be the chief operating officer of the
corporation and, subject to the directions of the Board of Directors,
shall have general charge of the business operations of the corporation and
general supervision over its employees and agents. He shall have the exclusive
management of the business of the corporation and of all of its dealings, but
at all times subject to the control of the Board of Directors. Subject to the
approval of the Board of Directors or the Executive Committee, he shall employ
all employees of the corporation, or delegate such employment to subordinate
officers, or such division chiefs, and shall have authority to discharge any
person so employed. He shall make a report to the President and Directors
quarterly, or more often if required to do so, setting forth the result of the
operations under his charge, together with suggestions looking to the
improvement and betterment of the condition of the corporation, and to perform
such other duties as the Board of Directors shall require.
10<PAGE>
Section 12. Other Officers. other officers shall perform such duties and
have such powers as may be assigned to them by the Board of Directors.
Section 13. Salaries. The salaries or other compensation of the officers
of the corporation shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a Director of the
corporation.
Section 14. Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the Board
of Directors may direct, conditioned upon the faithful performance of h duties
to the corporation, including responsibility for negligence and for the
accounting for all property, monies or securities of the corporation which may
come into his hands
ARTICLE V
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than two nor more than
seven members, one of whom shall be the President, and shall designate one of
such members as Chairman. The Board may also designate one or more of its
members as alternates to serve as members of the Executive Committee in the
absence of a regular member or members. The Board of Directors reserves to
itself alone the power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, change the membership of a
committee at any time, fill vacancies therein, and discharge any committee
either with or without cause at any time. Subject to the foregoing
limitations, the Executive Committee shall possess and exercise all other
powers of the Board of Directors during the intervals between meetings.
11<PAGE>
Section 2. Other Committees. The Board of Directors may also appoint
from among its own members such other committees as the Board of Directors may
determine, which shall in each case consist of not less than two Directors, and
which shall have such powers and duties as shall from time to time be
prescribed by the Board. The President shall be a member ex officio of each
committee appointed by the Board of Directors. A majority of the members of
any committee may fix its rules of procedure.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loan or advances shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated or transferred as
security for the payment of any loan, advance, indebtedness of liability of the
corporation unless and except as authorized by the Board of Directors. Any
such authorization may be general or confined to specific instances.
Section 3. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select, or as may be selected by any officer or agent authorized to do so by
the Board of Directors.
12<PAGE>
Section 4. Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the corporation shall be signed
by such officer or officers or such agent or agents of the corporation and in
such manner as the Board of Directors from time to time may determine.
Endorsements for deposit to the credit of the corporation in any of its duly
authorized depositories shall be made in such manner as the Board of Directors
from time to time may determine.
Section 5. Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the President or a Vice-President and by the Treasurer or by the
Secretary, and sealed with the seal of the corporation. The seal may be
facsimile, engraved or printed. Where such bond or debenture is authenticated
with the manual signature of an authorized officer of the corporation or other
trustee designated by the indenture of trust or other agreement under-which
such security is issued, the signature of any of the corporation's officers
named thereon may be facsimile. In case any officer who signed, or whose
facsimile signature has been used on any such bond or debenture, shall cease to
be an officer of the corporation for any reason before the same has been
delivered by the corporation, such bond or debenture may nevertheless be
adopted by the corporation and issued and delivered as though the person who
signed it or whose facsimile signature has been used thereon had not ceased to
be such officer.
ARTICLE VII
CAPITAL STOCK
13<PAGE>
Section 1. Certificate of Share. The shares of the corporation shall be
represented by certificates prepared by the Board of Directors and signed by
the President or the Vice-President and by the Secretary, and sealed with the
seal of the corporation or a facsimile. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
Section 3. Transfer Agent and Registrar. The Board of Directors shall
have power to appoint one or more transfer agents and registrars for the
transfer and registration of certificates of stock of any class, and may
require that stock certificates shall be countersigned and registered by one or
more of such transfer agents and registrars.
14<PAGE>
Section 4. Lost or Destroyed Certificates. The corporation may issue a new
certificate to replace any certificate theretofore issued by it alleged to have
been lost or destroyed. The Board of Directors may require the owner of such a
certificate or his legal representative to give the corporation a bond in such
sum and with such sureties as the Board of Directors may direct to indemnify
the corporation as transfer agents and registrars, if any, against claims that
may be made on account of the issuance of such new certificates. A new
certificate may be issued without requiring any bond.
Section 5. Consideration for Shares. The capital stock of the corporation
shall be issued for such consideration, but not less than the par value
thereof, as shall be fixed from time to time by the Board of Directors. In the
absence of fraud, the determination of the Board of Directors as to the value
of any property or services received in full or partial payment of shares shall
be conclusive.
Section 6. Registered Shareholders. The company shall be-entitled to
treat the holder of record of any share or shares of stock as the holder
thereof, in fact, and shall not be bound to recognize any equitable or other
claim to or on behalf of this company any and all of the rights and powers
incident to the ownership of such stock at any meeting, and shall have power
and authority to execute and deliver proxies and consents on behalf of this
company in connection with the exercise by this company of the rights and
powers incident to the ownership of such stock. The Board of Directors, from
time to time, may confer like powers upon any other person or persons.
15<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification. No officer or Director shall be personally
liable for any obligations of the corporation or for any duties or obligations
of the corporation or for any duties or obligations arising out of any acts or
conduct of said officer or Director performed for or on behalf of the
corporation. The corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at any time
hereafter as a Director or officer of the corporation from and against any and
all claims, judgments and liabilities to which such persons shall become
subject by reason of his having heretofore or hereafter been a Director or
officer of the corporation, or by reason of any action alleged to have
heretofore or hereafter taken or omitted to have been taken by him as such
Director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such person from all suits or claims as
provided for under the provisions of the Nevada Business Corporation Act;
provided, however, that no such person shall be indemnified against, or be
reimbursed for, any expense incurred in connection with any claim or liability
arising out of his own negligence or willful misconduct. The rights accruing
to any person under the foregoing provisions of this section shall not exclude
any other right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the corporation to indemnify or reimburse such
person in any proper case, even though not specifically herein provided for.
The corporation, its directors, officers, employees and agents shall be fully
protected in taking any action or making any payment, or in refusing so to do
in reliance upon the advice of counsel.
Section 2. Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director
officer or employee, and shall inure to the benefit of the heirs, executors and
administrators of such person.
16<PAGE>
Section 3. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer or employee
of the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
liability under the provisions of this section or of the general Corporation
Law of Nevada.
Section 4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the corporation by it Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or Director
of the corporation under the provisions of these Bylaws, or under the
provisions of the Articles of Incorporation, or under the provisions of the
Nevada Business Corporation Act, a waiver thereof in writing signed by the
person or person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice:
Attendance at any meeting shall constitute a waiver of notice of such meetings,
except where attendance is for the express purpose of objecting to the legality
of that meeting.
17<PAGE>
ARTICLE X
AMENDMENTS
These bylaws may be altered, amended repealed, or new bylaws adopted by
50% of the entire Board of Directors at any regular or special meeting. Any
bylaw adopted by the Board may be repealed or changed by action of the
shareholders.
ARTICLE XI
FISCAL YEAR
The fiscal year of the corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XII
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the corporation.
ARTICLE XIII
CORPORATE SEAL
The seal of the corporation shall be in the form of a circle and shall
bear the name of the corporation and the year of incorporation per sample
affixed hereto.
18<PAGE>
Exhibit 4. Form of Registrant's Common Stock certificates.
(Certificate)
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT INCORPORATED UNDER THE LAWS
OF THE STATE OF NEVADA
Number Techinical Maintenance Corporation Shares
2391
CUSIP No. 878462 10 0
AUTHORIZED STOCK: 25,000,000 SHARES
PAR VALUE: $.001 PER SHARE
COUNTERSIGNED AND REGISTERED
NATIONAL STOCK TRANSFER, INC.
3098 S HIGHLAND DR, #485
SALT LAKE CITY, UT 84106
BY:____________________
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
SHARES OF THE COMMON STOCK OF TECHNICAL MAINTENANCE CORPORATION
transfereable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly appointed officers.
Dated: (Seal)
- --------------------- --------------------
SECRETARY PRESIDENT
<PAGE>
(Back of Certificate)
NOTICE: Signature must be guaranteed by a member of the Medallion
Signature Program, or by an international bank (other than a savings
bank), or an international trust company. The following abbreviations,
when used in the inscription on the face of this certificate, shall be
construed as though they were written out in full according to applicable
laws or regulations
TEN COM - as tenants in common UNIF GIFT MIN ACT - ... Custodian...
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as under Uniform Gift to Minors
tenants in common Act..............
(State)
Additional abbreviations may also be used though not
on the above list
For Value Received, ________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
- ----------------------------------------------------------------
(PLEASE PRINT OF TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE
OF ASSIGNEE)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------Shares
of the capital stock represented by the within certificate, and
do hereby irrevocably constitute and appoint
- ---------------------------------------------------------Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises
Dated
- ----------------------------------------------------------------
SHAREHOLDER(S) SIGNATURE
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
Exhibit 10. (xv) Lease for premises at One Commerce Place, Nun's Island,
Verdun (Quebec), Canada, H3E 1A2 between Touchtunes Digital Jukebox Inc.
and landlord of said premises.<PAGE>
OFFICE LEASE
BETWEEN
JESTA MANAGEMENT CORP.
(Landlord)
-AND-
TOUCHTUNES DIGITAL JUKEBOX INC.
(Tenant)
1, Place du Commerc
Nuns' Island<PAGE>
Section 11.10 Entry not Forfeiture .................... 20
ARTICLE XII - DAMAGE AND DESTRUCTION AND EXPROPRIATION
Section 12.01 Interpretation of Article XII ............... 20
Section 12.02 Damage to the Premises ................... 20
Section 12.03 Damage to or Expropriation of the Building ......... 21
Section 12.04 Architect's Certificate .................. 21
ARTICLE XIV - ASSIGNMENT
Section 13.01 Consent Required ...................... 21
Section 13.02 Landlord's Right to Terminate ............... 23
Section 13.03 Terms and Conditions Relating to Consents ......... 23
Section 13.04 No Advertising of the Premises ............... 24
Section 13.05 Sales and Other Dispositions by the Landlord ........ 24
ARTICLE XIV - ACCESS AND ALTERATIONS
Section 14.01 Right of Entry ....................... 24
ARTICLE XV - STATUS STATEMENT AND SUBORDINATION
Section 15.01 Status Statement ...................... 25
Section 15.02 Subordination ....................... 25
ARTICLE XVI - DEFAULT
Section 16.01 Default and Remedies .................... 25
Section 16.02 Right to Terminate or Relet ................ 27
Section 16.03 Expenses .......................... 27
Section 16.04 Landlord May Cure the Tenant's Default ........... 27
Section 16.05 Application of Money .................... 27
Section 16.06 Remedies .......................... 28
ARTICLE XVII - MISCELLANEOUS
Section 17.01 Rules and Regulations ................... 28
Section 17.02 Overholding - No Tacit Renewal ............... 28
Section 17.03 Successors ......................... 28
Section 17.04 Joint Liability ...................... 28
Section 17.05 Waiver ........................... 28
Section 17.06 Accord and Satisfaction .................. 29
Section 17.07 Brokerage Commission .................... 29
Section 17.08 Force Majeure ....................... 29
Section 17.09 Notices .......................... 29
Section 17.10 Registration ........................ 29
Section 17.11 Quiet Enjoyment ...................... 29
Section 17.12 No Partnership ....................... 30
Section 17.13 No Offer .......................... 30
Section 17.14 Waivers by the Tenant ................... 30
Section 17.15 Security Deposit ...................... 30
Section 17.16 Survival of Obligations .................. 30
Section 17.17 Relocation of Premises ................... 30
Section 17.18 Parking .......................... 31
Section 17.19 Moveable Hypothec ..................... 31
Section 17.20 Right of Cancellation of Lease ............... 32
Section 17.20 Language .......................... 32
Section 17.21 Freely Negotiated ..................... 32
SCHEDULE "A" - LEGAL DESCRIPTION OF THE LANDS
SCHEDULE "A-1" - CONSTRUCTION MODIFICATION PLAN
SCHEDULE "B" - FLOOR PLAN OF THE BUILDING
SCHEDULE "C" - CONSTRUCTION OF THE PREMISES
SCHEDULE "D" - RULES AND REGULATIONS
APPENDIX "A" - MINUTES OF A BOARD OF DIRECTORS<PAGE>
THIS LEASE
BETWEEN JESTA MANAGEMENT CORP., a company duly incorporated under the federal
laws, having an office in the City of Verdun and represented by Elliott
Aintabi, is duly authorized representative,
(the "Landlord")
OF THE FIRST PART
AND TOUCHTUNES DIGITAL JUKEBOX INC., a company incorporated under the
laws of QUEBEC, having an office in the City of Verdun and represented by Tony
Mastronardi, its duly authorized representative,
(the "Tenant")
OF THE SECOND PART
ARTICLE I - DEFINITIONS
Section 1.01 Definitions
The following definitions apply in this Lease.
"Additional Rent": any money payable by the Tenant under this Lease (except
Gross Rent) whether or not it is designated "Additional Rent".
"Architect": an accredited architect chosen by the Landlord from time to time.
"Base Municipal Taxes": means the Municipal Taxes for the twelve (12) month
period commencing on January 1st, 1996 and ending on December 31st, 1996, which
are ONE HUNDRED THIRTEEN THOUSAND FIVE HUNDRED NINETEEN dollars and THIRTY ONE
cents ($113,519.31).
"Base Operating Expenses": means the Operating Expenses for the twelve (12)
month period commencing on January 1st, 1996 and ending on December 31st, 1996,
which are THREE HUNDRED SIXTY SEVEN THOUSAND EIGHT HUNDRED EIGHTY ONE dollars
and ($367,881.00).
"Base School Taxes": means the School Taxes for the twelve (12) month period
commencing on July 1st, 1996 and ending June 30th, 1997, which are ELEVEN
THOUSAND SEVEN HUNDRED SIXTY FIVE dollars and FORTY EIGHT cents ($11,765.48).
"Base Surtaxes": means the Surtaxes paid for the twelve (12) month period
commencing on January 1st, 1996 and ending on December 31st, 1996, which is ONE
HUNDRED THIRTEEN THOUSDAND FIVE HUNDRED TWENTY EIGHT dollars and FORTY EIGHT
cents ($113,528.48).
"Building": the Land, as same may be altered, reduced or expanded from time to
time and the buildings, improvements, equipment and facilities (including,
without limitation, the Common Elements) serving them or located on or in them
from time to time.
"Business Hours": 8:00 A.M. to 5:30 P.M. from Monday to Friday inclusively and
8:00 A.M. to 12:30 P.M. on Saturday, except when any of such days is an
holiday.
"Commencement Date": the date so defined in Section 3.04.
Common Elements:
(a) the areas, facilities, utilities, improvements, equipment and
installations (collectively, elements) in the Building that, from time to
time, are not intended to be leased to tenants of the Building, or are
designated from time to time as Common Elements by the Landlord,
(b) the elements outside the Building that serve the Building (or any part of
it) whether or not adjacent to or near the Building and which are
designated from time to time by the Landlord as part of the Common
Elements, and
(c) the elements in or on Rentable Premises that are provided for the benefit
of the tenants of the Building and their employees, customers and other
invitees in common with others entitled to use them. The Common Elements
include, but are not limited to, the roof, exterior wall assemblies
including weather walls, exterior and interior structural components and
bearing walls in the buildings and improvements in the Building; loading
and shipping docks and other installations of similar nature whether used
by the tenants of the Building in general or only by one or some of the
tenants of the Building; equipment, furniture, furnishings and fixtures;
music, fire prevention, security and communication systems; columns;
pipes; electrical, plumbing, drainage, mechanical and other installations,
equipment or services in the Building or related to it, as well as the
structures housing them; the heating, ventilating and air-conditioning
system of the Building; and the Parking Facilities.<PAGE>
"Emphyteutic Lessors": the emphyteutic lessor(s), if any, of the Landlord from
time to time. In sections that contain a release or other exculpatory language
in favour of the Emphyteutic Lessors includes the officers, employees (while in
the ordinary course of their employment), and agents of the Emphyteutic
Lessors.
"Event of Default": has the meaning ascribed thereto in Section 16.01.
"Gross Rent": has the meaning ascribed therefor in Section 4.02.
"Landlord": the party of the First Part and its authorized representatives. In
sections that contain a release or other exculpatory provision in favour of the
Landlord, Landlord includes the directors, officers, employees (while in the
ordinary course of their employment), and agents of the Landlord.
"Landlord's Work": the work to be performed by the Landlord pursuant to
Schedule C.
"Land": the land described in Schedule A to this Lease, as same may be altered,
reduced or extended from time to time.
"Lease": this agreement, all Schedules hereto and the Rules and Regulations
adopted or revised from time to time under Section 17.01.
"Mortgagee": a mortgagee or hypothecary creditor of the Building or part of it
and a chargee or other secured creditor that holds any right, title or interest
in and to the Building or a part of it as security, but a creditor, chargee or
security holder of a tenant of Rentable Premises is not a Mortgagee.
"Municipal Taxes": has the meaning ascribed thereto in Section 5.01.
"Net Rentable Area": in the case of Rentable Premises consisting of part of a
floor, the floor area bounded by the outside surface of the exterior glass, the
Premises side of the corridor or any other permanent partitions and the centre
of partitions that separate the Rentable Premises from adjoining Rentable
Premises (if any) without deductions for columns or projections but after
making the same exclusions as are made in computing Rentable Area.
"Operating Expenses": has the meaning ascribed thereto in Section 6.02.
"Owners": the registered owner or owners, or the emphyteutic lessee(s), if any,
from time to time, of the Lands. In sections that contain a release or other
exculpatory language in favor of the Owners, "Owners" includes the officers,
directors, employees (while in the ordinary course of their employment), and
agents of the Owners.
"Parking Facilities: the improvements constructed, or which may be constructed
in the Building for parking, and the areas and facilities that are appurtenant
solely to those improvements.
"Person": if the context allows, a person, firm, partnership or corporation,
group of persons, firms, partnerships or corporations, or any combination of
them.
"Premises": the Rentable Premises described in Section 3.01.
"Prime Rate of Interest": the rate of interest per annum from time to time
publicly quoted by the Canadian chartered bank designated from time to time by
the Landlord as the reference rate of interest (commonly known as its "prime
rate" used by it to determine rates of interest chargeable in Canada on
Canadian dollar demand loans to its commercial customers.
"Proportionate Share": a fraction which has as its numerator the GLA of the
Premises (3,933 square feet), and as its denominator the GLA of the building
(66,447 square feet), which is FIVE percent and NINETY TWO hundredths of one
percent (5.92%).
"Province": the province in which the Building is located.
"Released Persons": has the meaning ascribed thereto in Section 10.04.
"Rent": Gross Rent described in 4.02 and Additional Rent.
"Rentable Area":
a) in the case of Rentable Premises occupying an entire floor, the floor area
bounded by the outside surface of the exterior glass walls, including
without limitation, washrooms, telephone, aisles, structures or columns,
structural or non-structural, projections, electrical and janitorial
closets and elevator lobbies; and<PAGE>
b) in the case of Rentable Premises consisting of part of a floor, the area
computed by multiplying the Net Rentable Area of such premises by a factor
representing such premises' pro rata share of the common corridors and
other non leasable areas on such floor.
In calculating Rentable Area, stairs, elevator shafts, flues, stacks, pipe
shafts and vertical ducts and their enclosing walls, any of which are used in
common, shall be excluded but no deductions or exclusions shall be made for
columns and projections forming part of the Building. The Landlord may for the
purpose of calculating the Minimum Rent and any Proportionate Share, change the
factor referred to in subparagraph (b) from time to time to reflect the actual
ration of the aggregate floor area of the floor on which the Premises are
located (using the measurement method set out in subparagraph (a)) to the
aggregate Net Rentable of all Rentable Premises on such floor.
"Rentable Premises": those premises (including the Premises), in or on the
Building that are, or are intended, by Landlord, from time to time to be leased
to tenants, but Rentable Premises do not include the Parking Facilities and the
Storage Areas.
"Rental Year": the period of time that, in the case of the first Rental Year of
the Term, starts on the first day of the Term, and ends on the last day of the
following month of December and in the case of Rental Years after the first
Rental Year, is a period of twelve (12) consecutive calendar months, starting
the first day after the Rental Year that immediately precedes it, but (i) the
last Rental Year whether it is twelve (12) calendar months or not, terminates
on the expiration or earlier termination of this Lease, and (ii) the Landlord
may, from time to time, by written notice to the Tenant, specify a date (which
may precede the notice) on which the then current Rental Year will terminate
and the anniversary of the specified date will be the expiry date of the
subsequent Rental Years. The Landlord will not change the Rental Year,
however, if its main purpose is to increase Rent, nor will it change a Rental
Year to shorten the Term.
"Rules and Regulations": the rules and regulations adopted, promulgated,
revised or amended by the Landlord from time to time under Section 17.01. The
rules and regulations existing as the Commencement Date are those set out in
Schedule "D".
"Sales Taxes": has the meaning ascribed thereto in Section 2.01.
"School Taxes": has the meaning ascribed thereto in Section 5.01.
"Stipulated Rate": the rate of interest per annum that is or three percentage
points more than the Prime Rate of Interest.
"Storage Areas": those areas designated from time to time by the Landlord as
Storage Areas.
"Surtaxes": has the meaning ascribed thereto in Section 5.01.
"Surety": a Person who has executed or agreed to execute the Suretyship
Agreement or who otherwise guarantees any of the obligations of the Tenant
hereunder.
"Suretyship Agreement": the suretyship agreement attached to this Lease as
Appendix "B".
"Taxes": has the meaning ascribed thereto in Section 5.01.
"Taxpayer": the Landlord and each of the Owners, as the case may be.
"Tenant": the Party of the Second Part and any Person mentioned as Tenant in
this Lease.
"Tenant's Work": the work to be performed by the Tenant pursuant to Schedule
"C", if any.
"Term": the period described in Section 3.04.
"Total Rentable Area of the Building": the aggregate of the Rentable Areas of
each floor in the Building as if each floor is occupied by one tenant, all as
determined by the Architect. The Total Rentable Area of the Building shall:
a) exclude the main telephone, mechanical, electrical and other utility rooms
and enclosures; and
b) be adjusted by the Architect from time to time to take account of any
structural, functional or other change affecting the same.
ARTICLE II - INTENT AND INTERPRETATION
Section 2.01 Lease
Except as stated in this Lease, the Landlord is not responsible for costs,
charges, or expenses relating to the Premises, their use and occupancy, their
contents, or the business carried on in them, and the Tenant will pay the
charges, impositions, costs and expenses relating to the Premises except as
stated in this Lease. Any cost, expense or other disbursement not expressly
stated to be for the Landlord's account shall be deemed to be for the Tenant's
account.<PAGE>
Notwithstanding any other provision of this Lease, Tenant shall pay to Landlord
an amount equal to any and all goods and services taxes, sales taxes, value
added taxes, multi-stage taxes, business transfer taxes, or any other taxes
imposed with respect to Rent or any other amount payable under this Lease, or
in respect of the rental space under this Lease, whether characterized as any
such taxes or otherwise (herein collectively called "Sales Taxes"). The amount
of Sales Taxes 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 Taxes apply are payable to the
Landlord under the terms of this Lease or upon demand at such other time or
times as Landlord from time to time determines. Notwithstanding any other
provision in this Lease, the amount payable by Tenant pursuant to this
paragraph shall be deemed not to be Rent, but Landlord shall have all the same
remedies for and rights of recovery of such amount as it has for the recovery
of Rent.
Section 2.02 Tenant, Landlord and Representatives to Act Reasonably and in
Good Faith
The Landlord, and each Person acting for the Landlord or the Tenant, as the
case may be, in making a determination, designation, calculation, estimate,
conversion, or allocation under this Lease, will act reasonably and in good
faith and each accountant, architect, engineer or surveyor, or other
professional Person employed or retained by the Landlord or the Tenant, as the
case may be, will act in accordance with the applicable principles and
standards of the Person's profession.
Section 2.03 Entire Agreement
There are no covenants, promises, agreements, conditions, representations,
incitement, parallel, accessory or concomitant agreement or understandings,
either oral or written, between the parties concerning this Lease, the
Premises, the Building or any matter related to all or any of them, except
those that are set out in this Lease. All representations, promises,
guarantees and incitements made by the Landlord or its agents or
representatives, if any, and upon which the Tenant relies, are contained in
this Lease and the Tenant expressly acknowledges, for now and always, that it
did not rely on any other representation, promise, guarantee or incitement
which is not contained in this Lease. No alteration, amendment, change or
addition to this Lease (except to the Rules and Regulations which may be
modified or revised from time to time by Landlord pursuant to Section 17.01
hereof) is binding upon the Landlord or Tenant unless it is in writing and
signed by the Tenant and two authorized representatives of the Landlord.
Section 2.04 General Matters of Intent and Interpretation
a) Each agreement under this Lease is an obligation.
b) The captions, section numbers, article numbers and Table of Contents do
not define, limit, construe or describe the scope or intent of the
sections or articles.
c) The use of the neuter singular pronoun to refer to the Landlord or the
Tenant is a proper reference even though the Landlord or the Tenant is an
individual, a partnership, a corporation or a group of two or more
individuals, partnerships or corporations. The grammatical changes needed
to make the provisions of this Lease apply in the plural sense when there
is more than one Landlord or Tenant and to corporations, associations,
partnerships or individuals, males or females, are implied.
d) If a part of this Lease or the application of it to a Person or
circumstance, is to any extent held or rendered invalid, unenforceable or
illegal, that part:
i. is independent of the remainder of the Lease and is severable from
it, and its invalidity, unenforceability or illegality does not
affect, impair or invalidate the remainder of this Lease; and
ii. continues to be applicable to and enforceable to the fullest extent
permitted by law against any Person and circumstance except those as
to which it has been held or rendered invalid, unenforceable or
illegal.
No part of this Lease, will be enforced against a Person, if, or to
the extent that by doing so, the Person is made to breach a law,
rule, regulation or enactment.
a) This Lease will be construed in accordance with the laws of the Province
and the laws of Canada applicable therein.
b) Time is of the essence of this Lease. In addition to any other
circumstances where the Tenant is in default by operation of law, the
simple occurrence of an Event of Default shall constitute the Tenant in
default in accordance with the provisions of Articles 1594 and following
of the Civil Code of Quebec.
ARTICLE III - GRANT AND TERM
Section 3.01 The Premises
The Landlord leases to the Tenant, and the Tenant leases from the Landlord, the
Premises in the Building for the Term. The Premises are located at 1 Place du
Commerce, suite 330 and suite 570, Nuns' Island, in the City of Verdun. The
Rentable Area of the Premises is approximately three thousand nine hundred
thirty three (3,933) square feet and is subject to adjustments as stipulated in
Section 3.05. The location of the Premises is outlined in red on Schedule "B".<PAGE>
The Tenant accepts the premises as is except for the work described in Annexe
'C' and Annexe 'A-1' which will be executed by the Landlord.
The Landlord and the Tenant acknowledge and convenant that there is no warranty
whatsoever by the Landlord that the Premises may be used for the purpose for
which they are leased hereunder and Landlord has no obligation whatsoever to
maintain the Premises for such purpose, the whole notwithstanding any law,
legislation or regulation to the contrary and the Tenant hereby expressly
forever waives any right it may presently enjoy or enjoy in the future with
respect to any such warranty or maintenance. The Tenant acknowledges and
represents to the Landlord to have examined and be satisfied with the zoning
affecting the Building and Premises.
Section 3.02 Acceptance of the Premises
The Tenant acknowledges and declares that it has examined and is perfectly
aware of the state of the Premises, that same are in good repair, that it is
entirely satisfied therewith and that it rents and accepts the same in their
present state on an "as is" basis. The Landlord shall not be required to make
any improvement, repair, installation or replacement in or to the Premises
except for those mentioned in Schedule 'C'.
Section 3.03 Use of Common Elements
The Tenant has the non-exclusive and non-transferable right to use the Common
Elements in common with others entitled to do so, for the purposes for which
they are intended and during the Business Hours subject however, to this Lease.
Section 3.04 The Term
The Tenant will have and hold the Premises for the term (the "Term") which,
unless sooner terminated, is:
a) the period of three (3) years, commencing on the 1st day of May, 1997 (the
"Commencement Date") and ending on the 30th day of April, 2000;
b) N/A
Section 3.05 Calculation and Adjustment of Areas
a) As soon as reasonably possible after completion of construction of the
Premises, the Landlord shall measure the Net Rentable Area of the Premises
and shall calculate the Rentable Area of the Premises and Rent shall be
adjusted accordingly. The effective date of any such re-adjustment shall:
(i) in the case of an adjustment to the Rentable Area resulting from a
change in the aggregate Net Rentable Area of all Rentable Premises on
the floor on which the Premises are situated, be the date on which
such change occurred; and
(ii) in the case of a correction to any measurement or calculation error,
be the date as of which such error was introduced in the calculation
of Rent.
ARTICLE IV- RENT
Section 4.01 Obligation to Pay
The Tenant agrees and undertakes to pay Gross Rent and Additional Rent.
Section 4.02 Gross Rent
a) The Tenant will, throughout the Term, pay to the Landlord at its head
office, or at any other place designated by the Landlord, in Canadian
funds, without demand and without deduction, abatement, set-off or
compensation, as Gross Rent:
i. the annual rate of sixteen dollars and seventy five cents ($16.75)
per square foot of the Rentable Area of the Premises, for the term of
the Lease being the annual sum of sixty five thousand eight hundred
seventy seven dollars and twenty cents ($65,877.20) payable in equal
consecutive monthly installments of five thousand four hundred eighty
nine dollars and eighty one cents ($5,489.81) each in advance on the
first day of each calendar month; and<PAGE>
a) If the Commencement Date is not the first day of a calendar month, the
Tenant will pay, on the Commencement Date, Gross Rent calculated on a per
diem basis (based on three hundred and sixty-five (365) days) from the
Commencement Date to the end of the month in which it occurs.
b) The Tenant will deliver to the Landlord at the beginning of each Rental
Year, a series of monthly postdated cheques for the Rental Year for the
total of the monthly payments of Gross Rent and any Additional Rent that
is estimated by the Landlord in advance.
Section 4.03 Additional Rent
Additional Rent,
a) is payable in Canadian funds without deduction, abatement, set-off or
compensation;
b) is payable (except when this Lease states that it is payable on demand or
otherwise) with the first monthly installment of Gross Rent after the
Additional Rent begins to accrue; and
c) accrues daily. Landlord shall not be responsible for any cost or expense
relating to the use or the occupancy of the Premises or to Tenant's
business.
Section 4.04 Overdue Rent
If the Tenant defaults in the payment of Rent, the unpaid Rent bears interest
from the due date to the date of complete payment, whether before or after
default judgment and notwithstanding any provision of law to the contrary,
including without restriction, Article 1883 of the Civil Code of Quebec, at the
Stipulated Rate in force on the date the payment was due. In addition to the
foregoing, the Landlord shall be entitled to any further amounts and damages
that it shall justify.
ARTICLE V - TAXES
Section 5.01 Municipal Taxes, School Taxes and Surtaxes - Definition
(a) "Municipal Taxes" means,
(i) real property, taxes, rates, duties and assessments (including local
improvement taxes) impost charges or levies, that are levied, rated,
charged or assessed against the Building or any part of it from time
to time (including, but not limited to, the Common Elements) by a
taxing authority, whether federal, provincial, municipal or
otherwise, and any taxes and other amounts that are imposed instead
of, or in addition to, real property taxes whether similar or not,
and whether in existence at the Commencement Date or not, and any
real property taxes levied or assessed against the Landlord or the
Owners on account of its or their ownership of or interest in the
Building, plus
(ii) the taxes, rates, duties, assessments, impost charges or levies
(referred to collectively as "water and garbage removal taxes"), that
are levied, rated, charged or assessed against the Building or any
part of it or the Taxpayer from time to time, with respect to
garbage, trash, rubbish and refuse and their removal and with respect
to water and any taxes and other amounts that are imposed instead of,
or in addition to water and garbage removal taxes, whether similar or
not, and whether in existence at the Commencement Date or not, plus
(iii) an administration fee of fifteen percent of the costs referred to
above.
For more certainty, Municipal Taxes do not include School Taxes and Surtaxes.
(b) "School Taxes" means,
(i) school taxes, taxes, rates, duties and assessments impost charges or
levies, that are levied, rated, charged or assessed against the
Building or any part of it from time to time (including, but not
limited to, the Common Elements) by a school taxing authority, and
any taxes and other amounts that are imposed instead of, or in
addition to, school taxes whether similar or not, and whether in
existence at the Commencement Date or not, plus
(ii) an administration fee of fifteen percent of the costs referred to
above.<PAGE>
(c) "Surtaxes" means,
(i) the surtaxes imposed, charged or levied pursuant to the authority
granted under the Act Respecting Municipal Taxation (Quebec), as
modified, replaced or supplemented from time to time, on the
Landlord, the Owners or the Building, on account of the latter being
a non-residential immoveable, including, without limitation, Parking
Facilities, the Common Elements, Storage Areas, and all Rentable
Premises whether leased or not, occupied or vacant, and any taxes and
other amounts that are imposed instead of, or in addition to surtaxes
whether similar or not, and whether in existence at the Commencement
Date or not, plus
(ii) an administration fee of fifteen percent of the costs referred to
above.
Section 5.02 Taxes Payable by the Landlord
The Landlord may defer payment of Taxes, or defer compliance with statutes,
laws or by-laws, regulations or ordinances in connection with the levying of
Taxes, to the extent permitted by law, if it diligently pursues or causes to be
pursued the contest or appeal of the Taxes. The Tenant's Proportionate Share
of Taxes shall however be and remain payable regardless of any deferment of
payment or contestation or appeal of the Taxes by the Taxpayer. The Landlord
will have no obligation to contest, object to, or to litigate the levying or
imposition of any Taxes.
Section 5.03 Taxes Payable by the Tenant
a) Tenant shall not contest any Taxes nor any valuation pertaining thereto
and to the extent required, hereby forever relinquishes and waives any
right it has or may have in the present or future to contest Taxes or any
valuation pertaining thereto. If during any Rental year, Municipal Taxes,
School Taxes and/or Surtaxes exceed respectively Base Municipal Taxes,
Base School Taxes and/or Base Surtaxes, the Tenant shall pay to Landlord
its Proportionate share of all said increases of Municipal Taxes, School
Taxes and/or Surtaxes; each of these increases shall be subject to a
separate and distinct calculation. For greater certainty, Tenant is not
entitled to any Gross Rent decrease and the Gross Rent will not in any
manner be reduced or modified if during any Rental year, Municipal Taxes,
School Taxes and/or Surtaxes be respectively lesser than Base Municipal
Taxes, Base School Taxes and/or Base Surtaxes.
Furthermore, Tenant shall pay to Landlord, as Additional Rent and over any
other payable amount in accordance with the Lease, it Proportionate share
of all costs and of all expenses incurred for consultation, appraisal,
legal or other fees and expenses to the extend they are incurred in an
attempt to minimize or reduce amounts mentioned in this Section
(collectively "Consultation Expenses").
b) The Tenant will pay the amounts payable under Section 5.03(a) according to
estimates or revised estimates made by the Landlord from time to time in
respect of each Rental Year. The Tenant's payments will be made in
advance in monthly amounts, determined by the Landlord, for periods
determined by the Landlord. Notwithstanding the foregoing, when invoices
or assessments for all or any portion of the Municipal Taxes, School Taxes
and/or Surtaxes so estimated are received, the Landlord may bill the
Tenant for Tenant's Proportionate Share of the increase thereof and Tenant
shall pay the Landlord the amounts so billed forthwith.
Within a reasonable time after the expiry of each Rental Year, the
Landlord will deliver a statement (a "Tax Statement") to the Tenant that
(i) specifies the Tenant's Proportionate Share of Consultation Expenses
and of the increase of Municipal Taxes, School Taxes and/or Surtaxes
for the Rental Year,
(ii) sets out the total, (the "Prepayment Total"), of amounts payable
under this Section 5.03(b) that have been paid by the Tenant for such
Rental Year. If the Prepayment Total, less any amounts that were
previously credited to the Tenant, and any amounts paid for arrears
in respect of previous Rental Years (the "Net Prepayment Total") is
less than the Tenant's Proportionate Share of Consultation Expenses
and of the Taxes' increase specified in the Tax Statement, the Tenant
will pay the deficiency without delay upon receipt of the Tax
Statement. If the Net Prepayment Total exceeds the Tenant's
Proportionate Share of Consultation Expenses and of the Taxes'
increase specified in the Tax Statement, the Landlord will, at the
Landlord's discretion, apply the excess towards other amounts due by
the Tenant or (unless the Tenant is then in default under any term or
condition of this Lease) refund the excess within a reasonable time
after delivery of the Tax Statement. Failure of the Landlord to
render any Tax Statement shall not prejudice Landlord's right to
render such Tax Statement thereafter or with respect to any other
period. The rendering of a Tax Statement shall also not affect the
Landlord's right to subsequently render an amended or corrected Tax
Statement.
c) If the last Rental Year expires or is terminated before the last day of a
calendar year, the Landlord will deliver to the Tenant a Tax Statement
within a reasonable time after the expiry of such calendar year or, at the
Landlord's option, within a reasonable time after the last Rental Year.
In the latter case, the Tenant's Proportionate Share of Consultation
Expenses and of Taxes' increase will be based on the Landlord's estimate
of Consultation Expenses and Taxes, which will be considered as the final
actual amount of Consultation Expenses and Taxes for the last Rental Year.
In either case, the Tenant will pay to the Landlord any deficiency without
delay upon receipt of the Tax Statement, or the Landlord will, at the
Landlord's discretion, apply any excess towards other amounts due by the
Tenant or pay to the Tenant any excess the Tenant is entitled to within a<PAGE>
reasonable time after the Landlord delivers the Tax Statement (unless the
Tenant is then in default under any term or condition of this Lease or it
owes money to the Landlord in respect of its obligations under this
Lease.)
Section 5.04 Business Taxes and Other Taxes of the Tenant
The Tenant will pay to the taxing authorities, or to the Landlord, as it
directs, before delinquency, all Business Taxes "Business Taxes" means,
a) the taxes, rates, duties, assessments and other charges that are imposed
against or in respect of the improvements, equipment and facilities of the
Tenant on or in the Premises or the Building or any part of them or the
Taxpayer on account of its ownership of or interest in either of them; and
b) every tax and license fee that is imposed against or in respect of
business carried on in the Premises or in respect of the use or occupancy
of the Premises or any part of the Building by the Tenant or its
subtenants or licensees, or against the Taxpayer on account of its
ownership of the Premises or the Building or any part of it.
If there is not a separate bill issued by the relevant authority for Business
Taxes, the Tenant will pay its Proportionate Share of the Business Taxes with
respect to the entire Building after deduction of any contributions made by the
tenants or occupants of the Rentable Premises not included in the Rentable Area
of the Building. The Landlord will remit amounts that it collects for Business
Taxes to the relevant authority.
Section 5.05 Tenant's Responsibility
The Tenant will,
a) on the Landlord's request, promptly deliver to the Landlord,
(i) receipts for payment of all Business Taxes payable by the Tenant;
(ii) notices of any assessments for Taxes or Business Taxes or other
assessments received by the Tenant that relate to the Premises of the
Building, and
(iii) whatever other information relating to Taxes and Business Taxes the
Landlord reasonably requests from time to time; and
b) deliver to the Landlord, at least ten (10) days before the last date for
filing appeals, notice of any appeal or contestation that the Tenant
intends to institute with respect to Business Taxes payable by the Tenant
and obtain the prior written consent of the Landlord for the appeal or
contestation, which consent will not be unreasonably withheld. If the
Tenant obtains the Landlord's consent and does not pay the Business Taxes
before the appeal or contestation, the Tenant will,
i. deliver to the Landlord whatever security for the payment of the
Business Taxes the Landlord reasonably requires;
ii. promptly and diligently pursue the appeal or contestation; and
iii. keep the Landlord informed on all aspects of it.
The Tenant will indemnify and save the Taxpayer harmless from all cost, charges
and expenses arising from Business Taxes as well as any taxes that are imposed
in place of Business Taxes or which are assessed against rentals payable under
this Lease in place of Taxes or Business Taxes, whether against the Taxpayer or
the Tenant including, but not limited to, increases in Taxes or Business Taxes
arising directly or indirectly out of an appeal or contest by the Tenant. The
Tenant will deliver to the Landlord any security for such an increase in Taxes,
Surtaxes or Business Taxes that the Landlord reasonably requires.
Section 5.06 Per Diem Adjustment
If a Rental Year is not twelve (12) calendar months, Tenant's Proportionate
share of Consultation Expenses, of the increase of Municipal Taxes, of the
increase of School Taxes and of the increase of Surtaxes payable by the Tenant
under Section 5.03 will be adjusted on a per diem basis, based on three hundred
and sixty-five (365) days.
ARTICLE VI - BUILDING AND COMMON ELEMENTS - CONTROL AND PAYMENT
Section 6.01 Control of the Building by the Landlord
The Common Elements and those portions of the Building which are not leased to
tenants are under the exclusive control of the Landlord.
a) Without limitation, the Landlord may, in its operation of the Building:
i. close parts of the Common Elements to prevent their dedication or the
accrual of rights in them in favour of Persons or the public; grant,
modify and terminate servitudes and other agreements pertaining to
the use and operation of the Building or any part of it, and
temporarily obstruct or close off or shut down parts of the Building
for inspection, maintenance, repair, construction, or safety reasons;<PAGE>
ii. employ personnel, including supervisory personnel and managers for
the operation, maintenance and control of the Building. The Building
or parts of it may be managed by any Person that the Landlord
designates in writing from time to time;
iii. regulate all aspects of loading and unloading, delivery and shipping
of fixtures, equipment and merchandise, and all aspects of garbage
collection and disposal. The Tenant is responsible for pick-up and
disposal of its garbage and its cost. If the Landlord provides
facilities or designates a commercial service for the pick-up and
disposal of garbage instead of, or in addition to the service
provided by the local municipality, the Tenant will use such
facilities and commercial service at its cost; and
iv. impose or permit to be imposed reasonable charges upon any Person
(including the general public) for the use of the Parking Facilities;
(b)
i. change the area, level, location, arrangement or use of the Building
or any part of it;
ii. construct other buildings, structures, or improvements in the
Building and make alterations to, subtractions from, or
rearrangements of the Building, and construct additional storeys,
buildings or facilities in, adjoining or near the Building.
iii. construct multiple deck, elevated or underground parking facilities,
and expand, reduce or alter them;
iv. diminish, expand, alter, relocate or rearrange the Common Elements
and other parts of the Building, and
v. do and perform such other acts in and to the Building as, in the use
of good business judgment, the Landlord determines to be advisable
for the proper operation of the Building.
Despite anything else in this Lease, the Landlord has no liability for
diminution or alteration of the Common Elements that occurs as the result of
the Landlord's exercise of its rights under this Section 6.01 or elsewhere
under this Lease and the Tenant will not be entitled to compensation or a
reduction or abatement of Rent or a cancellation of the Lease and no such
diminution or alteration of the Common Elements shall be deemed to be a
constructive or actual eviction of the Tenant or a default by the Landlord of
any obligation for quiet enjoyment contained in this Lease or provided by law.
Moreover, the Landlord shall not be in breach of its covenant for quiet
enjoyment or liable for any loss, costs or damages, whether direct or indirect,
incurred by the Tenant due or by reason, directly or indirectly of any of the
foregoing and none of the foregoing shall constitute nor shall be deemed to
constitute a change in the form or the destination of the Premises or the
Building.
Section 6.02 Tenant's Proportionate Share of the Increase of Operating
Expenses
a) In each Rental Year, the Tenant will pay to the Landlord its Proportionate
Share of the increase in costs and expenses of maintaining, operating,
repairing, replacing and administering the property including for greater
certainty, the Common Elements (collectively "Operating Expenses") over
the Base Operating Expenses.
b) The Operating Expenses include, but are not limited to those listed below,
none of which is to be a duplication of another cost or expense:
i. insurance (after deducting recoveries from tenants under clauses
similar to Section 10.02) on lands, buildings, improvements,
equipment and other property in the Building. The Landlord's
insurance may include (but might not be limited to),
a) loss of insurable gross profits attributable to the perils
insured against by the Landlord or commonly insured against by
landlords, including loss of rent and other amounts receivable
from tenants in the Building, and
b) third party liability coverage including the exposure of
personal injury, bodily injury, property damage occurrence,
including all contractual obligations coverage and including
actions of the employees, contractors, subcontractors and agents
working on behalf of the Landlord;
ii. cleaning, snow removal, garbage and waste collection and disposal,
and landscaping;
iii. loudspeakers, public address and musical broadcasting systems,
telephone answering services, telephone facilities and systems used
in or serving the Common Elements;
iv. policing, security, supervision and traffic control;
v. salaries of personnel, including management and other supervisory
personnel, employed to carry out the cleaning, maintenance and
operation of the Building, including contributions and premiums for
fringe benefits, unemployment insurance, and workers compensation
insurance, pension plan contributions, and severance pay or
indemnity;<PAGE>
vi. rental of equipment and signs, and the cost of building supplies used
by the Landlord in the maintenance, cleaning, repair and operation of
the Building;
vii. auditing (including audit fees for the statements referred to in
Section 6.03), accounting, managing, legal and other professional and
consulting fees and disbursements;
viii. repairs (including major and structural repairs), renovations,
replacements to and maintenance and operation of the Building;
ix. depreciation or amortization of the costs, including repair,
renovation and replacement of the maintenance, cleaning and operating
equipment, master utility meters, the heating, ventilating and air-
conditioning system of the Building and all other fixtures, equipment
and facilities that are part of the Building unless they are, under
Section 6.02(b)(viii), charged fully in the Rental Year in which they
are incurred, all in accordance with generally accepted accounting
principles;
x. all cost incurred for the heating, ventilating and air-conditioning
of the Building (including for greater certainty the Common Elements
and the Rentable Premises);
xi. interest calculated upon the undepreciated or unamortized part of the
costs referred to in Section 6.02(b)(ix), at a rate per annum that is
two percentage points above the average daily Prime Rate of Interest
for the period during which the present interest is calculated;
xii. the Business Taxes, if any, payable by the Taxpayer;
xiii. the cost (including taxes) of all electricity, fuel, steam, water,
power, gas, natural gas and all other utilities used in or for the
Building; including, for greater certainty, Common Elements and
Rentable Premises;
xiv. other costs and expenses not otherwise expressly excluded hereunder
attributable to the ownership, operation, maintenance, supervision
and administration of the Building, including expenses incurred or
contributions made by the Landlord in respect of off-site facilities
which are utilized by or benefit the Building (such as access roads
and rights-of-way, and landscaping associated therewith), the fair
rental value of space occupied by any on-site management office of
and for the Building and reasonable costs and expenses attributable
to off-site computer, accounting and other support services presently
located at 1 Place du Commerce, suite 230, Nuns' Island, Verdun to
the extent provided for the operation, maintenance, supervision and
administration of the Building;
xv. improvements, fixtures and equipment made or added for the greater
comfort and convenience of the public or the tenants;
xvi. any and all emphyteutic rent or other occupancy cost payable with
respect to the Building; and
xvii. an administration fee of fifteen percent of the costs referred to
above but excluding those referred to in Section 6.02(b)(xi).
From the total of the costs referred to in Sections 6.02(b)(i) to (xvii)
(inclusive) there is deducted net proceeds of insurance actually recovered by
the Landlord applicable to damage, to the extent of the corresponding costs of
repairs included in the costs mentioned in Section 6.02(b).
Section 6.03 Payment of the Tenant's Proportionate Share of the Increase of
Operating Expenses
a) The Tenant will pay the amounts payable under Section 6.02 according to
estimates or revised estimates made by the Landlord from time to time in
respect of periods determined by the Landlord. The Tenant's payments will
be made in monthly installments in advance for the periods in respect of
which the estimates are made. Within a reasonable time after the end of
each Rental Year the Landlord will deliver to the Tenant a report prepared
by the Landlord of the amounts referred to in Section 6.02 together with a
statement prepared by the Landlord (collectively a "Statement") of the
Tenant's Proportionate Share of those amounts. Such Statement shall
contain reasonable details about the calculation of the amounts referred
to in Section 6.02 and the Tenant's Proportionate Share thereof. If the
Tenant has paid more than a Statement specifies, the excess will be, at
the discretion of the Landlord, applied towards other amounts due by the
Tenant or credited against future installments of Tenant's Proportionate
Share of the amounts referred to in Section 6.02 or refunded within a
reasonable time after delivery of the Statement (unless the Tenant is then
in default under any term or condition of this Lease). If the Tenant has
paid less than a Statement specifies, the Tenant will pay the deficiency
without delay upon receipt of the Statement. Failure of the Landlord to
render any Statement shall not prejudice Landlord's right to render such
Statement thereafter or with respect to any other period. The rendering
of a Statement shall also not affect the Landlord's right to subsequently
render an amended or corrected Statement. For greater certainty, Tenant
is not entitled to any Gross Rent decrease and the Gross Rent will not in
any manner be reduced or modified if during any Rental Year, Operating
Expenses be lesser than Base Operating Expenses.
b) For the last Rental Year the Landlord may elect to either
i. deliver to the Tenant, within a reasonable time after the last Rental
Year, a Statement of the amounts referred to in Section 6.02 (which
Statement, although it may involve estimates, will be considered
final), or<PAGE>
ii. deliver a Statement to the Tenant, within a reasonable time after the
date when the last Rental Year would have ended if the Term had not
expired or this Lease had not terminated.
The Tenant will pay any deficiency to the Landlord, without delay upon
receipt of the Statement, or the Landlord will pay to the Tenant any
excess that the Tenant is entitled to, within a reasonable time after the
Landlord delivers the Statement, (unless the Tenant owes money to the
Landlord in respect of its obligations under this Lease).
c) If a Rental Year is less than twelve (12) months, the Tenant's
Proportionate Share under Section 6.02 will be prorated on a per diem
basis based on three hundred and sixty-five (365) days.
ARTICLE VII - UTILITIES
Section 7.01 Electricity
1) The Tenant will, if requested by the Landlord, install at its own expense,
at a location designated by the Landlord, a separate check meter
indicating demand and consumption for any utility, including without
restriction, electricity, fuel, steam, water, gas and natural gas (the
"Utilities"). If, at any time the Premises are equipped with a separate
meter for any Public Utility Service, either because of the Landlord
request or otherwise, then Tenant shall take its own arrangements and pay
directly Public Utility Service all cost relating to the consumption of
this Public Utility Service within the Premises. Upon Landlord's request,
from time to time, Tenant shall remit to Landlord the proof of said
payment.
The Landlord is not liable for interruption or cessation of, or failure in the
supply of Utilities, services or systems in, to or serving the Building or the
Premises, whether they are supplied by the Landlord or others, and whether or
not the interruption or cessation is caused by the Landlord's negligence or the
negligence of any Person for whom the Landlord is responsible at law.
b) The Landlord shall have the exclusive right to replace bulbs, tubes and
ballasts in the lighting system in the Premises, on either an individual
or a group basis. The Tenant shall pay the cost of such replacement on
the first day of each month or at the option of the Landlord upon demand.
Any such payment by Tenant shall constitute final acceptance by Tenant of
the price therefor and shall be final and binding and without return for
any reason.
Section 7.02 Interruption of Services
The Landlord shall have the right without liability or obligation to the
Tenant, and without such action constituting an eviction of the Tenant or a
failure of the Landlord to furnish peaceful enjoyment, to discontinue or modify
any services or the supply of any Utilities required of it pursuant to this
Article 7 or elsewhere in this Lease during such times as may be necessary, or
as the Landlord may deem advisable by reason of accident or for the purpose of
effecting repairs, replacements, alterations or improvements. Without limiting
the generality of the foregoing, but in addition thereto, the Landlord shall
not be liable for failure to supply the said services or Utilities in whole or
in part for any reason whatsoever.
ARTICLE VII - SERVICES TO BE SUPPLIED BY LANDLORD
Section 8.01 Services
Landlord covenants and agrees that, so long as Tenant shall not be in default
hereunder:
a) Landlord will, Monday through Friday except holidays in each week, cause
the office portion of the Premises, excluding storage areas and private
washrooms, to be cleaned, provided the same are kept in order by Tenant.
Such cleaning may be done between the hours of 5:00 P.M. and 6:00 A.M.
Windows will be cleaned from time to time as Landlord shall determine.
b) Landlord will provide automatic passenger elevator service in the Building
between the hours of 7:30 A.M. and 6:30 P.M. of each business day, except
Saturdays when the hours shall be from 8:00 A.M. to 1:00 P.M. Landlord
shall be under no obligation to provide operators for any such passenger
elevators and the fact that Landlord may from time to time in its
discretion provide operators shall in no way obligate Landlord to continue
such provision.
Freight service will be provided at such hours as Landlord may designate
from time to time, and shall be subject to a charge as determined from
time to time by Landlord.
Tenant shall have free use of the elevators in common with others but
Landlord shall not be liable for any damage caused to Tenant and its
officers, agents, employees, servants, visitors, licenses or any Person
permitted or tolerated to be in the Building by the Tenant by such others
using the elevators in common or for any other cause or reason and Tenant
shall indemnify and hold the Landlord harmless against any such claim.<PAGE>
c) The Landlord shall provide climate control to the Premises during Business
Hours to maintain, in the responsible opinion of the Landlord, a
temperature adequate for normal occupancy, except during the making of
repairs, alterations or improvements, provided that the Landlord shall
have no liability for failure to supply climate control service when
stopped as aforesaid or when prevented from doing so by repairs, or causes
beyond the Landlord's reasonable control. Any rebalancing of the climate
control partitions, equipment or fixtures by or on behalf of the Tenant or
by any use of the Premises not in accordance with the design standards of
such system will be performed by the Landlord at the Tenant's expense.
The obligations of Landlord hereunder shall also be conditional upon the
following:
i. Tenant keeping all exterior windows closed at all times and blinds
fully drawn on all windows exposed to the sun during the cooling
cycle;
ii. the average amount of electrical energy consumed by lights and
machines in the Premises not exceeding 6 watts per square foot of the
Net Rentable Area of the Premises;
iii. the occupancy of the Premises not exceeding one person per hundred
square feet of the Net Rentable Area of the Premises.
All individual controls required by Tenant shall be installed at Tenant's
expense.
In case Landlord deems it necessary to run portions of the system through
the Premises in order to serve other tenants, Tenant shall permit Landlord
and its agents and contractors to perform such work in the Premises.
d) Nothing contained in this Lease shall be deemed to create any obligation
of Landlord to furnish electricity, heating, air-conditioning or any other
services to Tenant to the extent these are required by the use in the
Premises of special equipment such as computers or other electrical or
similar equipment.
e) Landlord shall be privileged, without liability or obligation to Tenant,
to discontinue or modify any services required of it under this Article
VIII or elsewhere in this Lease during such times as may be necessary, or
as Landlord may deem advisable by reason of accident, or for the purpose
of effecting repairs, replacements, alterations or improvements. Without
limiting the foregoing but in addition thereto, Landlord shall not be
liable to Tenant for failure for any reason to supply the said services or
any of them, Landlord, however, undertaking to correct any such failure
with reasonable diligence.
ARTICLE IX - USE OF THE PREMISES
Section 9.01 Use of the Premises and Trade Name
a) The Premises shall be used and occupied for office purposes only and for
no other purpose.
Tenant shall not leave the Premises unoccupied or vacant (and surrender of
the keys shall not be necessary in order that the Premises may be deemed
unoccupied or vacant) during the Term. Acceptance of the surrender of
this Lease shall not be effective unless made in writing and signed by
Landlord.
By way of further restriction to the specific purpose herein set forth the
Tenant shall not carry on nor shall permit or tolerate
i. any business on the Premises which is or is similar to the business
carried on by a bank, or by a trust, acceptance or loan corporation,
or by a corporation or organization engaged in the business of
accepting money on deposit or lending money or operating a dental
clinic; or
ii. any other activity restricted by the Rules and Regulations.
The Tenant acknowledges and agrees that continuous occupancy of the
Premises during the Business Hours is of the essence of this Lease and
that any default of Tenant under this Section will cause grave prejudice
to the Landlord which cannot be entirely compensated by the payment of a
sum of money.
The Tenant further acknowledges and covenants that, in addition to all
other resources of Landlord under this Lease or at law, Landlord can and
is entitled to enforce any of the provisions of this Article, including
without restriction, all negative and all positive covenants of the Tenant
hereunder, by way of injunctive relief and that the filing of Landlord's
affidavit stating the existence of a default hereunder shall be sufficient
for the obtention of the injunctive relief sought by Landlord.
b) Without derogation to the provisions of Section 9.02(a), the Tenant will
not use, permit to be used, or engage in any promotion or display bearing
any trademarks or trade or business names or insignia in existence from
time to time associated with the Building or owned or authorized for use
by the Landlord or the Owners, without the Landlord's prior written
consent, which consent may be unreasonably or arbitrarily withheld.<PAGE>
c) The Tenant shall not disturb the normal enjoyment of the other tenants and
shall see and ensure that its officers, invitees, licensees, employees,
servants, clients, agents, contractors, any Person from whom the Tenant is
responsible at law and any Person the Tenant allows or tolerates to use or
to have access to the Building or the Premises act in such a way as not to
disturb the normal enjoyment of the other tenants and the Tenant shall
indemnify and save the Landlord harmless from all loss, claims, actions,
damages, liability and expenses in connection or arising from any
violation of the foregoing.
Section 9.02 Conduct of Operation
The Tenant will throughout the Term, conduct continuously and actively the
office operation set out in Section 9.01 in the whole of the Premises. In the
conduct of the Tenant's business, the Tenant will:
a) use the name and insignia that the Landlord requires in connection with
the Building in the advertising of the Tenant's business in the Premises;
claim no rights in those names, marks or insignia; promptly abandon or
assign to the Landlord any such rights that it acquires by operation of
law, and promptly execute the documents that the Landlord requests to give
effect to this provision:
b) not allow or cause to exist or occur in the Premises anything which may be
or result in a nuisance or annoyance to the Landlord or any visitor or
tenants of the Building, or which shall be in breach of any by-law or
other legal requirement or any reasonable requirement of any insurer under
any policy affecting the Landlord or any part of the Building;
c) not allow or cause any machines selling merchandise or services, including
vending machines and machines operated by coins, credit cards or
otherwise, to be present in the Premises;
d) not allow or cause to be present in the Premises any machines providing
entertainment, whether by coines, credit cards or otherwise;
e) not allow or cause any act or omission to occur which may damage the
Building or any business conducted therein, shall keep the Premises at all
times orderly and tidy, in a clean and sanitary condition, free from
rubbish and dirt, shall store all trash and refuse within the Premises (in
refrigerated storage in the case of perishable goods) or such other
location as may be specified by the Landlord from time to time, and shall
arrange for the removal of such trash and refuse at the regular times
specified by the Landlord for such removal and at such other times as may
be approved by the Landlord. The Tenant shall not dispose of any trash or
refuse in or about the Premises or anywhere else in the Building or allow
or cause any sounds or odours to emanate from the Premises which are
objectionable in the Landlord' sole opinion;
f) from time to time or upon request of Landlord make such renovations and
replacements to the improvements, fixtures, furnishings, chattels and
decorations in and of the Premises as may be necessary in order that same
will be of first class quality and the Premises shall always be suitable
for the proper operation of the office business required to be carried on
therein, and in so doing shall obtain the consent of the Landlord wherever
required under the Lease;
g) upon written notice by Landlord immediately cease and refrain from doing
any advertisement or other publicity which in the absolute discretion of
Landlord tends to lower the character, standing or reputation of the
Building or may, in the absolute discretion of Landlord, negatively affect
the reputation of the Landlord, Building or any tenants thereof or which,
in the absolute discretion of Landlord, create confusion in the public or
induce the public in error;
h) not do, or permit anything to be done on or about the Premises or the
Building which may injure or obstruct the rights of Landlord, or of other
tenants or occupants of the Building, or of owners or occupants of
adjacent on contiguous property, or do anything on or about the Premises
or the Building or bring or keep anything therein which will in any way
conflict with the regulations of the Fire, Police, or Health departments
or with the rules, regulations, by-laws or ordinances of any governmental
authority having jurisdiction over the Premises and/or the Building, all
of which Tenant undertakes to abide by and conform to;
i) install and maintain at its cost such fire protection equipment including,
without limitation, emergency lighting as is deemed reasonably necessary
or desirable by Landlord or any governmental or insurance body, and if so
required by Landlord or any such body Tenant shall appoint a warden to
coordinate with the fire protection facilities and personnel of Landlord;
j) conduct no activity or exhibition having the effect in the absolute
discretion of Landlord or unduly congesting a corridor, or any other
activity considered offensive of improper by Landlord, shall be permitted
or tolerated by Tenant in or about the Premises or the Building, and no
sign, advertisement, notice, awning or electrical display shall be placed
on any part of the outside or inside of the Premises and/or the Building,
or in any area near the same, except with the written consent of Landlord.
Landlord shall have the right in its absolute discretion to enter into the
Premises and the Building and to remove and/or eliminate anything not in
conformity herewith.
Section 9.03 Compliance with and Observance of Law
a) The Tenant will comply with the statutes, regulations, ordinances or other
governmental requirements relating to its ability to enter into and comply
with this Lease.<PAGE>
b) The Tenant will comply at all times with all laws, by-laws, regulations
and ordinances of all applicable governmental or quasi-governmental
authorities which pertain to the Premises, the Tenant's use of the
Premises, the conduct of business in the Premises, or the doing of work on
or in the Premises. The Tenant is not required, however, to remedy work
done by the Landlord in contravention of or without the permits required
by law.
Section 9.04 Energy Conservation
The Tenant will comply with reasonable requests of the Landlord for
conservation of energy, and will pay its Proportionate Share of the costs of
acquiring and installing energy conservation equipment and systems for the
Building.
Section 9.05 Environmental Assessment of Premises
For the purposes of this Section:
"Environmental Assessment": means any evaluation, examination, assessment,
study or test performed by the Landlord or conducted at the Landlord's request
in connection with the environmental conditions of the Premises.
"Environmental Liability": means any and all claims, actions, demands, damages,
liabilities, fines, costs and expenses arising out of or in connection with any
and all non-compliance by the Tenant, insofar as environmental provisions are
concerned, with any federal, provincial or municipal statute, law, by-law,
regulation, order, rule, directive, decision or the like adopted or rendered by
any governmental, quasi-governmental, administrative, judicial or regulatory
authority.
"Hazardous Substances": means any contaminant, pollutant, dangerous or
hazardous or toxic substance, liquid or solid or industrial waste as defined in
or pursuant to any federal, provincial or municipal, statute, law, by-law,
regulation, order, rule directive, decision or the like adopted or rendered by
any governmental, quasi-governmental, administrative, judicial or regulatory
authority.
a) The Tenant shall, at any time during the Term and any extension or renewal
thereof and upon prior verbal or written notice, provide the Landlord or
any employee, servant or agent of the Landlord with access to the Premises
for the purpose of conducting an Environmental Assessment of the Premises.
b) In the event that:
i. the Environmental Assessment referred to in Section 9.05(a) hereof
indicates a previous and/or on-going or potential release, use, leak,
deposit, addition, emission, discharge, generating, refining,
treating, transportation, transfer, storage, handling, disposal,
production or processing of Hazardous Substances on the Premises, not
in strict compliance with all federal, provincial or municipal
statute, law, by-law, regulation, order, rule, directive, decision or
the like adopted or rendered by any governmental, quasi-governmental,
administrative, judicial or regulatory authority; or
ii. the Tenant received notice, written or otherwise, from any federal,
provincial or municipal statute, law, by-law, regulation, order,
rule, directive, decision or the like adopted or rendered by any
governmental, quasi-governmental, administrative, judicial or
regulatory authority, has been, may have been, is about to be
committed or is continuing on the Premises.
The Tenant shall immediately, upon receiving the Landlord's notice pursuant to
Section 9.05(b)(i) hereof or any notice referred to in Section 9.05(b)(ii)
hereof,
iii. take and carry out with all due diligence all the necessary measures,
in strict compliance with all applicable laws, to prevent any
potential or stop any on-going release, use, leak, deposit, addition,
emission, discharge, generating, refining, treating, transportation,
transfer, storage, handling, disposal, production or processing of
Hazardous Substances on the Premises, and
iv. take and carry out with al due diligence all remediation measures to
remedy any previous, potential or on-going release, use, leak,
deposit, addition, emission, discharge, generating, refining,
treating, transportation, transfer, storage, handling, disposal,
production or processing of in strict compliance with all federal,
provincial or municipal statute, law, by-law, regulation, order,
rule, directive, decision or the like adopted or rendered by any
governmental, quasi-governmental, administrative, judicial or
regulatory authority.
c) Upon the expiry of the Term or any sooner termination of the Lease, the
Tenant shall, at its own cost and expense and in strict compliance with
all applicable laws, immediately take and carry out with all due diligence
any and all measures to fully and completely remove from the Premises any
and all Hazardous Substance as well as any container, tank or the like or
any other material or object having been used or having served in
connection with the Hazardous Substances.<PAGE>
d) If the Tenant fails to immediately take and carry out with all due
diligence all the necessary measures and/or remediation measures referred
to in Sections 9.05(b) and/or 9.05(c) hereof, the Landlord may, without
prejudice to any other rights, remedies or recourses it may have, take
such measures referred to in Section 9.05(b) and (c) hereof and charge the
cost thereof to the Lessee plus a fifteen percent charge of the total
costs for the Landlord's administrative charge. Nothing in this Lease
shall be construed so as to obligate or require the Landlord to take any
measures for which the Tenant is responsible hereunder. The Landlord may
supervise any measures taken by the Tenant in or to the Premises and the
Tenant shall pay to the Landlord, upon demand, all reasonable costs
incurred by the Landlord with respect to such supervision.
e) The Tenant shall, from and after the Commencement Date, assume any and all
Environmental Liability relating to the Premises, including, but not
limited to, any liability for the clean-up of any Hazardous Substances on
or flowing or otherwise escaping from the Premises.
f) The Tenant shall indemnify and save the Taxpayer harmless from all losses,
claims, actions, demands, liabilities, fines, costs and expenses arising
out of or in connection with any and all Environmental Liability relating
to the Premises from and after the Commencement Date. The obligations
referred to in this Section 9.05 shall survive the expiration or sooner
termination of this Lease.
ARTICLE X - INSURANCE AND INDEMNITY
Section 10.01 Tenant's Insurance
a) The Tenant will maintain the insurance described below throughout the Term
and any period when it is in possession of the Premises, and each policy
of that insurance will name, as insureds, the Tenant, the Landlord (both
in its capacity as Landlord and hypothecary creditor), the Owners and the
Mortgagee as their respective interests may appear. The insurance which
the Tenant is required to maintain is as follows:
i. all risks (including flood) property insurance in an amount of at
least ninety percent (80%) of the full replacement cost, insuring
1) all property owned by the Tenant, or for which the Tenant is
legally liable, or installed by or on behalf of the Tenant, and
located within the Building including, but not limited to,
fittings, installations, alterations, additions, partitions, and
all other leasehold improvements, and
2) the Tenant's inventory, machinery, furniture, trade fixtures and
moveable equipment;
ii. public liability and property damage insurance including personal
injury liability, contractual liability, non-owned automotive
liability, employers liability, and owners' and contractors'
protective insurance coverage, with respect to the Premises and the
Tenant's use of the Common Elements, with coverage including the
activities and operations conducted by the Tenant and any other
Person on the Premises and by the Tenant and any other Person
performing work on behalf of the Tenant and those for whom the Tenant
is in law responsible, in any other part of the Building. These
policies will
1) be written on a comprehensive basis with inclusive limits of at
least Two Million Dollars ($2,000,000) per occurrence for bodily
injury for any one or more Persons, or property damage, (but the
Landlord, acting reasonably, or the Mortgagee, may require
higher limits from time to time), and
2) contain a severability of interests clause and cross liability
clauses; and
iii. any other form of insurance and with whatever higher limits the
Tenant, the Landlord, acting reasonably, or the Mortgagee requires
from time to time, in form, in amounts and for risks against which a
prudent tenant would insure.
iv. Tenant's legal liability for full replacement cost of the Premises.
b) The policies specified under Sections 10.01(a)(i), 10.01(a)(ii) and
10.01(a)(iii) will contain the Mortgagee's standard mortgage clause and
may have reasonable deductibles of up to three percent (3%) of the amount
insured. If there is a dispute as to the amount of the full replacement
cost, the Landlord will determine it.
c) The policies specified under Sections 10.01(a)(i), 10.01(a)(ii) and
10.01(a)(iii) will contain a waiver of any subrogation rights which the
Tenant's insurers may have against all and any of the Landlord, the
Owners, the Emphyteutic Lessors and the Mortgagee and those for whom all
and any of them are or is in law responsible, whether the damage is caused
by their act, omission or negligence.
d) All policies will
i. be taken out with insurers acceptable to the Landlord;
ii. be in a form satisfactory to the Landlord;
iii. be non-contributing with, and will apply only as primary and not
excess to any other insurance available to all and any of the
Landlord, the Owners and the Mortgagee;<PAGE>
iv. not be invalidated as respects the interests of all and any of the
Landlord, the Owners, the Emphyteutic Lessors (if any), and the
Mortgagee by reason of any breach or violation of warranties,
representations, declarations or conditions contained in the
policies; and
v. contain an undertaking by the insurers to notify the Landlord, the
Owners and the Mortgagee in writing not less than thirty (30) days
before any material change, cancellation, or termination.
e) The Tenant will deliver certificates of insurance in the form satisfactory
to the Landlord, duly executed by the Tenant's insurers forty-eight (48)
hours before entering the premises evidencing that the required insurance
is in force, or, if required by the Landlord or the Mortgagee, the Tenant
will deliver certified copies of each insurance policy as soon as possible
after the placing of the insurance. No review or approval of any
insurance certificate or insurance policy by the Landlord derogates from
or diminishes the Landlord's rights under this Lease.
Section 10.02 Increase in Insurance Premiums
The Tenant will comply promptly with the loss prevention recommendations of the
Landlord's insurer, pertaining to the Premises or the Building. If the
occupancy of the Premises, the conduct of the business in the Premises, or
anything done or omitted by the Tenant results in an increase in premiums for
the insurance carried by the Landlord with respect to the Building, the Tenant
will pay the increase to the Landlord immediately on demand. In determining
whether the Tenant is responsible for increased premiums and the amount for
which the Tenant is responsible, a written document to that effect prepared by
the Landlord's insurers shall be conclusive evidence.
Section 10.03 Cancellation of Insurance
The Tenant will not do or permit anything to be done that results in the
cancellation or threatened cancellation or the reduction of coverage under, or
threatened reduction of coverage, under any insurance policy on the Building or
any part of it.
Section 10.04 Loss or Damage
Except for gross negligence or wilful misconduct of a Released Person (as
hereinafter defined), none of the Landlord, the Owners, the Emphyteutic Lessors
or the Mortgagee (collectively and individually "Released Persons") is liable
for damage to property of the Tenant or of others located on the Premises or
elsewhere, nor will they be responsible for disturbance of enjoyment of the
Premises or for loss of damage to, or loss of use of property of the Tenant or
others from any cause, whether or not it results from the negligence or
misconduct of a Released Person, its employees, servants, agents, contractors,
any Person for whom a Released Person is responsible in law or any Person,
another tenant or a Released Person allows or tolerates to use or to have
access to the Building or Premises. Without limiting the general intent of the
previous sentence, except for gross negligence or wilful misconduct of a
Released Person, no Released Person is liable for damage to property resulting
from fire, explosion, falling plaster, steam, gas, electricity, water, rain,
flood, snow or leaks from any part of the Premises or the Building or from
pipes, appliances, plumbing works, roof or subsurface of any floor or ceiling,
or from the street or any other place, or by dampness or by any other cause and
no Released Person is liable for damage or inconvenience caused by other
tenants or Persons allowed or tolerated by a Released Person or another tenant
to use or to have access to the Building or Persons in the Building or by
occupants of property adjacent to the Building, or the public, or caused by
construction or by any private,public, or quasi-public work, or by an
interruption, lessening or failure to supply any Utilities, or on account of
the making of grosses reparations, alterations, repairs, improvements or
structural changes to the Building, or any thing or service therein or thereon
or contiguous thereto. All property of the Tenant or any other Person kept or
stored in the Premises shall be so kept or stored at the risk and peril of the
Tenant only and the Tenant releases the Released Persons and agrees to
indemnify the Released Persons and save them harmless from any claims arising
out of any damage to the same, including, without limitation, any subrogation
claims by insurers.
Except for gross negligence or wilful misconduct of the Landlord, the Landlord
shall not be liable for any damage suffered by the Tenant should any delay in
the completion of the Premises or the Landlord's Work in any way delay or
inconvenience the occupation or operation thereof or the enjoyment of the
Building or accessories or services.
Except for gross negligence or wilful misconduct of the Landlord, the Landlord
shall not be responsible for any damages caused to the Tenant by reason of
failure to any equipment or facilities serving the Building or delays in the
performance of any work for which the Landlord is responsible under this Lease.
Section 10.05 Landlord's Insurance
The Landlord may maintain, throughout the Term, in those reasonable amounts,
and with those reasonable deductions that a prudent owner of a building similar
to the Building would maintain, having regard to size, age and location,
a) all risks insurance on the Building (excluding the foundations and
excavations) and the machinery, boilers and equipment contained in it and
owned by the Landlord, or the Owners;
b) public liability and property damage insurance with respect to the
Landlord's operations in the Building; and
c) whatever other forms of insurance the Landlord, the Owners or the
Mortgagee reasonably consider advisable.<PAGE>
This section does not relieve the Tenant from liability arising from or
contributed to by its negligence or its misconduct; no insurable interest is
conferred on the Tenant under any policies of insurance carried by the
Landlord; and the Tenant has no right to receive proceeds of any of those
policies.
Section 10.06 Indemnification of the Released Persons
Despite anything else in this Lease, the Tenant will indemnify the Released
Persons and save them harmless from all loss (including loss of Rent payable by
the Tenant under this Lease), claims, actions, damages, liability and expenses
in connection with loss of life, personal injury, damage to property or any
other loss or injury arising from this Lease, or any occurrence in, on, or at
the Premises, or the occupancy or use by the Tenant of the Premises, or any
part of them, or occasioned wholly or in part by an act or omission of the
Tenant, its officers, invitees, licensees, employees, servants, clients,
agents, contractors or any Person for whom the Tenant is responsible in law or
any Person allowed or tolerated to use or to have access to the Premises or the
Building by the Tenant. However, the Tenant is not required to indemnify the
Released Persons or save them harmless from loss, claims, actions, damages,
liability or expenses when they arise directly from the negligence of the
Released Persons.
ARTICLE XI - MAINTENANCE, REPAIRS AND ALTERATIONS
Section 11.01 Maintenance and Repairs by the Tenant
Subject to Article XII, the Tenant will keep the Premises and all improvements
in on or serving them (including, without restriction, all Premises Work and
Tenant's Work) in first class condition. Notwithstanding Article 1864 of the
Civil Code of Quebec or similar legislation, the Tenant shall at all times
during the Term or any extension or renewal thereof at its own cost and expense
maintain, repair and replace the Premises (including, without restriction, all
Premises Work and Tenant's Work) and shall keep the same and every part
thereof, in good order and condition to a standard consistent with a first
class office building, with the exception only of those repairs which are the
obligations of the Landlord under this Lease. At the expiry or termination of
this Lease, the Tenant will,
a) leave the Premises in the same condition as it was required to keep them
in during the Term.
b) deliver all keys for the Premises to the Landlord at the place then fixed
for the payment of Rent,
c) give to the Landlord the combinations of any locks, safes, and vaults in
the Premises, and (d) comply with Section 11.07(b).
If the tenant fails to carry out any maintenance, repairs, replacement or work
required to be carried out by it under this Lease to the reasonable
satisfaction of the Landlord, the Landlord may at its option carry out such
maintenance, replacement or repairs without any liability for any resulting
damage to the Tenant's property or business. The cost of such work, plus a sum
equal to fifteen percent of such cost representing the Landlord's
administrative charge, shall be paid by the Tenant to the Landlord on demand.
If Tenant demands from Landlord to maintain, repair and replace work required
to be carried out under this Lease and under the Tenant responsibility, the
Landlord may at its option carry out such maintenance, replacement or repairs
without any liability for any resulting damage to the Tenant's property or
business, the cost of such work plus an administrative charge of fifteen
percent of such cost shall be paid by the Tenant to the Landlord on demand.
The Tenant shall without delay notify the Landlord in writing of any damage to,
defect in or malfunction of any water pipe, heating, air conditioning or
ventilating system, or electrical wiring, or other system located in or serving
the Premises, whether or not the maintenance and repair thereof is the
responsibility of the Landlord.
Section 11.02 Approval of the Premises Work
a) The Tenant will not make repairs, alterations, replacements, decorations
or improvements (individually and collectively, "Premises Work") to the
Premises without the Landlord's prior written approval, which approval
will not be unreasonably withheld, if,
i. the Premises Work will equal or exceed the then current standard for
the Building;
ii. adequate plans and specifications are produced;
iii. the Tenant obtains the consents, permits and other governmental
approvals that are required; and
iv. the Tenant provides to the Landlord reasonable assurances that it
will comply with Section 11.02(b).
b) The Premises Work will be performed,
i. by competent workmen whose labour union affiliations are compatible
with others employed by the Landlord and its contractors,
ii. in a good and workmanlike manner,
iii. in accordance with the plans and specifications approved by the
Landlord, and
iv. in accordance with the Landlord's reasonable requirements.<PAGE>
c) The Landlord may require that any maintenance to the Premises, Premises
Work, or improvements installed to benefit the Premises, be performed by
the Landlord at the Tenant's cost if they affect,
i. the structure of the Premises,
ii. the Common Elements, or
iii. any part of the Building outside the Premises. As the work
progresses, the Tenant will pay from time to time to the Landlord, on
demand, the Landlord's cost including architectural and engineering
consultants fees plus an administration fee of fifteen percent of the
total costs.
d) The Tenant must immediately obtain at the end of the Premises Work, one or
more certificates from the Commission de la Sante et de la Securite du
Travail certifying that the Persons who completed the Premises Work, as
the case may be, have complied with all the requirements provided for by
the Loi des Accidents du Travail and by the Loi sur la Sante et la
Securite du Travail and that such Persons are duly registered members and
that they are in good standing at the date of the certificate(s). The
Tenant will remit to the Landlord the certificate(s) upon receipt thereof.
e) In the performance of and contracting for any Premises Work, the Landlord
and the Tenant acknowledge and agree that the Tenant is not and shall be
deemed not to be an agent or mandatory of Landlord.
Section 11.03 Maintenance and Repairs by the Landlord
Subject to Article XII, the Landlord will maintain and repair the Common
Elements as would a prudent owner of a similar building, having regard to size,
age and location but the cost will be included under Section 6.02. The
obligations of the Landlord under this Section 11.03 are subject to the
following exceptions:
a) any occurrence which is not covered by insurance maintained by the
Landlord or the cost of repair or restoration which exceed the proceeds of
such insurance actually received by the Landlord;
b) damage or destruction or expropriation as set out in Article XII, in the
circumstances where the Lease will terminate; and
c) damage or injury caused by or resulting from any negligence, fault,
omission, want of skill, act or misconduct of the Tenant, its officers,
agents, clients, servants, employees, contractors, invitees, licensees or
any Person for whom the Tenant is responsible in law or any Person allowed
or tolerated by the Tenant to use or to have access to the Building or the
Premises.
Section 11.04 Repairs Where the Tenant is at Fault
If the Building or any part of it requires repair, replacement or alteration,
a) because of the negligence, fault, omission, lack of skill, act or
misconduct of the Tenant or its officers, agents, servants, employees,
contractors, clients, invitees or licensees or any Person for whom the
Tenant is responsible at law or any Person allowed or tolerated by the
Tenant to use or have access to the Building or the Premises.
b) due to the requirements of governmental authorities relating to the
Tenant's conduct of business, or
c) as a result of the Tenant stopping up or damaging the heating apparatus,
water pipes, drainage pipes or other equipment or facilities or parts of
the Building,
The cost of the repairs, replacements or alterations plus a sum equal to
fifteen percent of the cost for the Landlord's administrative charge will be
paid by the Tenant to the Landlord on demand.
Section 11.05 Tenant Not to Overload
The Tenant will not install equipment that overloads the capacity of a utility,
electrical, or mechanical facility in the Premises and will not,
a) bring into the Premises any utility, electrical, or mechanical facility or
service of which the Landlord does not approve, or
b) bring upon the Premises, anything that might damage them or overload the
floors. If damage is caused to the Premises or to the Building by the
act, neglect, fault, lack of skill, or misuse of the Tenant or its
officers, agents, servants, employees, contractors, clients, invitees,
licensees or Persons for whom the Tenant is responsible in law or any
Person allowed or tolerated by the Tenant to use or to have access to the
Building or the Premises or generally any Person having business with the
Tenant, the Tenant will repair the damage, or at the Landlord's option,
pay to the Landlord on demand the cost of repairing the damage plus a sum
equal to fifteen percent of the costs for the Landlord's administrative
charge.
Perimeter walls, division walls and all partition walls shall not be utilized
in any way as a bearing for the storage of goods or merchandise. If said walls
are so used, the Tenant will be held fully responsible for any damages which
may result from such use.<PAGE>
Section 11.06 Installation of Trade Fixtures
a) The Tenant will install only first-class trade fixtures owned by it of a
type usual for its business and in good and sufficient manner, but not so
as to damage or impair the structure or the heating, ventilating, air-
conditioning, plumbing, electrical or mechanical systems or any other
basic systems of the Premises or the Building, nor so as to impair their
good working order.
b) (Moved to Section 17.19(e).
c) In no event will such Guarantee, which the Tenant may wish to give, affect
property which is or may become the Landlord's pursuant to the terms of
this Lease.
d) N/A
e) N/A
f) The Tenant agrees to furnish the Premises with, and to maintain therein at
all times during the Term and any renewal or extension thereof, a
sufficient quantity of inventory, equipment, furniture, trade fixtures and
other effects owned by the Tenant free and clear of any Guarantee, the
value of which charged by the Landlord's moveable hypothec under Section
17.20 hereof will in no event be less than the amount stated in said
Section 17.20
g) (Moved to Section 17.19(f)).
Section 11.07 Removal and Restoration by the Tenant
All Premises Work (including Tenant's Work) done by the Tenant, or by the
Landlord or others for the Tenant (but not the Tenant's trade fixtures) is the
property of the Landlord on affixation or installation, without compensation to
the Tenant. The Tenant will not remove any Premises Work (including any
Tenant's Work) or trade fixtures from the Premises at any time except that:
a) the Tenant may during the Term in the ordinary course of its business and
on obtaining the prior written consent of the Landlord, remove its trade
fixtures if they have become excess for the Tenant's purpose, or the
Tenant substitutes new and similar trade fixtures; and
b) the Tenant shall, at the expiry or earlier termination of the Term, at its
sole cost, removed its trade fixtures in the Premises. The Tenant shall
forthwith at its own expense repair any damage caused or occasioned to the
Premises or Building by such removal. If Tenant fails to remove its trade
fixtures on the expiry or earlier termination of the Term, they will, at
the Landlord's option, become the property of the Landlord without
compensation and may be removed from the Premises and sold or disposed of
by the Landlord in such manner as it deems advisable without any liability
whatsoever vis a vis the Tenant; and
c) the Tenant shall, at the expiration or earlier termination of the Term, at
its sole cost, either remove such of the Premises Work as the Landlord
shall require to be removed, and restore the Premises to Landlord then
current base building standard to the extent required by the Landlord, or
at the Landlord's option, pay to the Landlord the estimated cost of such
removal and restoration as determined by the Landlord, acting reasonably.
In the event the Landlord elects that the Tenant shall perform the
required work, then
i. the Tenant shall submit detailed demolition drawings to the Landlord
for its prior approval, and such work shall be completed under the
supervision of the Landlord,
ii. the Tenant shall, at its expense, repair any damage caused to the
Premises or Building by such removal, and
iii. if the Tenant fails to complete work by the expiry or earlier
termination of the Term the Tenant shall pay compensation to the
Landlord for each day following the expiry or earlier termination of
the Term until the completion of such work, at a rate equal to the
double of the per diem Rent payable during the month preceding the
expiry or earlier termination of the Term, which sum is agreed by the
parties to be the minimum amount of damages suffered by the Landlord
for the loss of use of the Premises and to without prejudice of the
Landlord proving a greater amount of damages and availing itself of
any other recourse or remedy under this Lease, at law or in equity,
including injunctive relief.
Nothing herein contained authorizes the Tenant to complete the aforesaid work
after the expiry or earlier termination of the Term. The Premises Work
required by the Landlord to be removed hereunder, shall upon their removal by
the Tenant pursuant to the provisions of this subsection be deemed to be the
Tenant's property without compensation to the Landlord.<PAGE>
Section 11.08 Tenant to Discharge all Hypothecs
The Tenant will promptly pay all charges incurred by it or on its behalf for
any work, materials or services supplied or done in respect of the Premises so
as to ensure that no hypothec or other encumbrance affects or is registered
against Tenant's assets or against the Building or any part of it or against
the Landlord's or the Owners' interest in the Building, or against the Tenant's
interest in the Lease or Premises. If the Tenant defaults under this section
the Landlord may discharge and radiate the hypothec or other encumbrance by
paying the amount claimed to be due into court or directly to the creditor
having registered a hypothec and the total amount so paid, as well as the costs
and expenses (including legal fees on a solicitor and client basis) incurred as
the result of the registration of the hypothec or other encumbrance, including
the radiation and discharge of the hypothec or other encumbrance, will be paid
by the Tenant to the Landlord on demand.
Section 11.09 Right to Enter and Inspect
The Landlord or any employee, servant or agent of the Landlord shall be
entitled at any time and from time to time to enter and examine the state of
maintenance, repair, decoration and order of the Premises, and all equipment
and fixtures therein or thereon, and otherwise ascertain whether the Tenant is
performing its obligations hereunder; and the Landlord may give notice to the
Tenant requiring that the Tenant perform such maintenance or effect such
repairs or replacements as the Landlord may find necessary from such
examination; the failure of the Landlord to give such notice shall not,
however, relieve the Tenant from its obligations to maintain, repair, decorate
and keep the Premises and appurtenances in good order as required by this
Lease. Nothing in these Lease shall be construed to obligate or require the
Landlord to make any repairs to the Premises but the Landlord shall have the
right at any time to make emergency repairs without notice to the Tenant and
charge the costs thereof to the Tenant plus an administration fee equal to
fifteen percent thereof. Should the Tenant fail to fulfil its obligations
under the present Section, the Landlord may, without prejudice to any of its
other rights and recourses, after having given the Tenant tan (10) days'
written notice of any deficiency, itself, correct such deficiency at the
expense of the Tenant, in which event, the Tenant shall be obliged to reimburse
the sum so expended to the Landlord plus an administration fee equal to fifteen
percent thereof, and the aggregate thereof shall be deemed to be payable by the
Tenant to the Landlord on the date of disbursement of the sum so expended by
the Landlord.
Section 11.10 Entry not Forfeiture
No entry into the Premises or anything done therein by the Landlord pursuant to
a right granted by this Lease shall constitute a breach of any covenant for
quiet enjoyment, or (except where expressed by the Landlord in writing) shall
constitute a repossession or forfeiture, or an actual or constructive eviction.
The Tenant shall have no claim for damages or loss suffered as a result of any
such entry or thing, except in the case of gross negligence or wilful
misconduct by the Landlord in the course of such entry. Moreover, the Landlord
shall in no event be responsible for the acts of negligence of any Persons
providing cleaning services in the Building.
ARTICLE XII - DAMAGE AND DESTRUCTION AND EXPROPRIATION
Section 12.01 Interpretation of Article XII
In this Article:
a) "Damage" means damage (including but not limited to, smoke and water
damage and damage that amounts to destruction that
i. for the purpose of Section 12.02 results from a peril against which
the Landlord is insured, and
ii. for the purpose of Section 12.03 results from any cause, and
"Damaged" has a corresponding meaning;
b) "Expropriated" means expropriated by a governmental authority, or
transferred, conveyed, or dedicated in contemplation of a threatened
expropriation, and "Expropriation" has a corresponding meaning:
c) "Landlord's Work" and "Tenant's Work" means the work described as
Landlord's Work and Tenant's Work respectively, in Schedule "C"; and
d) "Usable" means usable by the Tenant for the purpose contemplated by this
Lease.
Section 12.02 Damage to the Premises
Subject to Section 12.03, if the Premises are Damaged the Landlord will repair
or reconstruct the Premises promptly, to the extent of the Landlord's Work (if
any). If part or all of the Premises is not Usable because of the Damage,
Gross Rent (but not Additional Rent) will abate in the proportion that the Net
Rentable Area of the part of the Premises that is not Usable is to the Net
Rentable Area of the whole of the Premises, from the date of the Damage until
substantial completion of the Landlord's Work.
<PAGE>
When the Landlord notifies the Tenant that it has completed enough of the
Landlord's Work to enable the Tenant to start the Tenant's Work, the Tenant
will complete the Tenant's Work and reopen the whole of the Premises for
operation as soon as possible but in any case within thirty (30) days after the
landlord's notice. No capital allowance, inducement to lease, or other payment
(if any) that was made to the Tenant at the time of, or in connection with the
original construction of the Premises will be payable by the Landlord to the
Tenant. Notwithstanding the foregoing, the Tenant will not be entitled to any
abatement of Gross Rent if the Damage resulted or was occasioned by any act,
fault, misconduct, negligence, omission or lack of skill of the Tenant, its
officers, servants, employees, contractors, invitees, agents, clients or
licensees, or by any Person for whom the Tenant is responsible at law or by any
Person allowed or tolerated by the Tenant to use or to have access to the
Building or the Premises.
Section 12.03 Damage to or Expropriation of the Building
a) Despite anything else in this Lease, if:
i. more than thirty-five percent (35%) of the Total Rentable Area of the
Building is Damaged or Expropriated, whether or not the Premises are
Damaged or Expropriated; or
ii. more than thirty-five percent (35%) of the floor area of the Common
Elements (excluding the Parking Facilities) or more than twenty
percent (20%) of the Parking Facilities is Damaged or Expropriated,
whether or not the Premises are Damaged or Expropriated,
the Landlord may, by written notice to the Tenant within ninety (90) days after
the Damage or Expropriation, terminate this Lease, effective thirty (30) days
after the notice, and all Rent will abate as of the effective date of the
termination. The Tenant will have no claim, action, right of action or any
other demand against the Landlord as a result of or arising from any such early
termination of this Lease.
b) If the Building is Damaged or Expropriated to the extent described in
Section 12.03(a) and the Landlord does not terminate this Lease, the
Landlord will promptly rebuild or repair the Building to the extent of its
obligations under its leases for Rentable Premises but the Landlord may
use plans and specifications and working drawings that are different in
content from those used in the original construction of the Building or
any part of it and the rebuilt or repaired Building may be different in
configuration, size or design from the Building before the Damage or
Expropriation.
c) The Landlord and the Tenant will co-operate with each other if there is an
Expropriation of all or part of the Premises or the Building, so that each
may receive the maximum award that it is entitled to at law. To the
extent, however, that a part of the Building, other than the Premises, is
Expropriated, the full proceeds that are paid or awarded as a result, will
belong solely to the Landlord, and the Tenant hereby irrevocably assigns
to the Landlord any rights that it may have or acquire in respect of the
proceeds or awards and will execute the documents that the Landlord
reasonably requires in order to give effect to this assignment. Whether
the Lease is terminated or not, the Tenant will have no claim, action,
right of action or any other demand against the Landlord as a result or
arising from the Expropriation of all or any part of the Building.
Section 12.04 Architect's Certificate
A certificate issued by the Architect will bind the parties concerning any of
the matters that need to be determined under this Article.
ARTICLE XIII - ASSIGNMENT
Section 13.01 Consent Required
a) In this Article "transfer" means,
i. an assignment, sale, conveyance, sublease, disposition or licensing
of this Lease or the Premises, or any part of them, or any interest
in this Lease (whether or not by operation of law) or in a
partnership that is a Tenant under this Lease,
ii. a hypothec, charge or debenture (floating or otherwise) or other
encumbrance of this Lease or the Premises or any part of them or of
any interest in this Lease or of a partnership or partnership
interest where the partnership is a Tenant under this Lease,
iii. a parting with or sharing of possession of all or part of the
Premises, and
iv. a transfer or issue by sale, assignment, bequest, inheritance,
operation of law or other disposition, or by subscription of all or
part of the corporate shares of the Tenant or an "affiliate" (as that
term is defined on the date of this Lease under the Canada Business
Corporations Act) of the Tenant which results in a change in the
effective voting control of the Tenant.
"Transferor" and "Trensferee" have meanings corresponding to the definition of
"Transfer" set out above, (it being understood that for a Transfer described in
Section 13.01(a)(iv) the Transferor is the Person that has effective voting
control before the Transfer and the Transferee is the Person that has effective
voting control after the Transfer).<PAGE>
b) The Tenant will not effect or permit a Transfer without the prior written
consent of the Landlord which consent will not be unreasonably withheld
but shall be subject to the Landlord's right under Section 13.02. except
that despite any other statute or law:
i. without limiting the grounds upon which a Transfer may be refused,
the Landlord may refuse its consent for any of the following reasons
and each of the following constitutes and is deemed to constitute a
serious reason for Landlord to refuse its consent:
1) the length of time since the Commencement Date is less than
twenty-four (24) months;
2) covenants, restrictions, or commitments given by the Landlord to
other tenants or prospective tenants in the Building or to
Mortgagees, the Owners, or other parties regardless of when
given, prevent or inhibit the Landlord from giving its consent
to the Transfer;
3) the Transferee,
A) does not have a history of successful business operation in
the business to be conducted in the Premises,
B) does not have a good credit rating and a substantial net
worth,
C) is not able to finance the Transferee's acquisition of its
interest in the Premises and its operations in the Premises
without a material risk of defaulting under this Lease and
in a manner that will enable the Transferee to carry on
business successfully in the Premises throughout the Term
or
D) is a Person to whom the Landlord would not rent premises in
the Building;
4) there is a history of defaults under commercial leases by the
Transferee, or by companies or partnerships in which the
Transferee or any of its principals, directors, senior officers
or principal shareholders was a director, officer, principal
shareholder or partner at the time of the defaults;
5) the length of time since the previous Transfer is less than
twenty-four (24) months;
6) the length of time remaining unexpired in the Term is less than
eighteen (18) months;
7) the Transfer is a hypothec, charge, or other encumbrance of, or
in respect of, this Lease or the Premises or any part of them;
8) the provisions of Section 13.03(g)(i) are not respected;
9) the Tenant is in default to any of its obligations or covenants
under this Lease;
10) the Landlord has or will have during the next six (6) months
space for rent in the Building or in other building owned by the
Taxpayer or a related Person and situated on Nun's Island;
11) the Transferee is a tenant of the Building;
12) the Landlord does not receive sufficient information from the
Tenant or the Transferee to enable it to make an enlightened
determination concerning the matters set out above; and
ii. the Landlord shall have no liability for any claims, actions,
damages, liabilities, losses or expenses of the Tenant or any
proposed Transferee as a result of the Landlord unreasonably
withholding its consent to any Transfer. The Tenant agrees that its
only remedy shall be to bring an application for a declaration that
the Landlord shall grant its consent to such Transfer.
c) Section 13.01(b) does not apply to
i. a Transfer that occurs on the death of the Transferor, or
ii. a Transfer described in Section 13.01(a)(iv) which occurs when the
Tenant is a corporation whose shares are traded and listed on a stock
exchange in Canada or the United States or is a subsidiary of such a
corporation.
However, if after such a Transfer the Tenant fails to satisfy the
Landlord, (who is to act reasonably) that there will be continuity or
improvement of the business practices and policies of the Tenant that
existed before the Transfer, the Landlord may, at any time after the
Transfer, until sixty (60) days after the Tenant notifies the
Landlord in writing of the Transfer, notify the Tenant of its
dissatisfaction and a default of Section 13.01(b) will be considered
to have occurred as of the date of the Landlord's notice.<PAGE>
d) When a Transfer is consented to by the Landlord, the Tenant must complete
the same within thirty (30) days of Landlord's consent and at the exact
terms and conditions disclosed to Landlord. Should such Transfer not be
fully completed within the aforementioned delay, Landlord's consent will
automatically lapse and the Tenant shall be required to apply anew for
Landlord's consent and the provisions of this Article XIII shall again
apply to such Tenant's request and proposed Transfer.
Section 13.02 Landlord's Right to Terminate
If the Tenant intends to effact a Transfer, the Tenant shall give prior notice
to the Landlord of such intent specifying the identity of the Transferee,
the type of Transfer contemplated, the portion of the Premises affected
thereby and the financial and other terms of the Transfer, and shall
provide such financial, business or other information relating to the
proposed Transferee and its principals as the Landlord or any Mortgagee
requires, together with copies of any documents which record the
particulars of the proposed Transfer. Notwithstanding Article 1871 of the
Civil Code of Quebec or similar legislation, the Landlord shall, within 30
days after having received such notice and all requested information,
notify the Tenant either that:
a) it consents or does not consent to the Transfer in accordance with the
provisions and qualifications of this Article XIII;
b) it elects to terminate this Lease as to the whole or part, as the case may
be, of the Premises affected by the proposed Transfer, in preference to
giving such consent.
If the Landlord elects to terminate this Lease (as to the whole or part) it
shall stipulate in its notice the termination date of this Lease, which date
shall be no less than 30 days nor more than 90 days following the giving of
such notice of termination. If the Landlord elects to terminate this Lease (as
to the whole or part), the Tenant shall notify the Landlord within 10 days
thereafter of the Tenant's intention either to refrain from such Transfer or to
accept termination of this Lease as to the whole or the portion of the Premises
in respect of which the Landlord has exercised its rights. If the Tenant fails
to deliver such notice within such 10 days or notifies the Landlord that it
accepts the landlord's termination, this Lease will as to the whole or affected
part of the Premises, as the case may be, be terminated on the date of
termination stipulated by the Landlord in its notice of termination. If the
Tenant notifies the Landlord within the said 10-day delay that it intends to
refrain from such Transfer, then the Landlord's election to terminate this
Lease shall become void. In any event, the Tenant shall have no claim, action,
right of action or any other demand against the Landlord by reason of the
choice of the latter to put an end to the Lease, in accordance with the
provisions of the present Section.
Section 13.03 Terms and Conditions Relating to Consents
The following terms and conditions apply in respect of a consent given by the
Landlord to a Transfer:
a) the consent by the Landlord is not a waiver of the requirement for consent
to subsequent Transfers;
b) if there is a permitted Transfer, the Landlord may collect rent from the
Tranferee and apply the next amount collected to the Rent payable under
this Lease but no acceptance by the Landlord of rent or other payments by
a Transferee is.
i. a waiver of the requirement for the Landlord to consent to the
Transfer,
ii. the acceptance of the Transferee as Tenant, or
iii. a release of the Tenant from its obligations under this Lease;
c) the Transferee shall not under any circumstance make any advance payment
of any amount to the Tenant;
d) any Transferee that is a sub-tenant shall for ever waive any right it may
have to exercise any of the rights and remedies of the Tenant against the
Landlord;
e) the Transferor, unless the Transferee is a sub-tenant of the Tenant, will
retain no rights under this Lease in respect of obligations to be
performed by the Landlord or in respect of the use or occupancy of the
Premises after the Transfer;
f) the Tenant and the Transferee will execute an agreement directly with the
Landlord agreeing that the Transferee be bound by this Lease as if the
Transferee had originally executed this Lease as Tenant and the
Transferor, notwithstanding any legislation to the contrary, including
without limitation, Article 1873 of the Civil Code of Quebec, shall not be
released of any of its obligations under the Lease but will remain jointly
and severally responsible with the Transferee for the fulfillment of all
obligations of the Tenant under this Lease for the Term and any renewal or
extension thereof, the whole without novation or derogation of any kind,
and without the exception of subrogation under the provisions of Article
1531 of the Civil Code of Quebec or any similar legislation, and if
required by the Landlord, the Transferor will execute any document
required by the Landlord's to further evidence the foregoing;
g) the Landlord's consent to any Transfer shall be subject to the conditions
that:<PAGE>
i. the gross and additional rent payable by the Transferee, calculated
on a square footage basis if the Transfer only affects a part of the
Premises (which, for the purposes of this subsection, shall be
calculated by deducting therefrom, the aggregate amount or value of
all and any incentives whatsoever given or granted to the Transferee
including without restriction, payment, allowance, free rent period
and lease takeover), shall not be at any time during the Transfer
less than the Rent payable by the Tenant under this Lease at the
corresponding time (including any increases provided for in this
Lease); and
ii. if the gross and additional rent to be paid by the Transferee under
such Transfer exceeds at any time during the Transfer the Rent
payable under this Lease at the corresponding time (on a square
footage basis if the Transfer only affects a part of the Premises),
the amount of such excess shall be paid by the Tenant to the landlord
in addition to all Rent payable under this Lease, and such excess
rent shall be deemed to be further Additional Rent. If the Tenant
receives from any Transferee, either directly or indirectly, any
consideration other than rent for such Transfer, either in the form
of cash, goods or services (other than the proceeds of any financing
as the result of t Transfer involving a mortgage, charge or similar
security interest in this Lease) the Tenant shall forthwith pay to
the Landlord an among equivalent to such consideration The Tenant
and the Transferee shall execute any document required by the
Landlord to give effect to the foregoing terms.
h) any documents relating to a Transfer or the Landlord's consent will be
prepared by the Landlord or its attorneys and all of the legal costs of
the Landlord together with a reasonable administration charge of at least
Two Hundred and Fifty Dollars ($250.00) will be paid to the Landlord by
the Tenant on demand and the Landlord and Tenant acknowledge, covenant and
agree that the foregoing amounts constitute reasonable costs and expenses
payable to the Landlord in relation with the foregoing;
i) if this Lease is repudiated, disaffirmed, disclaimed, surrendered (except
with the consent of the landlord) or terminated by a Transferee, by any
trustee in bankruptcy of a Transferee, or by a court representative, the
original Tenant named in this Lease or any Transferee (except the bankrupt
or insolvent Transferee) will be considered, upon Landlord's notice (which
the Landlord may elect to give to the Tenant within thirty (30) days of
the repudiation, disaffirmation, disclaimer, surrender or termination), to
have entered into a lease (the "Remainder Period Lease") with the
Landlord, containing the same terms and conditions as this Lease modified,
however, by increasing the Gross Rent based on the formula in Section
13.02(g) (it being agreed that the commencement date of the Remainder
Period Lease will be considered to be the date of the repudiation,
disaffirmation, disclaimer, surrender or termination, and the expiration
date of the Remainder Period Lease shall be the date on which this Lease
would have expired had the repudiation, disaffirmation, disclaimer,
surrender or termination not occurred) and with the exception that there
will be no allowance, incentive or other payment by Landlord, no rent free
period and that there will be no improvement or construction work by
Landlord;
j) any option or other right of Tenant to renew or extend the Term, shall
automatically and without any other document or notice become absolutely
null and void and of no further effect upon the occurrence of any Transfer
even though the Tenant had notified the Landlord in writing before the
occurrence of the Transfer of its exercise of its option or other right to
renew or extend the Term.
Section 13.04 No Advertising of the Premises
The Tenant will not offer or advertise the whole or any part of the Premises or
this Lease for the purpose of a Transfer and will not permit a broker or other
Persons to do so.
Section 13.05 Sales and Other Dispositions by the Landlord
If the Landlord sells, leases or otherwise transfers or disposes of the
Building or any part of it, or if the Landlord assigns this Lease or any
interest of the Landlord under it, to the extent that the purchaser, lessee,
transferee or other disposee agrees with the Landlord to assume the Landlord's
obligations under this Lease, the Landlord will be forever released from those
obligations.
ARTICLE XIV - ACCESS AND ALTERATIONS
Section 14.01 Right of Entry
a) It is not a breach of any obligation for quit enjoyment if the Landlord
enters the Premises at reasonable times after twenty-four (24) hours
notice, (but if the landlord, determines there is an emergency no notice
is required),
i. to make works, repairs, alterations, improvements or additions to the
Premises or the Building or adjacent property, or
ii. to excavate land adjacent to or subjacent to the Premises, and the
Landlord may take material into and on the Premises for those
purposes.
This right extends to (and is not limited to) the pipes, conduits, wiring,
ducts, columns and other installations in the Premises. Rent will not abate or
be reduced while the repairs, alterations, improvements or additions are being
made and the Landlord is not liable for any damage to the property of the
Tenant or others located on the Premises as a result of the entry regardless of<PAGE>
b) The Landlord may, during the Term and any extension or renewal thereof
enter the Premises at reasonable times to show them to prospective
purchasers, tenants or Mortgagees. During the Twelve (12) months before
the expiry of the Term, the Landlord may display on the Premises "For
Rent" or "For Sale" notices of reasonable size and number, and in
reasonable locations.
c) If the Premises are not open when, for any reason, an entry therein is
necessary or permissible, the Landlord may enter the Premises by a key, or
by force, without rendering the Landlord liable therefore and without in
any way affecting the obligations of the Tenant under this Lease.
Moreover, if Tenant decides to change his locks during the Term, he shall
give to Landlord three (3) keys for each lock changed.
ARTICLE XV - STATUS STATEMENT AND SUBORDINATION
Section 15.01 Status Statement
Within ten (10) days after the Landlord requests it from the Tenant, the Tenant
will deliver to the Landlord, on a form supplied by the Landlord, a status
statement or certificate to the Owners, any proposed or actual Mortgagee, or
any proposed purchaser, or other disposee of part or all of the Building and to
the Landlord, stating:
a) that this Lease is in full force and effect, except only for any
modifications that are set out in the statement or certificate;
b) the commencement and expiry dates of the Lease;
c) the date to which Rent has been paid under this Lease and the amount of
any prepaid Rent or any deposits held by the Landlord;
d) that the Gross Rent and the Additional Rent are then accruing under this
Lease or the dates on which each of these will start accruing;
e) that the Premises are free from any construction deficiencies, or if there
are such deficiencies, the certificate will state the particulars;
f) that there is not any uncured default on the part of the Landlord or if
there is a default, the certificate will state the particulars;
g) whether there are any set-offs, defences or counter-claims against
enforcement of the obligations to be performed by the Tenant under this
Lease;
h) with reasonable particularity, details concerning the Tenant's and any
Surety's financial standing and corporate organization; and
i) any other information or statement that the Owners, an actual or proposed
Mortgagee, a proposed purchaser, or other disposee may reasonably require.
Section 15.02 Subordination
a) This Lease is and will remain subordinate to every hypothec, emphyteutic
lease, charge, trust deed, financing, refinancing or collateral financing
and the instruments thereof, as well as the charge resulting from all or
any of them and any renewals or extensions of them from time to time
(collectively, "Encumbrances") against the Premises or the Building and
the Tenant will, on request, subordinate this Lease in the form requested
by the Landlord to any Encumbrance and to all advances made or to be made
on the security of the Encumbrance. The Tenant will also agree to become
the tenant of the holder of any Encumbrance or the Owners.
b) If possession is taken under, or any proceedings are brought for the
foreclosure of, or if a power of sale is exercised or if a taking in
payment is obtained resulting from an Encumbrance the Tenant will become
the tenant to the Person that so takes possession if that Person requests
it and will recognize that Person as the Landlord under this Lease.
c) The form and content of any document effecting the subordination and
recognition provided for in this Section 15.02 will be that required by
the holder of the Encumbrance in each case, and each such document will be
delivered by the Tenant to the Landlord within ten (10) days after the
Landlord requests it.
ARTICLE XVI - DEFAULT
Section 16.01 Default and Remedies
a) An "event of Default" shall occur whenever:
i. the Tenant defaults in the payment of Rent or Sales Taxes and fails
to remedy the default within five (5) days after written notice;<PAGE>
ii. the Tenant commits a breach that is capable of remedy other than a
default in the payment of Rent or Sales Taxes, and fails to remedy
the breach within ten (10) days after written notice that
1) specifies particulars of the breach, and
2) requires the Tenant to remedy the breach (or if the breach would
reasonably take more than ten (10) days to remedy, fails to
start remedying the breach within the ten (10) day period, or
fails to continue diligently and expeditiously to complete the
remedy);
iii. the Tenant commits a breach of this Lease that is not capable of
remedy and receives written notice specifying particulars of the
breach;
iv. a report or statement required from the Tenant under this Lease is
false or misleading except for a misstatement that is the result of
an innocent clerical error;
v. the Tenant or a Transferee or a Person carrying on business in any
part of the Premises becomes bankrupt or insolvent or takes the
benefit of any statute for bankrupt or insolvent debtors or files,
makes or causes to be filed or made, as the case may be, any notice
of intention to file a proposal, any proposal, assignment, plan or
arrangement with, to or in respect of its creditors;
vi. a receiver or receiver and manager or an interim receiver or a
coordinator is appointed for all or a part of the property of the
Tenant, or of another Person carrying on business in the Premises, or
of a Surety;
vii. steps are taken or proceedings are instituted for the dissolution,
winding up or other termination of the Tenant's or the Surety's
existence or the liquidation of their respective assets;
viii the Tenant makes or attempts to make a bulk sale of any of its assets
regardless of where they are situated (except for a bulk sale made to
a Transferee when the Transfer has been consented to by the
Landlord);
ix. the Tenant abandons or attempts to abandon the Premises, or sells or
disposes of property of the Tenant or removes it from the Premises so
that the value of the property of the Tenant on the Premises, charged
by the Landlord's moveable hypothec under Section 17.20 is less than
the amount stated in such Section 17.20;
x. the Premises are vacant or unoccupied for two (2) consecutive days
during the Business Hours or for five days during the Business Hours
in any Rental Year;
xi. the Tenant effects or attempts the effect a Transfer that is not
permitted by this Lease;
xii. this Lease or any of the Tenant's assets on the Premises are taken or
seized under a writ of execution, an assignment, pledge, charge,
debenture, or other security instrument;
xiii the Tenant consents to or attempts to grant a Guarantee, as defined
in Section 11.06, without having previously obtained the Landlord's
written consent or without having obtained from the holder of such
Guarantee, an assignment of its priority of rank and a subordination
of its rights in favour of the Landlord;
xiv. the Tenant or a Transferee, or a Person carrying on business in a
part of the Premises, or a Surety, or any coordinator, monitor,
receiver, receiver and manager, interim receiver or trustee in
bankruptcy of or in respect of a Tenant, or a Transferee, or a Person
carrying on business in a part of the Premises, or a Surety
disaffirms, disclaims, repudiates, terminates or in any way modifies
or attempts to disaffirm, disclaim, repudiate, terminate or modify
this Lease or any of the terms or conditions hereof (including
without limitation payment of Rent);
xv. any preliminary measure is taken or instituted for the exercise of
secured or hypothecary rights against or in respect of this Lease,
the Tenant, a Transferee, a Surety or any of the Tenant's,
Transferee's or Surety's assets or property, including without
limitation, any preliminary measure taken or instituted by way of the
sending of a notice of intention to enforce security pursuant to the
Bankruptcy and Insolvency Act (Canada) or the filing and or
registration of a notice of intention to exercise a hypothecary right
pursuant to the Civil Code of Quebec or any other legislation of
similar effect;
xvi. if an Event of Default as defined in this Section occurs with respect
to any lease or agreement under which the Tenant occupies other
premises of the Taxpayer or rents other premises from the Taxpayer.
b) Notwithstanding any provision of law to the contrary, including without
restriction, Article 1595 of the Civil Code of Quebec, upon the occurrence
of any Event of Default, the full amount of the current month's and the
next three (3) months' instalments of Gross Rent and Additional Rent will
become due and payable, and, at the option of the Landlord, this Lease
shall be ipso facto terminated without legal proceedings and the Landlord,
to the extent permitted by law, may immediately repossess the Premises and
expel all Persons from the Premises and may remove all property from the
Premises, sell or dispose of it as the Landlord considers appropriate, or
store it in a public warehouse or elsewhere at the cost of the Tenant, all
without service of notice, without legal proceedings, and without
liability for loss or damage and wholly without prejudice to the rights of<PAGE>
default by the Tenant of its obligations or agreements under this Lease or
of any term or condition of this Lease, and wholly without prejudice to
the rights of the Landlord to recover from the Tenant damages for loss of
Rent suffered by reason of this Lease having been prematurely terminated.
c) Should an Event of Default occur and should the Landlord have instituted
proceedings to cancel this Lease, notwithstanding Article 1883 of the
Civil Code of Quebec or similar legislation, the Tenant will not have any
right to prevent such cancellation by remedying its default or defaults
subsequent to the institution of such legal proceedings.
d) Notwithstanding any provision hereof or any custom or legislation to the
contrary, during the continuance of an Event of Default, the Landlord may
without liability cease furnishing the Premises with any services and
Utilities.
Section 16.02 Right to Terminate or Relet
a) If the Landlord does not exercise its right under Section 16.01 to
terminate this Lease, it may nevertheless relet the Premises or a part of
them for whatever term or terms (which may be for a term extending beyond
the Term) and at whatever Rent and upon whatever other terms, covenants
and conditions the Landlord considers advisable. On each such reletting,
the Rent received by the landlord from the reletting will be applied,
first to the payment of amounts owed to the Landlord that are not Rent;
second to the payment of any costs and expenses of the reletting including
brokerage fees and legal fees, (on a solicitor and client basis), and the
costs of any alterations or repairs needed to facilitate the reletting;
third to the payment of Rent; and the residue if any will be held by the
Landlord and applied in payment of Rent as it becomes due and payable. If
Rent received from reletting during a month is less than that to be paid
during that month by the Tenant, the Tenant will pay the deficiency, which
will be calculated and paid monthly in advance on or before the first day
of every month. No repossession of the Premises by the Landlord will be
construed as an election on its part to terminate this Lease unless a
written notice of termination is given to the Tenant. If the Landlord
relets without terminating it may afterwards elect to terminate this Lease
for the previous default. If the Landlord terminates this Lease for a
default, it may recover from the Tenant damages it incurs by reason of the
default, including the cost of recovering the Premises, legal fees (on a
solicitor and client basis) and including the worth at the time of the
termination, of the excess, if any, of the amount of Rent required to be
paid under this Lease for the remainder of the Term over the rental value,
at the time, of the Premises for the remainder of the Term, all of which
amounts will be due immediately and payable by the Tenant to the Landlord.
b) If the Landlord terminates the Lease or repossesses the Premises for a
default after the expiration of two (2) or more twelve (12) month Rental
Years, the annual Rent, for the purpose of calculating the Landlord's
damages will be considered to be equal to the highest annual Gross Rent
that was payable for those expired Rental Years, plus Additional Rent. If
the termination or the re-entry takes place before the expiry of two (2)
twelve (12) month Rental Years, the annual Rent, for the purpose of
calculating the Landlord's damages will be considered to be equal to
twelve (12) times the monthly payment of the highest Gross Rent that was
payable, plus Additional Rent.
Section 16.03 Expenses
In the event that the Landlord retains the services of a Solicitor to enforce
the fulfilment by the Tenant or any Transferee of any of the obligations
undertaken by it or them under the terms hereof, then, and in such event, the
Landlord shall be entitled to demand jointly and severally from the Tenant and
the Transferee (when applicable) in addition to and without prejudice to
judicial costs otherwise recoverable, and whether or not judicial proceedings
are in fact instituted, an indemnity equal to fifteen percent of the amounts
otherwise owing to the Landlord by the Tenant and\or the Transferee (if
applicable), such indemnity to indemnify the Landlord for additional
administrative expenses incurred in connection with the enforced fulfilment of
the obligations of the Tenant or the Transferee hereunder.
Section 16.04 Landlord May Cure the Tenant's Default
If the Tenant defaults in the payment of money that it is required under this
Lease to pay to a third party, the landlord after giving (5) days; notice in
writing to the Tenant, may pay all or part of the amount payable. If the
Tenant defaults under this Lease (except for a default in the payment of Rent)
the Landlord may, after giving reasonable notice (it being agreed that forty-
eight (48) hours is reasonable notice of a default of Section 10.01) or,
without notice in the case of an emergency, perform or cause to be performed
all or part of what the Tenant failed to perform and may enter upon the
Premises and do those things that it considers necessary for that purpose. The
Tenant will pay to the Landlord on demand, the landlord's expenses incurred
under the Article XVI plus an amount equal to fifteen percent of those expenses
for the Landlord's administrative charge. The Landlord will have no liability
to the Tenant for loss or damages resulting from its action or entry upon the
Premises.
Section 16.05 Application of Money
The Landlord may apply money received from or due to the Tenant against money
due and payable under this Lease. The Landlord may impute any payment made by
or on behalf of the Tenant towards the payment of any amount due and owing by
the Tenant at the date of such payment regardless of any designation or
imputation by the Tenant.<PAGE>
Section 16.06 Remedies
a) The remedies under this Lease are cumulative. No remedy is exclusive or
dependent upon any other remedy. Any one or more remedies may be
exercised generally or in combination. The specifying or use of a remedy
under this Lease does not limit rights to use other remedies available at
law generally.
b) Except as provided in Section 13.01(b)(ii) hereof, any breach by the
Landlord under this Lease can be adequately compensated in damages and the
Tenant agrees that its only remedy to enforce its rights under this Lease
is an action for damages.
ARTICLE XVII - MISCELLANEOUS
Section 17.01 Rules and Regulations
The Landlord may adopt Rules and Regulations acting reasonably and they may
differentiate between different types of businesses. Each Rule and Regulation,
as revised from time to time, forms part of this Lease as soon as the Rule,
Regulation or revision is made known to the Tenant. The Tenant will comply and
will ensure that its officers, agents, employees, servants, contractors,
visitors, clients, licensees, any Person for whom the Tenant is responsible at
law and any Person permitted or tolerated by the Tenant to be on the Building
or the Premises comply with each Rule and Regulation and each revision of it.
The provisions of the Rules and Regulations shall not be and shall not be
deemed to limit any covenant or provisions of this Lease to be performed or
fulfilled by the Tenant. The landlord is not responsible to the Tenant for the
non-observance of a Rule or Regulation or of the terms, obligations or
conditions of any other lease of Rentable Premises.
Section 17.02 Overholding - No Tacit Renewal
Tenant agrees to give written notice to Landlord of its intention to vacate the
Premises at the expiry of the Term at least twelve (12) months prior to the
said expiry. In default of such notice by Tenant, Landlord shall have the
right to renew this Lease for a further period of twelve (12) months under the
same terms and conditions of the lease in force on the date of termination,
with the exception that the Gross Rent payable with respect to the last Rental
Year immediately preceding the renewal shall be increased by fifty percent
(50%), provided the Landlord gives written notice of such renewal to Tenant at
least thirty (30) days before the expiry of the Term. If neither of the above
notices is given, this Lease shall terminate on the expiry of the Term, and any
continued occupation of the Premises by Tenant after the termination date shall
be presumed to be against the will of Landlord and shall not have the effect of
extending or renewing this Lease for any period of time and there will be no
tacit renewal of this Lease, notwithstanding Article 1879 of the Civil Code of
Quebec or other legislation. Landlord may hold the Tenant responsible for all
damages suffered by the Landlord as a result of such holding over and charge
occupation rent to Tenant and the Tenant shall indemnify, hold harmless and
defend Landlord from all claims made by a successor tenant resulting from
Landlord's delay in delivering possession of the Premises to such successor
tenant or Landlord may consider the Tenant as a tenant month to month at a
monthly Gross Rent payable in advance on the first day of each month equal to
twice the amount of Gross Rent for the last month of the Term and otherwise
upon the same terms and conditions as are in this Lease as far as they apply to
a monthly tenancy including the payment of Rent. Nothing herein contained
shall be deemed to waive any right Lessor may have to recover possession of the
Premises upon the expiration or earlier termination of the Term of this Lease
or any renewal thereof.
Section 17.03 Successors
The rights and obligations under this Lease extend to and bind the successors
and assigns of the Landlord and, if Section 13.01 is complied with, the heirs,
executors, administrators and permitted successors and assigns of the Tenant.
If there is more than one Tenant, or more than one Person constituting the
Tenant, each is bound jointly and severally by this Lease.
Section 17.04 Joint Liability
If there is at any time more than one Tenant or more than one Person
constituting the Tenant, their covenants shall be joint and several and shall
apply to each and everyone of them, without the exception of subrogation under
the provisions of Article 1531 of the Civil Code of Quebec or any similar or
succeeding legislation. If the Tenant is or becomes a partnership or other
business association, the members of which are, by virtue of statutory or
general law, subject to personal liability, each Person who is a member, or
shall become a member, of such partnership or other business association, and
each Person who becomes a member or their respective successors, is jointly and
severally liable as Tenant under this Lease and will continue to be so liable
after that Person ceases to be a member of the partnership or other business
association or a successor of the partnership or other business association and
after the partnership or other business association ceases to exist, the whole
without the exception of subrogation under the provisions of Article 1531 of
the Civil Code of Quebec or any similar or succeeding legislation.
Section 17.05 Waiver
The waiver by the Landlord or the Tenant of a default under this Lease is not a
waiver of any subsequent default. The Landlord's acceptance of Rent after a
default is not a waiver of any preceding default under this Lease even if the
Landlord knows of the preceding default at the time of acceptance of the Rent.
No term, covenant or condition of this Lease will be considered to have been
waived by the Landlord or the Tenant unless the waiver is in writing. The
Tenant waives any statutory or other rights in respect of abatement, set-off or
compensation in its favour that may exist or come to exist in connection with
Rent.<PAGE>
Section 17.06 Accord and Satisfaction
Payment by the Tenant or receipt by the Landlord of less than the required
monthly payment of Gross Rent is on account of the earliest stipulated Gross
Rent. An endorsement or statement on a cheque or letter accompanying a cheque
or payment as Rent is not an acknowledgement of full payment or an accord and
satisfaction, and the Landlord may accept and cash the cheque or payment
without prejudice to its right to recover the balance of the Rent or pursue its
other remedies.
Section 17.07 Brokerage Commission
Any brokerage commission with respect to this Lease transaction or anything
related to it shall be borne exclusively by the Tenant and the Tenant will
indemnify and hold the Landlord harmless from any and all claims and costs,
including all legal fees on a solicitor and client basis, incurred by the
Landlord with respect thereto.
Section 17.08 Force Majeure
Despite the rest of this Lease, if the Landlord or the Tenant is, in good
faith, delayed or prevented from doing anything required by this Lease, because
of a strike; labor trouble; inability to get materials or services; power
failure; restrictive governmental laws or regulations; riots; insurrection;
sabotage; rebellion; war; act of God; or any other similar reason, that is not
the fault of the party delayed, the doing of the thing is excused for the
period of the delay and the party delayed will do what was delayed or prevented
within the appropriate period after the delay. The preceding sentence does not
excuse the Tenant from payment of Rent or the Landlord from payment of amounts
that it is required to pay, in the amounts and at the times specified in this
Lease.
Section 17.09 Notices
Notices, demands, requests or other instruments under this Lease will be
delivered in person or sent by telecopier or registered mail postage prepaid
and addressed.
a) if to the Landlord, JESTA MANAGEMENT CORP., 500 Chemin du Gol, Nuns'
Island, Verdun, Quebec, H3E 1A9, attention: Mr. Elliott Aintabi,
fax:(514)769-8750 and
b) if to the Tenant, at the Premises.
A notice, demand, request or consent will be considered to have been given or
made on the day that it is delivered, or, if mailed, on the third day following
the date of mailing, or, if faxed on the first day following its sending and
acknowledgment of receipt.
The Landlord may notify the Tenant in writing of a change of address and the
address specified in the notice will be considered the address of the Landlord
for the giving of notices under this Lease. If the postal service is
interrupted or substantially delayed, any notice, demand, request or other
instrument will only be delivered in person or by telecopier. A notice given
by or to one Tenant is a notice by or to all of the Persons who are the Tenant
under this Lease.
The Tenant hereby elects domicile at the Premises for all purposes of this
Lease and any legislation.
Section 17.10 Registration
Neither the Tenant nor any Person shall register this Lease or any right of the
Tenant thereunder unless in the form of an extract or summary previously
approved by Landlord and provided that this Lease shall not be presented for
conservation and consultation, but only an extract thereof previously approved
by the Landlord. Should this Lease require to be reexecuted in notarial form
or otherwise to conform to the foregoing, all costs fees and expenses incurred
shall be paid for by the Tenant and the Tenant shall reimburse the Landlord
without delay for all costs, fees and expenses (including without restriction
legal fees) incurred by the Landlord with respect to the foregoing, including
without restriction all costs relating to the registration of the Lease,
Landlord's approval and reexecution of the Lease. If the Building comprises
more than one lot, the Landlord may direct the Tenant as to the lot(s) against
which registration may be effected. The Tenant shall supply one copy of the
said registered summary bearing registration number to the Landlord at the
Tenant's expense forthwith following registration.
In the event that the present Lease is so registered, the Tenant undertakes to
obtain, at its own expense, the radiation of such registration at the latest on
the date of expiration or other termination of the Term hereof.
Should the Tenant fail to obtain such radiation within the aforementioned
delay, the Landlord is hereby appointed by the Tenant, as of the expiration or
other termination of the Term hereof, the irrevocable agent of the Tenant for
the purpose of obtaining, at the Tenant's expanse, the radiation of such
registration.
Section 17.11 Quiet Enjoyment
If the Tenant performs its obligations under this Lease, it may hold and use
the Premises without interference by the Landlord or any other Person claiming
by, through or under the Landlord, subject however to the covenants, terms and
conditions of this Lease.<PAGE>
Section 17.12 No Partnership
Nothing contained in this Lease or as a result of any acts of the parties
hereto will be deemed to create any relationship between the parties other than
that of Landlord, Tenant and, if applicable, Surety.
Section 17.13 No Offer
The Landlord will not be deemed to have made an offer to the Tenant by
furnishing the Tenant with an unexecuted copy of this Lease with particulars
inserted. Notwithstanding that a deposit or the first instalment of Gross Rent
is received by the Landlord when this Lease is received by it for execution, no
contractual or other right will exist between the Landlord and the Tenant with
respect to the Premises until both have executed and delivered this Lease.
Section 17.14 Waivers by the Tenant
The Tenant waives any right which it may have or enjoy at any time pursuant to
Articles 1859, 1861, 1863 (second paragraph) and 1867 of the Civil Code of
Quebec, or any replacement legislation.
Section 17.15 Security Deposit
Tenant shall on or before the execution of this Lease, at the option of
Landlord, either
i. pay to Landlord a deposit in the amount of sixteen thousand four
hundred seventy dollars ($16,470.00) to be held by Landlord as
security for Tenant's performance of its covenants, obligations and
agreements under this Lease. If Tenant shall be in default of any
such covenant, obligation or agreement Landlord may, without notice
to Tenant, appropriate and apply such portions of the security
deposit as Landlord in its sole discretion considers necessary to
compensate it for Rent outstanding or loss or damage suffered by
Landlord arising out of or in connection with such default. Upon
demand of Landlord following any such appropriation, Tenant shall pay
without delay to Landlord an amount sufficient to restore the
original amount of the security deposit; or
a) upon the expiration or sooner termination of this Lease, Landlord may
inspect the Premises and examine any state of non-repair or damage which
Tenant failed to repair in accordance with its obligations under this
Lease, and estimate the cost of repair and restoration thereof. Landlord
may appropriate so much of the security deposit as is equal to all or any
portion of such estimated cost. If Tenant is not otherwise in default of
any of its covenants, obligations or agreements under this Lease, so much
of the deposit as then remains unappropriated by Landlord shall be
returned to Tenant without interest. In the event of a sale, transfer or
assignment of this Lease by Landlord, the Landlord may transfer such
security deposit or so much thereof as shall then remain, to the
purchaser, transferee or assignee and thereupon Landlord shall be released
and discharged from any further liability in connection with such security
deposit, as the case may be.
b) Tenant shall not assign, hypothec or encumber its interest in the security
deposit, and Landlord shall not be bound by and attempted assignment,
hypothec or encumbrance of the security deposit, except in the case of any
permitted Transfer (other than a sub-lease) of this Lease, in which case
Tenant's interest in the security deposit shall be deemed to have been
assigned to such permitted Transferee (other than a sub-lessee) as of the
date of such Transfer.
c) The security deposit shall not be governed by the provisions of Articles
2283 and following and 1299 and following of the Civil Code of Quebec and
such provisions shall have no application with regard to the security
deposit.
Section 17.16 Survival of Obligations
The rights and obligations of the Landlord and the Tenant in respect of
obligations which arose or existed prior to or at the expiry or other
termination of the Term shall survive such expiry or other termination. In
particular and without limitation the expiry or other termination of this Lease
shall not prejudice in any manner Landlord's rights in respect of arrears of
Rent, the right of each party to recover damages in respect of a default by the
other occurring prior to or at the expiry or other termination or the right to
indemnification of the Released Persons in respect of occurrences prior to or
at the expiry or other termination of the Term.
Section 17.17 Relocation of Premises
The landlord shall have the right at any time upon thirty (30) days' written
notice to relocate, the Tenant, at his own costs, to other Rentable Premises in
the Building (the "Relocated Premises") and the following terms and conditions
shall be applicable:
a) the Relocated Premises shall contain approximately the same Net Rentable
Area as the Premises;
b) The Landlord shall provide, at its expense, Premises Work in the Relocated
Premises equal to the standard of the Premises presently occupied by the
Tenant;
c) The Landlord shall pay for the reasonable moving costs (if any) of the
Tenant's trade fixtures and furnishings from the Premises to the Relocated
Premises;<PAGE>
d) The Tenant shall not be entitled to any other compensation than what is
provided in subsections (b) and (c) above;
e) All other terms and conditions of this Lease shall apply to the Relocated
Premises except as are inconsistent with the terms and conditions with
this Section 17.17.
Section 17.18 Parking
If any portion of the Parking Facilities are reserved or designated at any time
by the Landlord for the use of the tenants of the Building and their employees,
the Tenant shall only use and shall ensure that its employees only use that
reserved or designated portion of the Parking Facilities. The Tenant covenants
to pay to the landlord an amount of ten dollars ($10.00) per vehicle (or any
greater amount the Landlord may in its discretion fix from time to time), for
any portion of day a Tenant's vehicle or the vehicle of any of its employees is
parked at a location not comprised in the one reserved or designated by
Landlord for the tenants of the Building and their employees. The foregoing
amount is a liquidated sum representing the minimum damages per vehicle that
the Landlord is deemed to have suffered as a result of the Tenant's failure to
respect the foregoing provisions and is without prejudice to the landlord's
right to recover other damages and to any other rights and remedies of the
Landlord including without restriction injunction or an order for specific
performance in a court of competent jurisdiction. The Landlord is also hereby
authorized to remove any vehicle so parked without further notice and the
Landlord shall not be liable for any damage suffered by the Tenant or any other
Person as a result or on the occasion of a removal and the Tenant shall
indemnify and hold harmless the Landlord against any third party claim,
including a claim by any of its employees, and shall pay to Landlord,
immediately upon demand, the full cost of any such removal. Within ten (10)
days of landlord's written request, Tenant shall furnish in writing to the
Landlord the plate numbers of each vehicle owned or used by the Tenant and each
of its employees and thereafter shall notify in writing the Landlord of any
change with respect to the foregoing within five (5) days thereof. Five (5)
interior parking spaces are included in the rent during the term of this lease.
Section 17.19 Moveable Hypothec
a) As continuing and collateral security for the due and punctual payment of
Rent and all other amounts now owing or which may hereafter become owing
to the Landlord by the Tenant under this Lease, as same may be amended,
renewed, extended or supplemented, and as continuing and collateral
security for the due and punctual performance and fulfilment of all other
obligations, covenants and agreements of the Tenant contained in this
Lease, as same may be amended, renewed, extended or supplemented, the
Tenant hereby hypothecates in favour of the Landlord, with effect as of
and from this date, for the sum of SEVENTY THOUSAND dollars ($70,000.00)
and interest thereon at the Stipulated Rate in force on the date hereof
(being 13 % per annum), calculated semi-annually, not in advance, all of
the rights, title and interests of the Tenant in and to the following
universality (hereinafter referred to as the "Universality"):
i. the universality of all moveable improvements, equipment, machinery,
furniture and trade fixtures of every kind, present and future,
located on or upon the Premises or used directly or indirectly in
connection with the business of the Tenant carried on at the
Premises, including all indemnities or proceeds paid under insurance
contracts or policies pertaining to or covering such moveables.
ii. the universality of all property in stock, raw material, work in
process and inventory, present and future, situated on or upon the
Premises or used directly or indirectly in connection with the
business of the Tenant carried on at the Premises, including all
indemnities or proceeds paid under insurance contracts or policies
pertaining to or covering such moveables.
b) The hypothec herein created in favour of the Landlord shall not constitute
nor be construed as a floating hypothec under Article 2715 of the Civil
Code of Quebec.
c) The security hereby created is without delivery.
d) Upon the occurrence of an Event of Default the security hereby constituted
shall become enforceable and the Landlord shall forthwith be entitled to
exercise any and all of the rights provided for in Chapter V of Title III
of Book VI of the Civil Code of Quebec and in the Code of Civil Procedure
of Quebec.
e) Except for the financing of its operation, the Tenant will not, and will
not permit, to be hypothecated, pledged, charged or encumbered any
inventory, equipment, furniture or trade fixtures which may, from time to
time, be on the Premises, in any manner whatsoever, including, without
limiting the foregoing, by way of a moveable hypothec, trust deed,
security under the Bank Act, conditional sales agreement, consignment
sales agreement, instalment sales agreement, sale with right of redemption
or in any other manner in which movables may guarantee the obligations of
the Tenant, in conformity with federal or provincial legislative
provisions (the "Guarantee).<PAGE>
f) Subject only to the subordination contemplated hereinafter, the moveable
hypothec shall and must constitute and remain at all times a first ranking
charge on all moveable assets charged thereunder and the Tenant hereby
represents an warrants to, and covenants with the landlord that the
aforesaid moveable hypothec shall constitute and remain during the whole
Term and any renewal or extension thereof, a first ranking charge on all
the moveable assets charged thereunder. However, should the Tenant obtain
a bona fide financing for the operation of its business in the Premises
from a Canadian chartered bank or other reputable financial lending
institution acceptable to Landlord acting reasonably (the Tenant's
Lender), the Landlord shall execute, at the cost of the Tenant, a
subordination agreement in favor of such bona fide financing in a form and
contents satisfactory to the Landlord and its legal counsel, provided that
Tenant pays to the landlord all costs incurred in relation thereto,
including without restriction legal costs, and that, no security granted
or to be granted to the Tenant's Lender shall affect or in any manner
whatsoever charge any asset which is or may, under this Lease, become the
property of landlord.
Section 17.20 Right of Cancellation of Lease
The Tenant will have the right to cancel the Lease during the term providing
the Landlord receives a minimum of three (3) months written notice including
the monetary compensation described below:
a) At the end of the 1st year:
i. The sum of NINETEEN THOUSAND FOUR HUNDRED FIFTY ONE dollars and
thirty five cents ($19,451.35) representing the non-amortized portion
of the construction costs undertaken by the landlord to secure this
transaction, plus;
ii. a penalty representing 3 months' rent
b) At the end of the 2nd year:
i. The sum of TEN THOUSAND TWO HUNDRED THIRTY TWO dollars and twenty two
cents ($10,232.22) representing the non-amortized portion of the
construction costs undertaken by the Landlord to secure this
transaction, plus;
ii. a penalty representing 3 months' rent
Section 17.21 Language
The parties hereto have required that this agreement be drawn in the English
language only. Les parties ont exige que la presente entente soit redigee en
langue anglaise seulement.
Section 17.22 Freely Negotiated
The Landlord and Tenant acknowledge and covenant to have been at liberty to be
represented by legal counsel in the discussion, negotiation and execution of
the present Lease. The Landlord and the Tenant further acknowledge and
covenant that the provisions of this Lease, including without restriction all
schedules and appendix attached thereto and forming part thereof, have been
freely and fully discussed and negotiated and that the execution of the present
Lease constitutes and is deemed to constitute full and final proof of the
foregoing. The Landlord and the Tenant acknowledge and covenant to have read,
examined, understood and approved all the provisions of this Lease, including
without restriction all schedules and appendix attached thereto and forming
part thereof.<PAGE>
The Tenant acknowledges having obtained all information useful or necessary to
take an enlightened decision to execute the present Lease.
IN WITNESS WHEREOF, the Landlord and the Tenant have signed this Lease on the
31 day of March 1997
- -- -----
SIGNED AND DELIVERED
in the presence of:
JESTA MANAGEMENT CORP.
(Landlord)
/s/(Illegible)
- ------------------------
Witness
Per: /s/Elliott Aintabi
-------------------
Elliott AINTABI
- ------------------------
Witness
TOUCHTUNES DIGITAL JUKEBOX INC.
(Tenant)
- ------------------------
Witness
Per: /s/Tony Mastronardi
-------------------
Tony MASTRONARDI
/s/(Illegible)
- ------------------------
Witness
Per:
-------------------
Authorized signature
I/We have authority to bind the Corporation.<PAGE>
SCHEDULE "A"
LEGAL DESCRIPTION OF THE LANDS
That designated building bearing civic number 1 Place du Commerce, Nuns'
Island, in the City of Verdun, District of Montreal, ,Province of Quebec,
erected on the land composed of subdivisions ONE HUNDRED TWENTY-THREE (123) and
ONE HUNDRED TWENTY-FOUR (124) of original lot number FOUR THOUSAND SEVEN
HUNDRED FORTY (4747-123 and 124) of the cadastre of the Parish of Montreal<PAGE>
SCHEDULE "A-1"
CONSTRUCTION MODIFICATION PLAN
(Diagram of Floor plan)<PAGE>
SCHEDULE "B"
FLOOR PLAN OF THE BUILDING
The purpose of this plan is to identify the approximate location of the
Premises in the Building. The Landlord reserves the right at any time to
relocate, rearrange, or alter the buildings and structures, other premises, and
Common Elements, and the Premises from that shown on this floor plan.
(Diagram of Floor Plan)<PAGE>
SCHEDULE "C"
CONSTRUCTION OF THE PREMISES
LANDLORD'S AND TENANT'S WORK
I. ACKNOWLEDGMENTS
1.01 Architect's Opinion
The Architect's opinion is binding on the Landlord and the Tenant respecting
all matters regarding the Landlord's Work and the Tenant's Work.
1.02 Access to Premises
Without in any way limiting Landlord's right of access under the Lease, the
Landlord may enter the Premises to maintain, install, alter or relocate
utilities, pipes, conduits and ducts, to install or reinforce columns, or to do
other work that benefits the Premises, or that is required in connection with
other parts of the Building, including expansion of it and the Tenant will
throughout the Term, provide the landlord and the utility companies with free
and uninterrupted access for those purposes.
1.03 Interpretation
This Schedule forms part of the Lease and defaults under this Schedule are
defaults under the Lease.
II. LANDLORD'S WORK
2.01 Purpose of Description
The Landlord's Work is described solely to indicate, in accordance with
Section 12.02 of the Lease, the extent of the Landlord's obligation to
rebuild or repair the Premises. The Landlord is not required to do any
work or provide any materials to or in respect of the Premises except as
expressly provided in the Lease. The Landlord's Work consists of those
items listed below that may have been provided and installed by the
Landlord as per construction Building Standard.
Suite 330
a) Demolition, as per plan attached, see Schedule "A-1";
b) Construction of a new wall in the reception area, one wall in the
conference room and one wall in the equipment room;
c) Painting of new walls; surrounding walls to be painted only in the
event of demolition and reconstruction of walls in the same room;
d) 1 new sliding door for closet;
e) Relocation of 2 existing office doors;
f) 55 sq. yards of new carpeting;
g) 210 sq. ft. of new vinyl tile;
h) New counter and cabinets in kitchen area;
i) 31 new dedicated electrical plugs;
j) 8 spotlights for conference room controlled by an independent switch;
k) 1 new solid wood door (8' high) for conference room;
l) Ceiling: repair and paint existing
change broken tiles
clean plastic covers
change burnt neons where need<PAGE>
Suite 570
a) Construction of new walls as per plan attached, see Schedule "A-1";
b) Install new ceiling tiles;
c) Painting of Premises throughout;
d) Approx. 130 sq. yards of 32 oz. nylon carpet and 320 lin. feet of
baseboards;
e) 1 glass door for entrance to Premises;
f) 4 solid wood office doors (8' high) including frame;
g) Provide and install adequate lighting (spot lights) in the reception area
which measures 20' x 20';
III. TENANT'S WORK
3.01 Work may be Performed by Landlord
The Landlord may, at its option, provide any items and perform any work
forming part of the Tenant's Work at the expense of the Tenant, and
payments shall be made in accordance with Article V of this Schedule.
3.02 Tenant's Work
The Tenant will provide and carry out, at its expense, all equipment and
work required to be provided and performed in order to make the Premises
complete and suitable to Tenant's operation therein, including, but not
limited to, the following:
a) Interior Finishes
All interior finishes and installations including, but not limited
to, painting and decorating, partitions, washrooms (if required by
law or by the Landlord), floor coverings, suspended ceiling (one hour
fire rated over the entire area if required by governmental
authorities having jurisdiction or the Landlord) with provision for
access, column enclosures (fire rated in accordance with the
requirements of governmental and regulatory authorities with
jurisdiction), store fixtures and furnishings, show window
enclosures, display platforms, special wall or ceiling finishes,
vertical and horizontal transportation equipment, security vaults,
sound insulation, smoke baffle and refuse refrigeration equipment as
may be required by law or by the Landlord.
b) Electrical
Main disconnect switch, Kw:H demand meter socket and meter (if
applicable), lighting and power panels, branch wiring, lighting
outlets and receptacles, all lighting and electrical fixtures
including lamps, (it being acknowledged that exposed fluorescent
light tubes must not be used in ceiling light fixtures, sales areas,
or display windows), time clocks, exit signs, emergency lighting,
night lights, contractors, appliances, any required smoke detectors
completely wired to the alarm system of the Building, bell system and
other equipment as required. If the main electrical service to allow
connected load of six (6) watts per square foot of the Net Rentable
Area of the Premises is not adequate as a result of the Tenant's
design for the Premises, the Tenant will provide the calculations
necessary for the Landlord to determine the service capacity required
in amperes based on the service voltage supplied and indicating an
anticipated connected load in kilowatts and the Landlord may, at its
option, agree to provide the additional electrical capacity at the
Tenant's expense. Immediately following the completion of the
Tenant's electrical installation, the Tenant will provide the
Landlord with a copy of the appropriate final certificate or
certificates of approval. All electrical work shall conform to the
Building Code, the Canadian Electrical Code, and the requirement of
all governmental and regulatory authorities having jurisdiction.
c) Heating, Ventilating and Air-Conditioning (HVAC)
The Tenant will connect to the Landlord's primary air equipment (if
any) and will supply and install all distribution duct work,
diffusers, controls and appurtenances required for maintaining the
design conditions throughout the Premises. The air side resistance
of the duct work must not exceed 0.25 inches w.g. in the supply ducts
and must not exceed 0.15 inches w.g. in the return ducts. The
Landlord will determine if return air from the Premises can be
recirculated. Air that is not acceptable for recirculation must be
removed to the outside of the Building by equipment to be installed
by the Tenant and approved by the Landlord in advance in writing.
Any reheat coil and any electric heating system installed in the
Premises must be connected to the Tenant's service meter or, if there
is no service meter for the Premises, as the Landlord directs. The
Tenant will supply the ventilation system and install all necessary
fans, duct work, grilles, and the other equipment for connection to
the Landlord's sanitary exhaust ventilation duct work, if any. If
the Tenant has requested approval for a designated lighting load in
excess of six (6) watts per square foot of the Net Rentable Area of
the Premises, the Landlord may, at its sole option, approve a limited
over-design in lighting load, subject to availability of additional
electrical and HVAC capacity, and any other considerations determined
by the Landlord. The supply by the Landlord of the additional
capacity will be at the Tenant's expense. Any heating, ventilating
and air-conditioning work required to be done outside the Premises
must be performed by the Landlord at the Tenant's expense.<PAGE>
d) Plumbing, Exhaust Ventilation and Gas
The Tenant will provide and install all internal plumbing and
accessories (except for whatever is provided by the Landlord), and a
water meter if required by any governmental or regulatory authority
having jurisdiction, or the Landlord, and domestic hot water tank and
heater as required.
If the Tenant is engaged in a trade required by law to provide public
washroom accommodation within the Premises, the Tenant will, at its
expense, install water closets, washbasins and plumbing and will do
all finishing. Additional water and drainage lines and exhaust
ventilation that may be required and as may be available for
installation will be provided by the Landlord for the Premises at the
Tenant's expense.
e) Communications
When required by the Landlord, by any governmental or regulatory
authority having jurisdiction, or by the Tenant subject to the
Landlord's approval, the Tenant will supply and install all parts and
components of the following systems: intercom, burglar and fire
alarm, antenna, cable and telephone. The Landlord reserves the
right, however, in its sole discretion, to install any such system or
any part of it at the Tenant's expense.
f) Renovations
The Tenant acknowledges and agrees that:
i. under reserve of the provisions of Section 3.02 of the Lease, it
is accepting possession of the Premises in an "as is" condition
as of the Commencement Date,
ii. the Landlord has no responsibility or liability for making any
renovation, alterations or improvements in or to the Premises
except for those mentioned in Clause 2.01 of 'Landlord's
Responsibilities;
iii. N/A
iv.
3.03 Restrictions and Requirements
Despite anything to the contrary contained in this Schedule, the following
restrictions and requirements apply:
a) Floor Loads
The Tenant will not, without the prior written consent of the
Landlord, impose upon any floor area a greater load than the designed
live load capacity for the Building.
b) Suspended Loads
No suspended loads are permitted other than the normal ceiling and
lighting loads from the underside of any floor, roof or ceiling
structures or assemblies of the Building without the prior written
approval of the Landlord. No suspended loads will be permitted from
roofs, steel decks, ducts, pipes or conduits.
c) Building Roof
The Tenant will not enter, nor will it permit or tolerate those for
whom it is in law responsible, or its contractors, or their employees
or agents, to enter onto the roof of the Building or make any opening
in the roof. Neither the Tenant nor its contractor or sub-
contractors will drill or cut openings for conduit or pipe sleeves,
or chases for ducts or equipment in the floors, columns, walls,
ceilings, roofs or structure of the Building; nor will they vary or
alter in any manner whatsoever any plumbing, electrical, mechanical
systems or HVAC System of the Building or any of their components
whether or not located within the Premises. Any such work required
by the Tenant, if approved by the Landlord, will be performed by the
Landlord at the Tenant's expense.
d) Perishables
If the Tenant handles perishable items it will provide a refrigerated
area or system for refuse storage satisfactory to and approved by the
Landlord.
3.04 Removal of Equipment and Improvements
Any requirement under this Article III for the Tenant to provide
equipment, carry out work or complete improvements also requires the
Tenant to remove any existing corresponding equipment and improvements,
unless the Landlord directs otherwise.
IV. LANDLORD'S REQUIREMENTS FOR TENANT'S WORK
4.01 Tenant's Obligation
The Tenant will comply with all the provisions of Section 4.02 of this
Schedule within thirty (30) days after the Landlord requests, in writing,
the plans, drawings, and specifications mentioned in Section 4.02(a).<PAGE>
4.02 Requirements Prior to the Commencement of the Tenant's Work
a) Submission of Plans, Drawings and Specifications to the Landlord
Within twenty-one (21) days after the Landlord requests them in
writing, the Tenant will submit to the Landlord for its approval, one
(1) set of sepias and three (3) white prints of each of its plans and
drawings (including the plans and drawings for its signs) together
with the specifications for the finishing of the Premises, which
plans, drawings and specifications must
i. be prepared by qualified architects, designers and engineers,
ii. conform to good engineering practice, and
iii. include floor plans, a reflected ceiling plan, wall elevations,
storefront elevation, sections, details including details of any
special facilities or installations which affect the Landlord's
facilities, and sign design drawings and details duly prepared
by a qualified designer or architect.
The Tenant will submit for the Landlord's approval, complete
mechanical and electrical drawings, prepared by persons suitably
qualified in the field acceptable to the Landlord. Mechanical and
electrical drawings must include all under-floor requirements, all
special equipment connections and installations, water and sewage,
heating, ventilating and air-conditioning distribution systems,
sprinkler mains and runs, electrical diagrams and panel schedules.
b) Landlord's Approval of Tenant's Drawings and Specifications
The Landlord will notify the Tenant either of its approval or of its
disapproval of the Tenant's plans, drawings and specifications and
may indicate any specific changes required by it. The Tenant will
then promptly prepare and submit to the Landlord, within fourteen
(14) days following notice of the disapproval, complete drawings and
specifications amended as required by the Landlord. If the Tenant
fails to submit complete drawings and specifications within the times
stated in this Schedule the Landlord may, by notice in writing,
terminate the Lease, without legal proceedings and without prejudice
to any of the Landlord's other rights and remedies and all amounts
paid by the Tenant to the Landlord will be forfeited on the
termination.
c) Tenant's Insurance
Before entering on the Premises for any purpose, the Tenant will
provide the Landlord with a certificate of insurance on the
Landlord's standard from, duly executed by the Tenant's insurers,
evidencing that the insurance required to be placed by the Tenant
pursuant to the Lease is in force.
d) Tenant's Contractors
The Tenant will employ a general contractor who will be responsible
for all construction within the Premises, including the contracting
and coordination of all trades. All work on or in respect of the
Premises will be performed by competent local workmen whose labour
union affiliations are compatible with others employed by the
Landlord and its contractors so that work stoppages are avoided.
e) Workers' Compensation Clearances
The Tenant will provide to the Landlord prior to commencing any work
in respect of the Premises, a current clearance certificate issued
pursuant to the workers' compensation act of the Province in respect
of the contractor and every sub-contractor which the Tenant proposes
to employ or to permit to do work in respect of the Premises and the
Tenant will not permit any contractor or sub-contractors to do work
in respect of the Premises except for those for which the clearance
certificate has been provided.
f) Tenant's Permits
The Tenant will provide evidence satisfactory to the Landlord prior
to commencing any work in respect of the Premises that the Tenant has
obtained at its expense, all necessary consents, permits, licenses
and inspections from all governmental and regulatory authorities
having jurisdiction and will post permits when required by law.
Should the Tenant fail to obtain any required consent, permit,
license, inspection or certificate, the Landlord may, but will not be
obligated to, obtain it on behalf of the Tenant at the Tenant's
expense.<PAGE>
4.03 Requirements with Respect to Performance of the Tenant's Work
a) Compliance with Laws, Insurers' and Landlord's Requirements
All Tenant's Work will comply with all applicable laws, building
codes, permits and approvals for the work and will comply also with
the requirements of the Landlord's insurers and the requirements of
the Landlord. If the Tenant is in default of this obligation and
does not correct the default within the time period required by the
authority or insurer, the Landlord may (but will not be obligated to)
cure the default and all charges and costs incurred by the Landlord
will be paid to the Landlord by the Tenant together with an
administrative fee equal to fifteen percent of those charges and
costs, as Additional Rent forthwith on demand.
b) Compliance with the Tenant's Drawings and Specifications
The Tenant will, immediately after satisfying all the requirements of
Section 4.02 but not before, proceed to complete the Tenant's Work in
a good and workmanlike manner using new materials, the whole of which
is to be to the Landlord's satisfaction and in conformity with the
plans, drawings and specifications approved by the Landlord.
Mediocre or inferior materials or workmanship will be replaced by the
Tenant at its expense by materials or workmanship of first class
quality, to the Landlord's satisfaction. One set of the plans,
drawings and specifications with the Landlord's consent endorsed on
them will remain on the Premises at all times when the Tenant's Work
is being performed.
c) Compliance with the Landlord's Requirements
The Tenant will itself and will also cause its contractors to:
i. abide by all safety regulations,
ii. provide adequate fire protection including, without limitation,
fire extinguishers,
iii. deliver and store materials and tools as may be directed by the
Landlord,
iv. stop immediately, if requested by the Landlord, any work which,
in the opinion of the Landlord, by reason of public hazard,
noise or otherwise, is likely to affect the normal operation of
the Building or any part of it, and
v. abide by all the rules and regulations and requirements
established by the Landlord from time to time relative to the
construction of the Premises.
d) Testing of the Tenant's Systems
The Tenant will test all plumbing, gas or fire protection and
electrical systems within five (5) days of the installation and give
two days' prior written notice to the Landlord that the test will
take place. The Landlord will have the right to be present in the
Premises when the test is performed. The Tenant will be responsible
for any damage caused as a result of the performance of the test.
Following completion of any testing, the Tenant will provide the
Landlord with a copy of the test results and a final certificate or
certificates of approval.
4.04 Requirements after the Performance of the Tenant's Work
a) Tenant's Declaration
The Tenant will provide the Landlord, within 60 days after the
opening of the Premises for business, with a statutory declaration
(the "Declaration"):
i. stating that the Tenant's Work has been performed in accordance
with all of the provisions of this Schedule and that all
deficiencies (if any) which the Landlord has brought to the
Tenant's attention have been corrected;
ii. stating that there are no amounts unpaid with respect to
workers' compensation and that there are no hypothecs or other
encumbrances affecting the Premises or the Building with respect
to work, services or materials relating to the Tenant's Work and
that all accounts for work, services and materials have been
paid in full with respect to all of the Tenant's Work;
iii. listing each contractor and sub-contractor who did work or
provided materials in connection with the Tenant's Work;<PAGE>
iv. confirming the date upon which the last such work was performed
and materials were supplied; and
v. confirming as correct, an itemized list showing the actual cost
of all improvements including, without limitation, sprinklers,
washrooms, or any other special facilities.
b) Final Workers' Compensation Clearances
The Tenant will also furnish to the Landlord, within 60 days after
the opening of the Premises for business, a clearance certificate
issued under the workers' compensation act of the Province in respect
of each contractor and sub-contractor listed on the Declaration.
c) Occupancy Permit
The Tenant will obtain and provide to the Landlord a copy of every
occupancy and other permit that may be required from any governmental
or other regulatory authority having jurisdiction, to permit the
Tenant to open for business.
V. PAYMENT SCHEDULE
5.01 Equipment or Work Supplied by Landlord
Any equipment or work other than that stipulated as the Landlord's Work
(if any) which is supplied or performed by the Landlord for or at the
request of the Tenant, or any excess or additional cost in the Landlord's
Work occasioned by the Tenant's requirements or revisions to such
requirements, will be paid for by the Tenant as Additional Rent within
fifteen (15) days after the receipt of a request for it. The cost of the
equipment or work will include (in addition to direct labour, material and
applicable taxes) architectural, engineering and contractor's fees, any
costs to the Landlord which are attributable to changes requested by the
Tenant, costs of temporary hoarding erected by the Landlord, and any
additional administrative charge for the Landlord's supervision equal to
ten percent (10%) of the aggregate cost of the equipment and work.
5.02 Garbage Removal
The Tenant is responsible for pick-up and disposal of its garbage at its
cost. If the Landlord provides facilities or designates a commercial
service for the pick-up of garbage instead of, or in addition to the
service provided by the local municipality, the Tenant will use such
facilities and commercial service at its cost.
5.03 Failure to Pay
The Tenant agrees that failure to pay any amount payable by it pursuant to
this Schedule in the manner provided for shall constitute a default under
the Lease. Such default shall entitle the Landlord to terminate the Lease
and to retain any amounts paid by the Tenant to it and to retain for its
use, without payment for it, any work forming part of the Tenant's Work,
which has been commenced within the Premises, without prejudice to the
Landlord's rights to claim and prove additional damages from the Tenant.<PAGE>
SCHEDULE "D"
RULES AND REGULATIONS
The following Rules and Regulations are the Rules and Regulations in force at
the execution of this Lease:
a) Tenant shall not perform any act or carry on any practices which may
injure the Premises or be a nuisance or menace to other tenants, or make
or permit any improper noises in the Building and shall forthwith upon
request by Landlord discontinue all acts or practices in violation of this
clause and repair any damage or injury to the Premises caused thereby;
b) Landlord shall have the right to prohibit any advertising of or by Tenant,
which in its opinion, tends to impair the reputation of the Building or
its desirability as a building for offices or for financial, insurance and
other institutions and businesses of a like nature. Upon written notice
from Landlord, Tenant shall forthwith refrain from or discontinue such
advertising;
c) Tenant shall not cause unnecessary labour by reason of carelessness and
indifference to the preservation of good order and cleanliness in the
Premises and in the Building;
d) No animals shall be brought or kept in or about the Building;
e) Canvassing, soliciting and peddling in the Building is prohibited and
Tenant shall co-operate to prevent the same;
f) The sidewalks, entries, passages, elevators and staircases shall not be
obstructed or used by Tenant or its clerks, servants, employees, clients,
agents, visitors, contractors or licensees for any other purpose than
ingress to and egress from the offices. Nothing shall be thrown by
Tenant, its clerks, servants, employees, clients, agents, visitors,
contractors or licensees, out of the windows or doors, or into the
entries, passages, elevators or staircases of the Building. Landlord
reserves entire control of the sidewalks, entries, elevators, staircases,
corridors and passages which are not expressly included within this Lease,
and shall have the right to make such repairs, replacements, alterations,
additions, decorations and improvements and to place such signs and
appliances therein, as it may deem advisable, provided that ingress and
egress from the Premises is not unduly impaired thereby;
g) Tenant shall not mark, paint, drill into or in any way deface the walls,
ceilings, floors, wood, stone or iron work, or any other appurtenance to
the Premises;
h) No sign, advertisement or notice shall be inscribed, painted or affixed on
any part of the outside or inside of the Building, except on the
directories and doors of offices, and then only of such size, colour and
style as Landlord shall determine and approve;
i) The sashes, sash-doors, windows, glass doors and the lights and skylights
that reflect or admit light into the halls or other places in the Premises
shall not be covered or obstructed, nor shall anything, whether books,
packages, flower pots or any other articles whatsoever, be placed upon or
hung from the window sills;
j) Tenant shall not sell or permit the sale at retail, of newspapers,
magazines, periodicals, theatre tickets, or such articles as are
customarily sold in tobacco shops, soda fountains or lunch counters, or
any other goods, wares or merchandise whatsoever, in or from the Premises.
Tenant shall not carry on or permit or allow or tolerate any employee or
other Person to carry on the business of stenography, typewriting or any
similar business in or from the Premises for the service or accommodation
of the occupants of any other portion of the Building, or the business of
a barber shop or a manicuring or chiropodist business, or any business
other than that specifically provided for in this Lease;
k) The workmen of Landlord must be employed by Tenant at Tenant's expense for
lettering, interior moving and other similar work that may be done on the
Premises;
l) Tenant shall not install window shades of any colour other than the
typical colours from time to time approved by Landlord. Tenant shall not
install curtains or venetian blinds without the approval of Landlord;
m) Tenant shall not lay linoleum, rubber, cork or other floor covering so
that the same shall come in direct contact with the floor, and if
linoleum, rubber, cork or other floor covering is desired to be used, an
interlining of builder's deadening felt shall be first affixed to the
floor by a paste or other adhesive which may be readily removed with
water;
n) The water and wash closets and urinals shall not be used for any other
purpose than the purposes for which they were respectively constructed,
and the expense of any breakage, stoppage or damage resulting from a
violation of this rule by Tenant or its clerks, agents, employees,
clients, servants, contractors, visitors, or licensees, any Person for
whom Tenant is responsible at law or any Person permitted or tolerated by
Tenant to be in the Building, shall be borne by Tenant;
o) If any apparatus used or installed by Tenant requires a permit as a
condition for installation, Tenant must file such permit with Landlord;<PAGE>
p) Landlord may require that all Persons entering and leaving the Building
between the hours of 7:00 P.M. and 8:00 A.M. on business days and
Saturdays, and all Persons entering and leaving the Building on Sundays
and holidays, shall use a key, satisfactory to Landlord, to access the
Building and the Premises. Between the hours of 7:00 P.M. and 8:00 A.M.
on business days and Saturdays, and on Sundays and holidays, Landlord will
have the right to prevent any Person from entering or leaving the Building
unless provided with the aforesaid key. Any Persons found in the Building
at such times without such key will be subject to the surveillance of the
employees and agents of Landlord. This rule is made for the protection of
Tenant, but Landlord shall be under no responsibility for failure to
enforce it;
q) Landlord shall have the power to prescribe the weight and position of
safes and other heavy equipment, which shall be placed and stand on such
plank strips or skids as Landlord may prescribe, to distribute the weight
properly. All damage done to the Building by taking in or moving out a
safe or any other article of Tenant's equipment, or due to its being on
the Premises, shall be repaired at the expense of Tenant. The moving of
safes shall occur only during such hours as Landlord may from time to time
establish and upon previous notice to Landlord, and the Persons employed
to move the safes in and out of the Building must be acceptable to
Landlord. Safes will be moved through halls and corridors only upon steel
bearing plates. No fright or bulky matter of any description will be
received into the Building or carried in the elevators, except during
hours approved by Landlord.
r) Tenant agrees to observe all reasonable rules and regulations regarding
the security and protection of the Building and the tenants thereof
including without limitation the right of Landlord to search the person
and/or any article carried by any person entering or leaving the Building.<PAGE>
APPENDIX "A"
EXTRACT FROM THE MINUTES
OF THE BOARD OF DIRECTORS
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
HELD on the 26 day of March, 1997.
RESOLVED:
THAT the Company enter into a Lease with JESTA MANAGEMENT CORP. for premises in
the Building (as defined in the Lease), which is erected in Nun's Island, City
of Verdun, Province of Quebec, and that Tony Mastronardi, its President and
N/A, its N/A be and that they are hereby authorized to execute the said Lease
on behalf of the Company.
Certified to be a true copy of a Resolution passed at a meeting of the
directors of the company duly called and held on the 26 day of March, 1997, as
set forth in the minutes of said meeting, which Resolution is presently in full
force and effect, unchanged.
DATED this 26 day of March, 1997.
--- ------ -
Per: /s/Tony Mastronardi
----------------------
President of Touchtunes Digital Jukebox Inc.<PAGE>
