<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1997
REGISTRATION NO. 333-33523
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
CANMAX INC.
(Exact name of Registrant as specified in its charter)
WYOMING 75-2461665
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
150 WEST CARPENTER FREEWAY
IRVING, TEXAS 75039
(972) 541-1600
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
PHILIP M. PARSONS COPY TO:
EXECUTIVE VICE PRESIDENT WILLIAM L. RIVERS, ESQ.
AND CHIEF FINANCIAL OFFICER ARTER & HADDEN
CANMAX INC. 1717 MAIN STREET, SUITE 4100
150 WEST CARPENTER FREEWAY DALLAS, TEXAS 75201-4605
IRVING, TEXAS 75039 (214) 761-2100
(972) 541-1600
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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 THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
863,364 SHARES
CANMAX INC.
COMMON STOCK
The 863,364 shares (the "Shares") of common stock, no par value per
share (the "Common Stock"), of Canmax Inc. ("Canmax") to which this
Prospectus relates are being offered on behalf of and for the account of a
certain stockholder (the "Selling Stockholder") of Canmax. Canmax
anticipates that the Shares will be offered for sale until the earlier of (i)
the sale of all of the Shares, or (ii) 180 days after the effectiveness of
this Registration Statement. Canmax has agreed to pay all expenses of
registration in connection with this offering, but will not receive any of
the proceeds from the sale of the Shares being offered hereby. All fees and
disbursements of counsel for the Selling Stockholder, and all brokerage
commissions and other similar expenses incurred by the Selling Stockholder
will be borne by the Selling Stockholder. The aggregate proceeds to the
Selling Stockholder from the sale of the Shares will be the purchase price of
the Shares sold, less the aggregate brokerage commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne
by Canmax. See "Use of Proceeds," "Plan of Distribution" and "Selling
Stockholder."
The Common Stock is included in the Nasdaq Stock Market's SmallCap
Market (the "Nasdaq SmallCap Market") under the symbol "CNMX." On November 4,
1997, the last reported sales price for the Common Stock was $ 1.50 per share.
This offering of the Shares is currently not being underwritten.
However, the Selling Stockholder, brokers, dealers or underwriters that
participate with the Selling Stockholder in the distribution of the Shares
may be deemed "underwriters," as that term is defined in the Securities Act
of 1933, as amended (the "Securities Act"), and any commissions received by
broker-dealers, agents or underwriters and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Although neither Canmax nor the Selling
Stockholder have entered into any arrangement or underwriting agreement with
any underwriter, broker-dealer or agent, the Shares being offered hereby,
when sales thereof are made, may be made in one or more transactions (which
may involve one or more block transactions) through customary brokerage
channels, either through brokers acting as brokers or agents for the sellers,
or through dealers or underwriters acting as principals who may resell the
Shares in the Nasdaq SmallCap Market or in privately negotiated sales, or
otherwise, or by a combination of such methods of offering. Each sale may be
made either at market prices prevailing at the time of the sale or at
negotiated prices.
If and to the extent required, the specific number of Shares to be sold,
the name of the Selling Stockholder, the purchase price, the public offering
price, the names of any such agents, dealers or underwriters and any
applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN
MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT
IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
NOVEMBER 10, 1997
<PAGE>
AVAILABLE INFORMATION
Canmax is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by Canmax with the Commission
may be inspected and copied at the Public Reference Section of the Commission
at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such materials also may be
obtained by mail at prescribed rates from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such materials filed electronically by Canmax with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov.
The Common Stock is listed on the Nasdaq SmallCap Market, and reports
and other information concerning Canmax may be inspected and copied at the
offices of the Nasdaq SmallCap Market at 1735 K Street, N.W., Washington,
D.C. 20006.
Canmax has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Shares of Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information contained in the Registration
Statement. For further information with respect to Canmax and the Shares
offered hereby, reference is hereby made to the Registration Statement and
its exhibits and schedules. The Registration Statement may be inspected
without charge at the Public Reference Section of the Commission at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
may be obtained therefrom at prescribed rates. Statements contained herein
concerning provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Canmax with the Commission under the
Exchange Act are hereby incorporated by reference in this Prospectus: (i)
Canmax's Annual Report on Form 10-K for the fiscal year ended October 31,
1996, (ii) Canmax's Current Report on Form 8-K filed with the Commission on
May 5, 1997, (iii) Canmax's Quarterly Reports on Form 10-Q for the quarters
ended January 31, 1997, April 30, 1997 and July 31, 1997 and (iv) the
description of the Common Stock contained in Canmax's Registration Statement
on Form 10 filed with the Commission on January 6, 1994 and in any amendments
or reports filed for the purpose of updating such description.
All reports and other documents filed by Canmax with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of the
Shares made hereby shall be deemed to be incorporated by reference herein and
to be a part hereof from the date of filing of such reports and documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a
statement contained herein or in a subsequently filed document modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the Registration Statement.
Upon written or oral request, Canmax will provide without charge to
each person to whom a copy of this Prospectus is delivered, a copy of any and
all of the documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Canmax Inc.,
150 West Carpenter Freeway, Irving, Texas 75039, Attention: Philip M. Parsons
(972) 541-1600.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
With the exception of historical information, the matters discussed in
this Prospectus include forward looking statements that involve risks and
uncertainties. Among the risks and uncertainties to which Canmax is subject
are (i) user acceptance of Windows NT as an operating system, (ii)
concentration of revenues between two customers and Canmax's relationship
with such customers, (iii) the ability of Canmax to manage its growth, (iv)
Canmax's need for additional financing to fund product development, marketing
and related support services, (v) future technological developments and
product acceptance, (vi) intense price and product competition within the
industry, (vii) acquisition integration (iii) Canmax's ability to maintain
listing on the Nasdaq SmallCap Market and (ix) other risks indicated herein
and in filings with the Commission. As a result, the actual results realized
by Canmax could differ materially from the statements made herein. Recipients
of this Prospectus are cautioned not to place undue reliance on the forward
looking statements made in this Prospectus.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE.
THE COMPANY
Canmax Inc. ("Canmax") through its wholly owned subsidiary Canmax
Retail Systems, Inc. ("CRSI"), develops and provides enterprise wide
technology solutions to the convenience store and retail petroleum
industries. Canmax offers fully integrated retail automation solutions,
including "C-Serve," which includes point of sale ("POS") systems,
credit/debit network authorization systems, pump control systems, and other
back office management systems, and "Vista," its headquarters-based
management system. Canmax's products and services enable retailers and
operators to interact electronically with customers, capture data at the
point of sale, manage site operations and logistics and communicate
electronically with their sites, vendors and credit/debit networks. Canmax
also provides (a) software development, customization and enhancements, (b)
systems integration, installation and training services, and (c) 24 hour a
day, 365 day per year help desk services. These additional services enable
Canmax to tailor the solutions to each customer's specifications and provide
successful system implementation, installation, training and after sales
support.
Canmax's objective is to be a leading provider of enterprise wide
technology solutions to the convenience store and retail petroleum market.
Canmax is developing an enhanced version of its C-Serve product to run on the
Windows NT operating system in conjunction with a development project with
NCR Corporation ("NCR") and The Southland Corporation ("Southland"). As of
July 31, 1997, Canmax's products have been installed in over 5,900 locations
and Canmax has customers including Southland, ARCO and the Army and Air
Force Exchange.
Canmax was incorporated on July 10, 1986 in British Columbia, Canada,
and subsequently changed its name to "International Retail Systems Inc." On
August 7, 1992, Canmax renounced its original province of incorporation and
elected to continue its domicile under the laws of the State of Wyoming, and
on November 30, 1994 its name was changed to "Canmax Inc." Canmax's
principal executive offices are located at 150 West Carpenter Freeway,
Irving, Texas 75039 and its telephone number is (972) 541-1600.
THE OFFERING
Common Stock Offered by the Selling Stockholder... 863,364 shares
Percent of Outstanding Common Stock
Offered by the Selling Stockholder............. 13.1%(1)
Nasdaq SmallCap Market Symbol..................... CNMX
Use of Proceeds................................... Canmax will not receive any
of the proceeds from the
sale of the Shares being
offered hereby. The Selling
Stockholder will receive
all of the proceeds from the
sale of the Shares.
- -------------
(1) Percentage indicated is based upon 6,611,005 shares of Common Stock
outstanding as of October 31, 1997.
-1-
<PAGE>
RISK FACTORS
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS
DISCUSSED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. CANMAX'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. IN ADDITION TO
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS COULD
CONTRIBUTE TO SUCH DIFFERENCES. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FOLLOWING FACTORS AND CAUTIONARY STATEMENTS IN DETERMINING
WHETHER TO PURCHASE SHARES OF COMMON STOCK IN THE OFFERING MADE HEREBY. ALL
FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION AND
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. SEE "SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
CONCENTRATION OF REVENUES; CUSTOMER CONCENTRATION
Canmax's revenues are currently concentrated in The Southland
Corporation ("Southland"), which accounted for approximately 80% and 92% of
Canmax's total revenue for the nine month periods ended July 31, 1996 and
1997, respectively. Canmax's revenues derived from its relationship with
Southland include products and services provided directly by Canmax to
Southland and indirectly through NCR Corporation ("NCR") to Southland
pursuant to NCR's contract with Southland. For the fiscal years ended
October 31, 1994, 1995 and 1996, Southland accounted for approximately 50%,
73% and 86%, respectively, of Canmax's total revenues for such fiscal years.
During those same periods, Electronic Data Systems ("EDS") accounted for 38%,
10% and 7%, respectively, of Canmax's revenues for such fiscal years. No
other customer accounted for over 10% of Canmax's total revenues. On April
29, 1997, Canmax and EDS agreed to terminate substantially all of their
business arrangements. Canmax does not anticipate any significant future
revenues from EDS.
Because a significant portion of Canmax's revenues are derived from its
relationship with Southland, the timing of payments received from Southland
will affect the percentage of current assets of Canmax classified as either
cash (or cash equivalents) or accounts receivable; however, Canmax does not
anticipate any significant problems in collecting the accounts receivable
arising from the Southland relationship beyond any reserves established
therefor. If the financial condition of Southland adversely changes at a
time when the receivable owing from Southland is substantial and Southland
becomes unable to pay its debts as they become due, then the working capital
resources of Canmax may be adversely affected.
By the end of calendar 1997, Canmax will have completed its previously
announced $9.5 million project development contract with NCR/Southland, and
Canmax's help desk services and production support agreements with Southland
expire in December 1998. Canmax is in discussions with Southland regarding
future projects and services, but no definitive agreement has been reached to
date. No assurances can be made that Canmax will be able to negotiate a
contract with Southland on terms satisfactory to Canmax, if at all. Any
termination or significant disruption of Canmax's relationship with Southland
would have a material adverse effect on Canmax's business, financial
condition and results of operations. In addition, a deterioration in the
financial condition of any of its principal customers could expose Canmax to
the possibility of large accounts receivable write-offs, which would
materially adversely affect Canmax's financial condition and results of
operations. See " - License of Source Code."
LICENSE OF SOURCE CODE
On October 31, 1997, Canmax and Southland amended their master
agreement for software development and services, wherein Canmax agreed, among
other things, to license to Southland the right to use, possess, and modify
the source code for the software used by and developed for Southland. In
addition, the amendment clarified Southland's rights to engage third parties
to assist Southland in the development, testing and modification of the
Canmax software and to market the Canmax software to Southland's foreign
licensees. The license arrangement permits Southland to modify and develop
the Canmax software without the assistance of, or input from, Canmax.
Although Southland has committed to pay to Canmax at least $4.0 million
through December 7, 1998 for third-party hardware, software maintenance, help
desk, development and other services, Southland's use and possession of the
source code could result in a material reduction in Southland's reliance
upon, and payment of fees for services to, Canmax. Prior to Canmax's grant to
Southland of the source code license, Canmax, by virtue of its exclusive
-2-
<PAGE>
possession of the source code, was assured that any development services or
enhancements to the Canmax software would be provided by Canmax, thereby
assuring Canmax that it would continue to receive any software development
and support projects from Southland. The source code license will enable
Southland to support and develop the licensed software either internally or
with the assistance of third-party contractors other than Canmax. The use by
Southland of its own staff or third-parties other than Canmax to perform such
services could have a material adverse effect on Canmax. See "Risk Factors -
Concentration of Revenues; Customer Concentration" and "Recent Events -
Southland Amendment."
PRODUCT CONCENTRATION
Canmax's primary product is C-Serve, which was designed by Canmax
exclusively for the retail petroleum and convenience store marketplace to
provide POS transaction processing including a comprehensive range of
management tools. For the fiscal years ended October 31, 1994, 1995 and
1996, C-Serve accounted for approximately 55%, 57% and 34%, respectively, of
Canmax's revenues for such fiscal periods. Canmax has allocated significant
capital resources to the development and completion of an enhanced version of
C-Serve to run on the Microsoft Windows family of operating systems
("Windows"). Canmax anticipates that C-Serve and its related enhancements
and versions will continue to account for a substantial portion of Canmax's
revenue for the foreseeable future. Accordingly, to the extent that Canmax
experiences any decline in demand for these products and services as a result
of competition, product obsolescence or otherwise, Canmax's operating results
and business prospects could be adversely affected.
HISTORY OF LOSSES
From inception through the fiscal year ended October 31, 1995, Canmax
experienced losses from continuing operations of approximately $6,042,000 and
$3,734,000 for the fiscal years ended October 31, 1994 and 1995,
respectively. For the fiscal year ended October 31, 1996, Canmax reported its
first full year of net income of approximately $143,000. For the nine months
ended July 31, 1997, Canmax reported a net loss of approximately $811,000.
There can be no assurance that Canmax will continue to report net income in
the future as it pursues its plans to expand its product offerings and
customer base and to enhance the capabilities of its state-of-the art help
desk.
The development of Canmax's business and the expansion of its product
offerings and customer base will require significant expenditures. Certain
of these expenditures, including marketing, sales and general and
administrative costs, are expensed as incurred while other expenditures,
including software design costs, are expensed over a period of time. Canmax
will continue to incur significant expenditures with the growth of its
business, including capital costs associated with expanding Canmax's product
offerings and sales, marketing and other expenses associated with expanding
Canmax's customer base. In light of Canmax's history of losses and its
expectation that it will continue to incur significant expenses in the
foreseeable future, there can be no assurance that Canmax will be able to
implement its growth strategy, sustain profitability or generate sufficient
cash flow to service its growth expectations.
LIQUIDITY NEEDS; DILUTION
Canmax generally maintains liquidity through cash generated by
operations, the issuance of equity securities, and the exercise of stock
options. Canmax has no line of credit or other lending facility. Canmax
continues to utilize the majority of its development resources to complete
the NCR/Southland Windows NT based project currently in progress. Canmax is
also developing its next generation Windows-based product to market to
potential customers other than Southland, the completion of which will not be
funded by work currently being performed for Southland. Canmax estimates
that the costs necessary to complete the development of this product and
bring the new product to market will range from $1.5 million to $2.0 million.
The failure to complete the development of such product could materially and
adversely affect the business prospects of Canmax.
Canmax believes that it may be necessary to raise additional capital to
complete development of its next generation products within the critical
window of opportunity and to provide vital marketing and other support
services. If cash generated from operations is insufficient to satisfy
Canmax's liquidity requirements, Canmax may
-3-
<PAGE>
be required to sell additional debt or equity securities or obtain lines of
credit, delay new product development or restructure operations to reduce
costs. No financing arrangements to support this development project have
been entered into by Canmax at this time and there can be no assurances that
such arrangements will be available in the future, or, if available, that
such arrangements will be on terms satisfactory to Canmax.
Canmax is reviewing an acquisition strategy within its current industry
and other vertical markets. From time to time Canmax will review acquisition
candidates with products, technologies or other services that could enhance
Canmax's product offerings or services. Any material acquisitions could
result in Canmax issuing or selling additional debt or equity securities,
obtaining additional debt or other lines of credit. These activities may also
result in a decrease in Canmax's working capital depending, on the amount,
timing and nature of the consideration to be paid.
SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
Canmax's quarterly and annual revenues and operating results have
varied significantly in the past and are likely to continue to do so in the
future. Revenues and operating results may fluctuate as a result of several
factors, including the demand for Canmax's products and services, the timing
and acceptance of the introduction of new hardware and software products,
competitive conditions and economic conditions. In particular, Canmax's
operating results are highly sensitive to changes in the mix of Canmax's
product and service revenues and product margins. Further, the purchase of
Canmax's products and services generally involves a significant commitment of
capital, with the attendant delays frequently associated with large capital
expenditures and authorization procedures within an organization. For these
and other reasons, Canmax's operating results are subject to a number of
significant risks over which Canmax has little or no control, including
customers' technology needs, budgetary constraints and internal authorization
reviews. Canmax may be unable to adjust spending sufficiently in a timely
manner to compensate for any unexpected revenue shortfall, which could
adversely affect operating results. Accordingly, Canmax believes that
period-to-period comparisons of its operating results should not be relied
upon as an indication of future performance. In addition, the results of any
quarterly period are not necessarily indicative of results to be expected for
a full fiscal year. It is possible that in certain future periods, Canmax's
operating results may be below the expectations of public market analysts and
investors. In such event, the price of Canmax's Common Stock would likely be
materially adversely affected.
NEED FOR ADDITIONAL FINANCING FOR GROWTH
The growth of Canmax's business will require substantial investment on
a continuing basis to finance capital expenditures and expenses related to
product development and customer base growth. However, although the majority
of Canmax's new product development expenses are currently funded through
revenues derived under agreements with NCR and Southland, Canmax anticipates
that it will require an additional $1.5 to $2.0 million to develop and bring
its next generation Windows-based product to market. Canmax has historically
utilized capital leases to fund its larger capital expenditures, and cash
flow from operations and trade credit for its working capital requirements.
There can be no assurance that any such required additional funds would be
available on satisfactory terms and conditions, if at all. The markets for
Canmax's product and service offerings are characterized by rapidly changing
technology and frequent new product and service offerings. As a result,
Canmax's success will depend on its ability to enhance existing products and
services and to develop and introduce, on a timely and cost-effective basis,
new products and services that keep pace with technological developments and
address increasingly sophisticated customer requirements. This continued
product development may utilize capital currently expected to be available
for Canmax's present operations. The amount and timing of Canmax's future
capital requirements, if any, will depend upon a number of factors, including
product development expenses, marketing support service expenses, and
competitive conditions, many of which are not within Canmax's control.
Failure to obtain any required additional financing could materially
adversely affect the growth, cash flow and earnings of Canmax.
INCREASED LISTING STANDARDS; APPLICATION OF PENNY STOCK RULES
On January 28, 1997, the National Association of Securities Dealers,
Inc. and The Nasdaq Stock Market approved increases in the listing and
maintenance standards governing the Nasdaq SmallCap Market. The Commission
approved the changes on August 22, 1997. The new standards were declared
effective by the Nasdaq
-4-
<PAGE>
SmallCap Market on August 25, 1997. These new standards require, as a
condition to continued listing on the Nasdaq SmallCap Market, an issuer
maintain either "net tangible assets" (defined as total assets, excluding
goodwill, minus total liabilities) of $2.0 million, market capitalization of
$35.0 million or net income in two of the last three fiscal years of $0.5
million. Companies failing to satisfy the new requirements are allowed a six
month "compliance" period during which they may take appropriate steps to
comply with the new requirements. As of July 31, 1997, Canmax had net
tangible assets of approximately $1.3 million and a market capitalization of
approximately $15.7 million. Accordingly, Canmax does not currently meet the
requirements for continued listing on the Nasdaq SmallCap Market. If Canmax
continues to fail to satisfy the requirements for continued listing on the
Nasdaq SmallCap Market, Canmax will be subject to being delisted from the
Nasdaq SmallCap Market. The delisting of Canmax would likely materially
adversely affect the liquidity of the Canmax Common Stock and the operations
of Canmax.
In addition, Canmax's Common Stock is subject to the so called "penny
stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as an investor with a
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with a spouse.) For transactions covered by the penny stock
rules, a broker-dealer must make a special suitability determination for the
purchaser and must have received the purchaser's written consent to the
transaction prior to sale. Consequently, both the ability of a broker-dealer
to sell the Common Stock and the ability of holders of Common Stock to sell
their securities in the secondary market, including the Nasdaq SmallCap
Market, may be adversely affected.
The Commission has adopted regulations that define a "penny stock" to
be an equity security that has a market price (as defined in the regulations)
of less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule relating to the penny stock market. The
broker-dealer must disclose the commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and,
if the broker-dealer is to sell the securities as a market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed
control over the market. Finally, monthly statements must be sent disclosing
recent price information for the penny stock held in the account and
information on the limited market in penny stocks. As a result of the
additional suitability requirements and disclosure requirements imposed by
the "penny stock" rules, an investor may find it more difficult to dispose of
the Common Stock.
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE
The markets for Canmax's product and service offerings are
characterized by rapidly changing technology and frequent new product and
service offerings. The introduction of new technologies can render existing
products and services obsolete and unmarketable. Canmax's primary software
product is C-Serve which runs under MS-DOS and UNIX operating systems. With
the emerging growth of the Windows family of operating systems, customers are
preferring that their systems, solutions and software run under a
Windows-based system. As a result, Canmax believes it is critical that it
develop a Windows based product to remain competitive in today's changing
marketplace. Further, Canmax's continued success will depend on its ability
to enhance existing products and services, to develop and introduce, on a
timely and cost-effective basis, new products and services that keep pace
with technological developments, and to address increasingly sophisticated
customer requirements. There can be no assurance that Canmax will be
successful in identifying, developing and marketing product and service
enhancements or new products and services that respond to technological
change, that Canmax will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of product and
service enhancements or new products and services, or that its product and
service enhancements and new products and services will adequately meet the
requirements of the marketplace and achieve market acceptance. Canmax's
business, financial condition and results of operations could be materially
adversely affected if Canmax were to incur delays in sourcing and developing
product and service enhancements or new products and services or if such
product and service enhancements or new products and services did not gain
market acceptance.
-5-
<PAGE>
DEPENDENCE ON AND NEED TO RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL
PERSONNEL
Canmax's success depends to a significant extent on its ability to
attract and retain key personnel. In particular, Canmax is dependent on its
senior management and technical personnel. As of July 31, 1997, Canmax
employed approximately 43 technical professionals. Canmax anticipates
further growth in its technical staff. In the past, Canmax has experienced
difficulty in attracting qualified technical personnel. Competition for such
technical personnel is intense and no assurance can be given that Canmax will
be able to recruit and retain such personnel. The failure to recruit and to
retain management and technical personnel could have a material adverse
effect on Canmax's anticipated growth, revenues and results of operations.
INTENSE COMPETITION
The markets in which Canmax operates are characterized by intense
competition from several types of technical service providers, including POS
equipment manufactures, specialized application software companies and pump
manufacturers. Canmax expects to face further competition from new market
entrants and possible alliances between competitors in the future. Certain of
Canmax's current and potential competitors have greater financial, technical,
marketing and other resources than Canmax. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products and services than Canmax. No assurance can be given
that Canmax will be able to compete successfully against current and future
competitors.
PROTECTION OF INTELLECTUAL PROPERTY
Canmax seeks to protect its proprietary software, systems and processes
through copyright, trademark and trade secret laws and contractual
restrictions on disclosure and copying. Despite such measures, it may be
possible for unauthorized third parties to copy aspects of Canmax's software,
systems and processes or to obtain and use information that Canmax regards as
proprietary. In addition, no assurance can be given that the protective
measures taken by Canmax will be sufficient to preclude competitors from
developing competing or similar proprietary software, systems and processes.
See " - License of Source Code."
ABSENCE OF DIVIDENDS
Canmax has never declared or paid any cash dividends on its Common Stock
and does not presently intend to pay cash dividends on the Canmax Common
Stock in the foreseeable future. Canmax intends to retain future earnings
for reinvestment in its business.
MARKET FOR COMMON STOCK; VOLATILITY OF STOCK PRICE
Canmax cannot ensure that an active trading market for the Common Stock
on the Nasdaq SmallCap Market will be sustained. See "--Increased Listing
Standards; Application of Penny Stock Rules." However, even if a trading
market for the Common Stock continues, the price at which shares of Common
Stock trade is likely to be subject to significant volatility. The market
for the Common Stock may be influenced by many factors, including the depth
and liquidity of the market for the Canmax Common Stock, investor perceptions
of Canmax and general economic and other similar conditions. The market price
for shares of the Canmax Common Stock has varied significantly and may be
volatile depending on news announcements or changes in general market
conditions. In particular, news announcements, quarterly results of
operations, competitive developments, litigation or governmental regulatory
action impacting Canmax or Canmax's significant customer Southland may
adversely affect the Canmax Common Stock price.
-6-
<PAGE>
THE COMPANY
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS
DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS OF CANMAX MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT
COULD CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED IN "RISK FACTORS," WITH
THE FORWARD-LOOKING STATEMENTS THROUGHOUT THIS PROSPECTUS AND IN "SAFE HARBOR
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
BUSINESS
GENERAL. Canmax through its wholly owned subsidiary CRSI, develops and
provides enterprise wide technology solutions to the convenience store and
retail petroleum industries. Canmax offers fully integrated retail automation
solutions, including "C-Serve," which includes point of sale ("POS") systems,
credit/debit network authorization systems, pump control systems, and other
back office management systems, and "Vista," its headquarters-based
management system. Canmax's products and services enable retailers and
operators to interact electronically with customers, capture data at the
point of sale, manage site operations and logistics and communicate
electronically with their sites, vendors and credit/debit networks. Canmax
also provides (a) software development, customization and enhancements, (b)
systems integration, installation and training services, and (c) 24 hour a
day, 365 day per year help desk services. These additional services enable
Canmax to tailor the solutions to each customer's specifications and provide
successful system implementation, installation, training and after sales
support.
Canmax's objective is to become a leading provider of enterprise wide
technology solutions to the convenience store and retail petroleum market.
Canmax is developing an enhanced version of its C-Serve product to run on the
Windows NT operating system in conjunction with a development project with
NCR and Southland scheduled for release in the fourth calendar quarter of
1997. As of July 31, 1997 Canmax's products have been installed in over 5,900
locations and its customers include, among others, Southland, ARCO and the
Army and Air Force Exchange.
BUSINESS STRATEGY. In the United States, there are currently
approximately 200,000 locations which derive revenues from the operations of
convenience stores and/or retail gasoline sites. Canmax believes that the
industry is currently under automated and under invested in automation and
technology solutions. The National Association of Convenience Stores (NACS)
1995 Future Study: Convenience 2000 confirms that the convenience store
environment requires information derived from automation solutions to compete
efficiently and effectively. Convenience stores lag the rest of the retail
industry in store automation. For example, approximately 16% of all
convenience stores utilize scanning technology, while grocery stores have
implemented scanning technology in approximately 90% of their locations.
Recent studies indicated that convenience store operators recognize the
significance of automation of their operations to their future success.
Canmax believes that the industry is prepared to increase its investment in
automation and technology solutions. This belief is supported by recent
surveys which reveal that the majority of convenience store operators plan to
increase their spending for technology solutions. Canmax therefore believes
that there will be demand in the marketplace for the Canmax's products,
solutions and services. Canmax believes that international markets also
represent substantial marketing opportunities for its solutions.
Canmax's marketing strategy includes: (i) providing solutions based
products and services for the automation and management of convenience stores
and gasoline stations, (ii) maintaining a high level of customer service
through its help desk services and account managers, (iii) seeking strategic
partnerships to provide Canmax visibility to buying audiences worldwide, and
(iv) continuing to invest in product development initiatives.
Canmax identifies potential customers by size and geographic location
and directs its marketing efforts along these segments. In general, Canmax
allocates its sales and marketing efforts to "corporate accounts" with global
operations, "national accounts" with operations primarily in the U.S. and
"regional accounts" with operations on a local or regional basis. Canmax
estimates that corporate accounts represent approximately 20% of its target
locations, national accounts represent 60% of its target locations, and
regional accounts represent the remaining
-7-
<PAGE>
20% of its target locations. Canmax utilizes concurrent efforts by both sales
representatives and account managers in analyzing, selecting and implementing
an automation system.
PRODUCTS AND SERVICES
Canmax utilizes a process called "Pathmation" to analyze a customer's
needs, assess a customer's options, and implement the best resources
available to build a path leading a customer to its ultimate goal. The
Pathmation process includes: (i) defining business goals, (ii) defining
business processes to support the business goals; (iii) determining
technology requirements to support defined business processes; (iv)
developing an implementation plan that encompasses business processes,
technology training and continuing support; (v) deploying modified business
processes, technology and support infrastructure; and (vi) continuously
validating results with business goals and changes in business practices.
In December of 1993, Canmax signed a five year agreement with Southland
to provide software licenses, development services, and provide hardware and
help desk services. Southland chose Canmax's proprietary convenience store
automation software, C-Serve, as the basis for its automation of store
functions and operations at its corporate and franchise operated 7-Eleven
convenience stores in the United States. Software licensing, product and
service revenue under this agreement during the fiscal years ended October
31, 1994, 1995, and 1996 totaled approximately $2,118,000, $3,733,000 and
$2,581,000, respectively, while development revenues recorded under the
Southland agreement during these same periods totaled approximately
$2,468,000, $1,792,000 and $971,000, respectively. In 1995, Canmax contracted
with NCR to successfully bid for two additional contracts with Southland.
These projects resulted in revenues to Canmax of approximately $1,005,000 and
$1,755,000 in the fiscal years ended October 31, 1995 and 1996, respectively.
During fiscal 1996, Canmax reached an agreement with NCR to develop for
Southland a next generation Windows NT based version of the Canmax C-Serve
convenience store software for $9.5 million. NCR was chosen by Southland to
provide project management and other professional services for the project.
Approximately $3,920,000 of revenues under such agreement was recognized by
Canmax in fiscal 1996, and the remainder is expected to be recognized in
fiscal 1997. There are currently over 5,000 7-Eleven stores using software
developed by Canmax. See "Risk Factors - Concentration of Revenues; Customer
Concentration" and "Risk Factors - License of Source Code."
C-SERVE. The Canmax C-Serve is a comprehensive site-based store
automation software solution that provides, as its key features, debit/credit
card processing, pump control, POS and scanning capabilities, and significant
back office functions. Canmax's solutions are designed to allow retailers to
process transactions, manage pumps and credit/debit card processing and
capture data at the point of sale, as well as manage other front office and
back office operations. The key purpose of such systems is to provide the
store operator with information and tools to enable improved store operations
and profitability. C-Serve includes features such as touch screen, PC
keyboard or integrated third party POS terminals providing user friendly
applications and flexibility in set up and configuration to accommodate the
operational needs and differences of each site. Further, C-Serve has the
capability of supporting communications and data transfer to and from remote
corporate headquarters.
C-Serve was designed exclusively for the retail petroleum and
convenience store marketplace. C-Serve's features include:
- POS transaction processing, incorporating touch screens, PC POS
keyboards, or integrated POS terminals,
- fueling transactions,
- dispenser controls,
- settlement transactions for credit/debit cards,
- shift and day reporting,
- store maintenance,
- file maintenance,
- inventory controls,
- fuel inventory management,
- reporting capabilities,
- accounts receivable controls,
-8-
<PAGE>
- island payment terminals,
- credit/debit card authorizations,
- communications to or from head office,
- security controls,
- shelf label generation,
- interface to handheld terminals and scanners,
- time and attendance records, and
- car wash interface.
Presently, C-Serve operates in a DOS/UNIX environment. Canmax is
currently developing its next generation of C-Serve software to run under the
Windows NT operating system. The next generation product is being developed
concurrently with the development project with NCR/Southland and is expected
to reflect state of the art technologies, features and functionality. Release
of this product is scheduled for the fourth calendar quarter of 1997. See
"Risk Factors - Liquidity Needs; Dilution."
VISTA. The Canmax " Vista" software provides a flexible automation
system that is able to conform to changing business needs. Vista is a
decision support, communications and remote store management system that
operates from corporate headquarters. Through a communications network,
Vista provides for the transmission of data messages from headquarters to the
remote store and from the store to headquarters. Vista's features include
fuel and retail pricebook maintenance, tax book maintenance, vendor
pricebook maintenance, and exception reporting for stores. Other features
of Vista include:
-batch or on-line communications
-remote on-line support
-sales analysis from store to store, zone to zone and region to region
-addition of new parameters at any time
-decision support, and
-report writer
OTHER SERVICES AND PRODUCTS. In addition to revenues generated from the
licensing of C-Serve and Vista software and sale of proprietary communication
boards, revenues are generated from the following other services:
1) modification and custom development contracts,
2) installation and training services,
3) annual maintenance and support services contracts, and
4) the provision of third-party software and hardware.
Canmax's products are designed to provide a flexible generic system that
can be easily modified to meet most customer's individual needs and
preferences. Most customers, most customers, such as major oil companies,
typically require a certain degree of product customization and the
development of unique interfaces to communicate with their existing
proprietary networks and host systems. Canmax typically charges for
customization and development costs. Because Canmax retains ownership of the
source code for such products (which is essential to effect program changes),
Canmax typically realizes service revenues from such products throughout the
duration of a relationship with the customer.
To assist retailers and store operators in optimizing their use of
Canmax's software, Canmax also offers consulting, installation, training and
help desk support services. Canmax provides installation and training
services at each installed site, and back-up and technical support services
from a central location. Canmax has developed a proprietary help desk support
system known as "Sites." Sites provides efficient call handling, automatic
problem escalation, and customer reporting 24 hours a day, 7 days a week.
Trained support technicians handle everything from "how do I..." questions to
dispatching field service for hardware problems. Support services also
include free software and user guide updates as well as ensuring that
technicians respond to all problems in a timely manner. Sites management
reports help identify and resolve recurring issues, such as the need for
additional training at the store or potential hardware failures. Sites also
supports remote dial in capability to the Canmax help desk Sites
-9-
<PAGE>
database, which provides customers managing a number of locations access to
data and reporting functions to better manage their operations.
Canmax does not usually directly sell hardware, such as personal
computers and POS terminals, although it does provide a small amount of
related equipment which may not be readily available from the principal
hardware vendor. The majority of hardware products supplied to customers is
provided by hardware vendors such as NCR, Ultimate Technologies and Compaq
Computers. Third party software and hardware products such as operating
systems, local and wide area network software and modems are also packaged
with Canmax's software and firmware products and sold in accordance with
distribution agreements entered into with such suppliers.
PRODUCT DEVELOPMENT. Due to the rapid pace of technological change in
its industry, Canmax believes that its future success will depend, in part,
on its ability to enhance and develop its software products to meet customer
needs.
C-Serve is being enhanced to be operating system independent through the
use of sophisticated software tools. Canmax believes that this independence
will be a competitive advantage. Canmax currently provides C-Serve in a Unix
environment and a Windows NT based version of C-Serve is scheduled for
release in fourth calendar quarter of 1997. Canmax has developed Vista
(commonly referred to as a "host system") which enables operators of chains
of gas stations/convenience stores to monitor and control activities at
stores. Operators are able to obtain "real time" store level information
(from all stores or any number of selected stores) at headquarters over
communications lines to provide timely information for decision making. See
"Risk Factors - Liquidity Needs; Dilution."
During the fiscal years ended October 31, 1994, 1995 and 1996, Canmax
expensed approximately $2,609,000, $2,401,000 and $1,477,000, respectively,
on product development activities. Canmax incurred approximately $3,127,000,
$0 and $129,000 during the fiscal years ended October 31, 1994, 1995 and
1996, respectively, in software development costs, which were initially
capitalized. Because of the uncertainty of future revenue in the near term
from certain products, Canmax recorded a write down of approximately
$4,127,000 of capitalized software costs in fiscal 1994.
SALES AND MARKETING. Canmax markets C-Serve and ancillary products and
services from its offices in Irving, Texas. Virtually all sales efforts are
focused on the U.S., Canada and Mexico at this time. However, Canmax plans to
expand its international marketing efforts in the future. More than 99% of
1996 revenue was derived from U.S. based customers.
BACKLOG. Product is generally delivered to customers when ordered.
There is no backlog of orders; however Canmax has signed contracts with
customers for the future delivery of products and services. Revenue from
these contracts may be affected by changes in customer requirements,
competition, technology and economic factors. There can be no assurance that
the Canmax's expectation of revenue will be realized in full.
COMPETITION
Canmax believes its competition can be categorized as follows:
- pump manufacturers,
- POS equipment manufacturers, and
- specialized application software companies.
Pump manufacturers supply the majority of point-of-sale devices used by
gas stations and convenience stores. They supply specialized equipment with
proprietary interfaces specific to their pump control consoles. The
proprietary nature of their products limits the technology used and the
ability to interface to other devices. Their primary intent, however, is to
provide a complementary service to the sale of their "core" product -pumps.
Canmax faces competition from manufacturers such as Dresser Industries Inc.,
Gilbarco Inc. and Tokheim Corporation.
-10-
<PAGE>
Software firms, such as Canmax, specializing in gas and convenience
store applications enjoy the advantage of bringing specialized knowledge and
applications to customers. The industry, however, does not enjoy a strong
reputation as service consultants who deliver solutions that meet/exceed
customer expectations. Canmax faces competition from software firms such as
Radiant Systems, Inc., MSI, Pinnacle, Inc., and Stores Automated Software,
Inc. Canmax's service strategy is designed to employ "Pathmation," a
consultative servicing process, to understand customer needs, while guiding
and delivering appropriate products better than other marketplace
alternatives.
Specialized POS manufacturers traditionally have developed solutions
based on their proprietary hardware. POS manufacturers, such as Verifone,
Ltd., NCR and IBM, also compete with Canmax.
Many of Canmax's current and prospective competitors have substantially
greater financial, technical and marketing resources than Canmax. The most
significant threat is the possibility of some consolidation or alliance of
major suppliers creating a larger, stronger presence in the marketplace.
Canmax also anticipates that additional competitors may enter certain of
Canmax's markets, resulting in even greater competition. There can be no
assurance that Canmax will be able to compete with existing or new
competitors. Increased competition could result in significant price
reductions with negative effects upon Canmax's gross margins and a loss of
market share, which could materially and adversely affect Canmax's business,
financial condition and operating results.
RECENT EVENTS
EDS OPTION EXERCISE
On April 29, 1997, EDS exercised an option to acquire 25% of Canmax's
Common Stock, resulting in Canmax issuing to EDS an additional 1,598,136
shares of Canmax Common Stock. Canmax accounted for this transaction by
reclassifying the amount associated with the option to common stock. EDS
then immediately sold its total interest in Canmax, representing 1,863,364
shares, in a private transaction to Founders Equity Group, Inc. ("the Selling
Stockholder") and the Dodge Jones Foundation, two Texas-based institutional
investors. In conjunction with this transaction, Canmax agreed to extend
certain registration rights similar to those held by EDS with regard to such
shares to the two institutional investors. See "Selling Stockholder" and
"Plan of Distribution."
Canmax believes that the termination of its relationship with EDS is
beneficial because Canmax will be able to market its products directly
(rather than through EDS) to a larger customer base within selected target
markets. Additionally, Canmax believes that the exercise of the EDS option
will facilitate Canmax's future growth strategies as the dilutive effect of
the EDS option has been eliminated.
WARRANT ISSUANCE
On May 9, 1997, the Selling Stockholder exercised its right to demand
that Canmax file a registration statement with regard to all its shares of
Canmax Common Stock. Under applicable securities laws, Canmax was unable to
file such registration statement until after the filing of the registration
statement relating to the sale of shares of Canmax Common Stock in the
proposed merger with Auto-Gas Systems, Inc. See "- The Proposed Auto-Gas
Merger." Pursuant to the terms of the registration rights agreement with the
Selling Stockholder, Canmax was to have filed a registration statement on or
about July 23, 1997 or incur a registration penalty of 50,000 shares per
month. The Selling Stockholder agreed to extend the registration obligation
in exchange for a warrant to purchase 50,000 shares of Canmax Common Stock at
an exercise price of $2.00 per share. The registration obligation has been
satisfied by the filing of the registration statement of which this
Prospectus forms a part.
THE PROPOSED AUTO-GAS MERGER
Canmax entered into an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") dated as of June 16, 1997 among Canmax, CRSI and
Auto-Gas Systems, Inc. ("AGSI") pursuant to which AGSI was to have been
merged (the "Merger") with and into CRSI. By the mutual agreement of Canmax
and AGSI, the Merger Agreement and Merger were terminated on October 10, 1997.
-11-
<PAGE>
In May 1997, Canmax retained the Selling Stockholder to provide
investment advisory services to Canmax regarding the Merger with AGSI.
Pursuant to the terms of such agreement, Canmax has agreed to pay to the
Selling Stockholder a fee of $25,000.
SOUTHLAND AMENDMENT
On October 31, 1997, Canmax and Southland entered into Amendment No. 3
to the Master Agreement for Computer Software Development, License and
Maintenance (the "Southland Amendment"). Pursuant to the terms of the
Southland Amendment, Southland agreed to pay to Canmax a one-time license fee
of $1.0 million for the license to use, possess and modify the source code
for the software developed by Canmax for Southland or otherwise used by
Southland. $500,000 of the license fee is payable within 5 days following
the execution of the Southland Amendment, and the remainder of the license
fee is payable within 5 days following the completion of the parties'
reconciliation of the source code and object code for such software. The
Southland Amendment also clarifies the right of Southland to market and
distribute the licensed software to foreign licensees of Southland and the
right of Southland to use the services of third parties other than Canmax to
modify, test and develop the licensed software. The Southland Amendment also
contains Southland's agreement to pay to Canmax on or before December 7,
1998, no less than $4.0 million for purchases of hardware and for software
maintenance, help desk, development and other services. In addition, the
Southland Amendment deletes Southland's right to terminate the agreement
without cause. See "Risk Factors - License of Source Code."
USE OF PROCEEDS
The Shares being offered hereby are for the account of the Selling
Stockholder. Accordingly, Canmax will not receive any of the proceeds from
the sale of the Shares by the Selling Stockholder. See "Selling Stockholder."
-12-
<PAGE>
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder and
the number of shares that may be offered by it. The number of Shares that may
be actually sold by the Selling Stockholder will be determined by the Selling
Stockholder, and may depend upon a number of factors, including, among other
things, the market price of the Common Stock. Because the Selling
Stockholder may offer all, some or none of the Shares that it holds, and
because the offering contemplated by this Prospectus is currently not being
underwritten, no estimate can be given as to the number of Shares that will
be held by the Selling Stockholder upon or prior to termination of this
offering. See "Plan of Distribution." The table below sets forth information
as of October 31, 1997, concerning the beneficial ownership of the Shares of
the Selling Stockholder. All information as to beneficial ownership has been
furnished by the Selling Stockholder.
<TABLE>
SHARES OF
COMMON STOCK
SHARES OF COMMON STOCK OFFERED IN SHARES OF COMMON STOCK
OWNED BEFORE OFFERING THE OFFERING OWNED AFTER OFFERING(1)
---------------------- ------------ -----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
- --------------------------- --------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Founders Equity Group, Inc. 913,364(2) 13.7% 863,364(3) 50,000(2) *
</TABLE>
- ---------------
* Less than one percent (1%)
(1) Assumes all shares of Common Stock offered hereby are sold.
(2) Includes 50,000 shares subject to presently exercisable warrants. Canmax
has agreed to grant to the Selling Stockholder the right to include the
shares of Common Stock acquirable upon exercise of the warrant in certain
other registration statements of Canmax.
(3) On April 29, 1997, the Selling Stockholder entered into a Purchase Agreement
with Electronic Data Systems Corporation, a Texas corporation ("EDS"),
whereby the Selling Stockholder purchased from EDS 863,364 shares of Common
Stock. In connection with such acquisition, Canmax granted certain
registration rights to the Selling Stockholder, and pursuant thereto, has
registered for sale in the offering made hereby 863,364 shares of Common
Stock. The costs of this registration (other than brokerage commissions
and other similar expenses) will be paid by Canmax.
PLAN OF DISTRIBUTION
Canmax will not receive any proceeds from the sale of the Shares by the
Selling Stockholder. The Shares may be sold from time to time to purchasers
directly by the Selling Stockholder. Alternatively, the Selling Stockholder
may from time to time offer its Shares to or through underwriters,
broker-dealers or agents who may receive compensation in the form of
commissions, underwriting discounts, concessions or other compensation from
the Selling Stockholder and/or the purchasers of such Shares for whom they
may act as agent. However, neither Canmax nor the Selling Stockholder has
entered into any arrangements or underwriting agreements with any
underwriter, broker-dealer or agent relative to the Shares to be offered
hereby. It is anticipated that the Selling Stockholder will offer all of the
Shares held by it for sale. All expenses of registration incurred in
connection with this offering are being borne by Canmax, but all brokerage
commissions and other similar expenses incurred by the Selling Stockholder
will be borne by the Selling Stockholder.
The Shares may be sold from time to time in one or more transactions at
fixed prices, at the prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The sale of the
Shares may be effectuated in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the Shares may be listed or quoted at the time of sale, (ii) in the over-
the-counter market, (iii) in transactions otherwise than on such exchanges or
in the over-the-counter market, or (iv) through the writing and exercise of
options. At the time a particular offer of Shares is made, if and to the extent
required, a supplement to this Prospectus (the "Prospectus Supplement") will be
distributed that will identify and set forth the aggregate amount of Shares
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter for
Shares purchased from the Selling Stockholder, any commissions, discounts and
other items constituting compensation from the Selling Stockholder and any
commissions, discounts or concessions allowed or reallowed or paid to dealers,
including the proposed selling price
-13-
<PAGE>
to the public. In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states, the Shares may
not be sold unless the Shares have been registered and qualify for sale in
such state, or unless an exemption from registration or qualification is
available and is obtained.
The Selling Stockholder and any dealer acting in connection with the
offering of any of the Shares or any broker executing or selling orders on
behalf of the Selling Stockholder may be deemed to be an "underwriter" within
the meaning of the Securities Act, in which event any profit on the sale of
any or all of the Shares and any commissions, underwriting discounts
concessions or other compensation received by any such dealers or brokers may
be deemed to be underwriting commissions and discounts under the Securities
Act. Any dealer or broker participating in any distribution of the Shares
may be required to deliver a copy of this Prospectus, including the
Prospectus Supplement, if any, to any person who purchases any of the Shares
from or through such dealer or broker.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage
in market making activities with respect to the Shares for a period of nine
business days prior to the commencement of such distribution. The Selling
Stockholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations promulgated thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases
and sales of the Shares by the Selling Stockholder.
On April 29, 1997, the Selling Stockholder entered into a Purchase
Agreement with EDS, whereby the Selling Stockholder purchased from EDS the
Shares. In connection with such acquisition, Canmax granted certain
registration rights to the Selling Stockholder, and pursuant thereto, has
registered for sale in the offering made hereby 863,364 shares of Common
Stock.
In May 1997, Canmax retained the Selling Stockholder to provide
investment advisory services to Canmax regarding the Merger with AGSI.
Pursuant to the terms of such agreement, Canmax has agreed to pay the Selling
Stockholder a fee of $25,000.
In connection with the registration rights agreement and the offering
made hereby, Canmax and the Selling Stockholder have agreed to certain
indemnity provisions between Canmax and the Selling Stockholder against
certain liabilities, including liabilities under the Securities Act. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Canmax, Canmax has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
Canmax by William D. Bagley, Cheyenne, Wyoming.
EXPERTS
The consolidated financial statements of Canmax Inc. appearing in Canmax
Inc.'s Annual Report (Form 10-K) for the year ended October 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
-14-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PAGE
----
Available Information ii
Incorporation of Certain Documents
by Reference ii
"Safe Harbor" Statement under the Private
Securities Litigation Reform Act of 1995 ii
Prospectus Summary 1
Risk Factors 2
The Company 7
Recent Events 11
Use of Proceeds 12
Selling Stockholder 13
Plan of Distribution 13
Legal Matters 14
Experts 14
863,364 SHARES
CANMAX INC.
COMMON STOCK
----------
PROSPECTUS
----------
NOVEMBER 10, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee $ 630
Accounting fees and expenses 2,500*
Legal fees and expenses (not including Blue Sky) 6,000*
Printing and engraving expenses 500*
Registrar and transfer agent's fees 100*
Blue Sky fees and expenses (including counsel fees) 1,000*
Miscellaneous expenses 0*
-------
Total $10,730*
-------
-------
- ------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The by-laws of Canmax provide for the indemnification of an individual
made a party to any proceeding because he or she is a director, officer,
employee or agent of Canmax against liability incurred in the proceeding if
(i) he or she conducted himself or herself in good faith; (ii) he or she
reasonably believed that his or her conduct was in or at least not opposed to
the best interest of Canmax; and (iii) in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be committed to directors or persons controlling Canmax,
Canmax has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and it is therefore unenforceable.
<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits
The exhibits listed below are filed as part of or incorporated by
reference in this Registration Statement. Where such filing is made by
incorporation by reference to a previously filed report or registration
statement, such report or registration statement is identified in
parentheses. See the Index of Exhibits included with the exhibits filed as
part of this Registration Statement.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation (file as of Exhibit 3.01 to Canmax's
Registration Statement on Form 10, File No. 0-22636 (the "Form
10"), and incorporated herein by reference)
3.2 Bylaws (filed as Exhibit 3.02 to the Form 10 and incorporated
herein by reference)
4.1 Registration Rights Agreement between Canmax and the Dodge
Jones Foundation (filed as Exhibit 4.02 to Canmax's Quarterly
Report on Form 10-Q for the period ended April 30, 1997 and
incorporated herein by reference)
4.2 Registration Rights Agreement between Canmax and Founders
Equity Group, Inc. (filed as Exhibit 4.02 to Canmax's Quarterly
Report on Form 10-Q for the period ended April 30, 1997 and
incorporated herein by reference).
4.3 Amended Stock Option Plan (filed as Exhibit 10.08 to Canmax's
Quarterly Report on Form 10-Q for the period ended July 31,
1996 and incorporated herein by reference).
5.1* Opinion of William D. Bagley (including the consent of such
firm) regarding legality of securities being offered.
10.1 Master Agreement for Computer Software Development, License
and Maintenance between CRSI and The Southland Corporation
(filed as Exhibit 10.05 to the Form 10 and incorporated herein
by reference).
10.2*** Software Development Agreement dated July 1, 1996 between
NCR Corporation and CRSI (filed as Exhibit 10.09 to Canmax's
Annual Report on Form 10-K for the period ended October 31,
1996).
10.3* Office Building Lease between Canmax and Commercial
Properties, Inc.
10.4* Employment Agreement, dated June 30, 1997 between Canmax
Retail Systems, Inc. and Roger D. Bryant.
10.5* Employment Agreement, dated June 30, 1997 between Canmax
Retail Systems, Inc. and Philip M. Parsons.
10.6* Employment Agreement, dated June 30, 1997 between
Canmax Retail Systems, Inc. and Debra L. Burgess.
10.7* Amendment No. 3 to Master Agreement for Computer Software
Development, License and Maintenance dated October 31, 1997
between Canmax Retail Systems, Inc. and the Southland
Corporation.
23.1* Consent of William D. Bagley (included as a part of his
Opinion filed as Exhibit 5.1 hereto).
23.2* Consent of Ernst & Young LLP, independent auditors.
24.1** Power of Attorney.
<PAGE>
* Filed herewith.
** Previously filed.
***Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission pursuant to
Canmax's Application requesting confidential treatment under
Rule 406 under the Securities Act of 1933, as amended.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because they are either not applicable or
the required information has been disclosed in the financial information or
notes thereto.
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Rule 415 Offering. 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:
(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
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by
reference. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(h) Request for acceleration of effective date. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to Canmax's Articles of Incorporation, Bylaws, both as amended, 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.
(i) Rule 430A. The undersigned Registrant hereby undertakes that:
<PAGE>
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to 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 S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irving, State of Texas, on the
5th day of November, 1997.
CANMAX INC.
By: /s/ Roger D. Bryant
--------------------------------
Roger D. Bryant,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 5th day of November, 1997, by the following
persons in the capacities indicated:
SIGNATURES TITLE
- ---------- -----
/s/ Roger D. Bryant Chief Executive Officer, President and Director
- --------------------------- (Principal Executive Officer)
Roger D. Bryant
/s/ Philip M. Parsons Executive Vice President, Chief Financial
- --------------------------- Officer and Director (Principal Financial
Philip M. Parsons and Accounting Officer)
/s/ Debra L. Burgess* Executive Vice President, Chief Operating
- --------------------------- Officer and Director
Debra L. Burgess
Director
- ---------------------------
Nick DeMare
Director
- ---------------------------
Robert M. Fidler
/s/ Thomas Rinehart* Director
- ---------------------------
Thomas Rinehart
Director
- ---------------------------
C. William Robertson
*By: /s/ Philip M. Parsons
- ---------------------------
Philip M. Parsons
AGENT AND ATTORNEY-IN-FACT
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation (file as of Exhibit 3.01 to Canmax's
Registration Statement on Form 10, File No. 0-22636 (the "Form
10"), and incorporated herein by reference)
3.2 Bylaws (filed as Exhibit 3.02 to the Form 10 and incorporated
herein by reference)
4.1 Registration Rights Agreement between Canmax and the Dodge
Jones Foundation (filed as Exhibit 4.02 to Canmax's Quarterly
Report on Form 10-Q for the period ended April 30, 1997 and
incorporated herein by reference)
4.2 Registration Rights Agreement between Canmax and Founders
Equity Group, Inc. (filed as Exhibit 4.02 to Canmax's Quarterly
Report on Form 10-Q for the period ended April 30, 1997 and
incorporated herein by reference).
4.3 Amended Stock Option Plan (filed as Exhibit 10.08 to Canmax's
Quarterly Report on Form 10-Q for the period ended July 31,
1996 and incorporated herein by reference).
5.1* Opinion of William D. Bagley (including the consent of such
firm) regarding legality of securities being offered.
10.1 Master Agreement for Computer Software Development, License
and Maintenance between CRSI and The Southland Corporation
(filed as Exhibit 10.05 to the Form 10 and incorporated herein
by reference).
10.2*** Software Development Agreement dated July 1, 1996 between
NCR Corporation and CRSI (filed as Exhibit 10.09 to Canmax's
Annual Report on Form 10-K for the period ended October 31,
1996).
10.3* Office Building Lease between Canmax and Commercial
Properties, Inc.
10.4* Employment Agreement, dated June 30, 1997 between Canmax
Retail Systems, Inc. and Roger D. Bryant.
10.5* Employment Agreement, dated June 30, 1997 between Canmax
Retail Systems, Inc. and Philip M. Parsons.
10.6* Employment Agreement, dated June 30, 1997 between
Canmax Retail Systems, Inc. and Debra L. Burgess.
10.7* Amendment No. 3 to Master Agreement for Computer Software
Development, License and Maintenance dated October 31, 1997
between Canmax Retail Systems, Inc. and the Southland
Corporation.
23.1* Consent of William D. Bagley (included as a part of his
Opinion filed as Exhibit 5.1 hereto).
<PAGE>
23.2* Consent of Ernst & Young LLP, independent auditors.
24.1** Power of Attorney.
* Filed herewith.
** Previously filed.
***Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to Canmax's Application requesting
confidential treatment under Rule 406 under the Securities Act of 1933, as
amended.
<PAGE>
LAW OFFICE OF
WILLIAM D. BAGLEY
TELEPHONE 1107 WEST SIXTH AVENUE FACSIMILE
(307) 634-0446 CHEYENNE, WYOMING 82001 (307) 637-7445
November 4, 1997
Canmax Inc.
150 West Carpenter Freeway
Irving, Texas 75039
Re: Offering of 863,364 Shares of Common Stock of Canmax Inc. by
Founder Equity Group, Inc., owner of 13.7% of Canmax Inc.
Ladies and Gentlemen:
I am advised that on or about November 4, 1997, Canmax Inc., a Wyoming
corporation (the "Company"), expects to file with the Securities and Exchange
Commission (the "Commission") Amendment No. 1 to that Registration Statement
on Form S-3 previously filed by the Company with the Commission on August 13,
1997 (as so amended, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"). Such Registration Statement relates to the
offering (the "Offering") of up to 863,364 shares of common stock, no par
value per share (the "Common Stock"), by Founders Equity Group Inc., one
stockholder of the Company (the "Selling Stockholder"). You have requested my
opinion with respect to certain legal aspects of the Offering.
In rendering our opinion, I have examined and relied upon the original or
copies of (1) the Articles of Incorporation of the Company dated July 9,
1986; and the (2) Certificate of Incorporation issued July 10, 1986 by the
Province of British Columbia; (3) the April 30, 1987 Resolution authorizing
issuance of 44,169,100 common shares without par value; (4) The State of
Wyoming Application for Certificate of Registration and Articles of
Continuance, filed August 7, 1992, and related documents; (5) The Bylaws of
the Company adopted June 23, 1993; (6) a copy of the February 28, 1997
Resolutions of the Board of Directors of the Company authorizing "in
principle" the issuance of the shares to EDS, which sold its interest to the
Selling Stockholder; (7) the draft Registration Statement and the exhibits
thereto; and (8) such other documents and instruments from the office of the
Wyoming Secretary of State as I have deemed necessary. In any examinations, I
have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals, and the conformity to original
documents of all documents submitted to me as certified or reproduction
copies. As to various questions of fact material to this opinion, I have
relied, to the extent I deem reasonably appropriate, upon representations or
certificates of officers or directors of the Company and upon documents,
records and instruments furnished to us by the Company, without independent
check or verification of their accuracy.
<PAGE>
Canmax Inc.
November 4, 1997
Page 2
Based upon the foregoing examination and subject to the comments and
assumptions noted below, I am of the opinion that the shares of Common Stock
to be sold by the Selling Stockholder in the Offering were validly issued and
fully paid and are nonassessable.
This opinion is limited in all respects to the General Corporation Law of
the State of Wyoming as in effect on the date thereof.
I bring to your attention the fact that this legal opinion is an
expression of professional judgment and not a guaranty of result. This
opinion is given as of the date hereof, and I assume no obligation to update
or supplement such opinion to reflect any facts or circumstances that may
hereafter come to our attention or any changes in laws or judicial decisions
that may hereafter occur.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, I do not admit that I have come within the category of
persons whose consent is required by Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Respectfully submitted,
/s/ William D. Bagley
----------------------------------
William D. Bagley
<PAGE>
150 CARPENTER FREEWAY
IRVING, TEXAS
OFFICE BUILDING LEASE
THIS LEASE is made this ______ day of ______________________, 19___,
between COSCAN COMMERCIAL PROPERTIES, INC., a Colorado corporation ("Landlord")
and __________________________, a ______________________________ ("Tenant").
1. PREMISES: Landlord hereby leases to Tenant those certain premises
designated on the Plans attached hereto as EXHIBIT A and incorporated herein by
this reference (the "Premises"), consisting of a total of approximately 10,638
square feet of space (Rentable Area) on the first (1st) floor(s), suite(s) 100
of the building known as 150 Carpenter Freeway located at 150 W. John Carpenter
Freeway (hereinafter the "Building"), located on the real property more
particularly described on EXHIBIT B attached hereto and incorporated herein by
reference, together with a non-exclusive right, subject to the provisions
hereof, to use all appurtenances thereunto, including, but not limited to,
parking garage, parking areas and any other areas designated by Landlord for use
by tenants of the Building (the Building, real property on which the same is
situated, parking areas, other areas and appurtenances are hereinafter
collectively sometimes called the "Building Complex"). For purposes of this
Lease, "Rentable Area" shall mean a measure of area expressed in square feet
computed by measuring the distance between the walls which enclose the floor to
the inside finished surface of the dominant portion of the permanent outer
building walls, exclusive of any major vertical penetrations of the floor and
inclusive of columns and projections necessary to the building. Major vertical
penetrations shall mean stairs, elevator shafts, flues, pipe shafts, vertical
ducts and the like, and their enclosing walls, which serve more than one floor
of the building, but shall not include stairs, dumbwaiters, lifts, and the like,
exclusively serving a tenant occupying the leased premises. This Lease is
subject to the terms, covenants and conditions set forth herein and Tenant and
Landlord each covenant as a material part of the consideration of this Lease to
keep and perform each and all of said terms, covenants and conditions to be kept
and performed by them.
2. TERM:
(a) The term of this Lease shall be for Seven (7) years (the "Primary
Lease Term") commencing at 12:01 a.m. on September 1, 1991 (the "Commencement
Date") and terminating at 12:00 midnight on August 31, 1998 (the "Termination
Date"), unless sooner terminated pursuant to the terms hereof. In the event the
Premises are not "Ready for Occupancy" as such term is defined in Paragraph 22
hereof, the Commencement Date shall mean and refer to the date the Premises are
Ready for Occupancy.
(b) If, as a result of the postponement or acceleration of the
Commencement Date, the term would begin other than on the first day of the
month, Tenant shall pay proportionate rent at the same monthly rate set forth
herein (also in advance) for such partial month and all other terms and
conditions of this Lease shall be in force and effect during such partial month,
and the end of the term hereof shall be adjusted to a date which is the last day
of the month _N/A_ years after the Commencement Date. Tenant agrees to execute
and deliver to Landlord, in form attached hereto as EXHIBIT C, an Estoppel and
Commencement Date Certificate, within ten (10) days of the date the term
commences, certifying as to the actual commencement and termination dates of the
term, the rent commencement date, if different, and such other matters as may be
reasonably required by Landlord.
3. RENT: Tenant shall pay to Landlord, rent for the Premises ("Base Rent")
as follows:
(a) During the First (1st) through Sixteenth (60th) months of the
Primary Lease Term, the sum of Five Hundred and Eighteen Thousand Six Hundred
and Two and 50/100 Dollars ($518,602.50) per year, payable in equal monthly
installments of Eight Thousand Six Hundred and Forty Three and 38/100 Dollars
($8,643.38);
(b) During the __________________ through _________________ months of
the Primary Lease Term, the sum of ___________________________________________;
1
<PAGE>
(c) During the Sixty-first (61st) through Eighty-fourth (84th)
months of the Primary Lease Term, the sum of Two hundred and sixty thousand
six hundred thirty one dollars and 00/100 Dollars ($260,631.00) per year,
payable in equal monthly installments of Ten thousand eight hundred fifty
nine and 63/100 Dollars ($10,859.63);
All installments of Base Rent shall be payable in advance, on the first (1st)
day of each calendar month during the term hereof. Rent for the first and last
months of the term hereof shall be prorated based upon the number of days during
each of said months that the Lease term was in effect. One monthly installment
of Base Rent shall be due and payable on the date of execution of this Lease by
Tenant. All Base Rent shall be paid without notice, demand, deduction or
offset, at the office of Landlord or to such other person or at such other place
as Landlord may designate in writing. Tenant shall pay to Landlord as
"Additional Rent" all other sums due under this Lease.
4. SECURITY DEPOSIT: It is agreed that Tenant, concurrently with the
execution of this Lease, has deposited with Landlord, and will keep on deposit
at all times during the term hereof, the sum of Ten thousand eight hundred and
fifty nine and 63/100 Dollars ($10,859.63), the receipt of which is hereby
acknowledged, as security for the payment of Tenant of the rent and all other
sums herein agreed to be paid and for the faithful performance of the terms,
conditions and covenants of this Lease. If, at any time during [illegible]
default in the performance of any provisions of [illegible] but shall not be
obligated, to use said deposit [illegible] payment of any rent in default,
reimbursement [illegible] in payment of any damages incurred by the [illegible]
such event, Tenant shall, on written demand [illegible] sufficient amount in
cash to restore said deposit Landlord [illegible] deposit has not been utilized
as aforesaid, [illegible] been utilized for such purposes, shall be returned to
Tenant within sixty (60) days after the termination of this Lease [illegible] by
Tenant and vacation of the Premises by Tenant. Landlord [illegible] to
commingle said deposit with other funds of Landlord. Landlord may deliver any
funds deposited herein by Tenant to any purchaser of Landlord's interest in the
Premises in the event such interest is sold, and thereupon Landlord shall be
discharged from further liability with respect to such deposit. If the claims
of Landlord exceed the amount of said deposit, Tenant shall remain liable for
the balance of such claims.
5. RENT ADJUSTMENT:
(a) The following terms shall have the following meanings with
respect to the provisions of this Paragraph 5:
(1) "Base Operating Expenses" shall mean an amount equal to the
actual operating expenses per square foot for calendar year 1991
______________________________________________ Dollars ($____________) per annum
multiplied by the total number of square feet of "Building Rentable Area", as
hereinafter defined. In the event that the actual Operating Expenses during any
year are less than the Base Operating Expenses, Tenant shall not be entitled to
any refund, credit or other form of reimbursement.
(2) "Building Rentable Area" shall mean all rentable space
available for lease in the Building. If there is a significant change in the
aggregate Building Rental Area, of a permanent nature, as a result of an
addition to the Building, partial destruction thereof or similar circumstance,
Landlord's accountants shall determine and make an appropriate adjustment to the
provisions herein.
(3) "Tenant's Pro Rata Share" shall mean a fraction, the
numerator of which is the Rentable Area of the Premises (i.e., 10,638 square
feet) and the denominator of which is the Building Rentable Area (i.e.,
48,290 square feet), and is equal to 22.03%. At such time, if ever, any
space is added to or subtracted from the Premises pursuant to the terms of
this Lease, Tenant's Pro Rata Share shall be increased or decreased
accordingly.
(4) "Operating Expenses" shall mean:
A. All operating expenses of any kind or nature which are
necessary, ordinary or customarily incurred with respect to the operation and
maintenance of the Building Complex as determined in accordance with generally
accepted accounting principles and shall include, but not be limited to:
2
<PAGE>
(i) Costs of supplies, including but not limited to
the cost of "relamping" all tenant lighting as the same may be required from
time to time;
(ii) Costs incurred in connection with obtaining and
providing energy for the Building Complex, including but not limited to costs of
propane, butane, natural gas, steam, electricity, solar energy and fuel oils,
coal or any other energy sources as well as costs for heating, ventilation, and
air conditioning services ("HVAC");
(iii) Costs of water and sanitary and storm drainage
services;
(iv) Costs of janitorial and security services, if
any;
(v) Costs of general maintenance and repairs,
including costs under HVAC and other mechanical maintenance contracts; and
repairs and replacements of equipment used in connection with such maintenance
and repair work;
(vi) Costs of maintenance and replacement of
landscaping; and costs of maintenance, repair, striping and repaving of parking
areas, common areas, plazas and other areas used by tenants of the Building
Complex, including trash and snow removal;
(vii) Any fees, costs or assessments imposed by any
property owners association;
(viii) Insurance premiums, including fire and all-risk
coverage, together with loss of rent endorsement; public liability insurance;
and any other insurance carried by Landlord on the Building Complex or any
component parts thereof;
(ix) Labor costs, including wages and other payments
for personnel equal to or below the level of building manager, costs to
Landlord of workmen's compensation and disability insurance, payroll taxes,
welfare fringe benefits and all legal fees and other costs or expenses
incurred in resolving any labor disputes;
(x) Professional building manage fees, to a maximum
of 4% of gross receipts generated by the property;
(xi) Legal, accounting, inspection and other
consultation fees (including, without limitation, fees charged by consultants
retained by Landlord for services that are designed to produce a reduction in
Operating Expenses or reasonably to improve the operation, maintenance or state
of repair of the Building Complex) incurred for the normal prudent operation of
the Building Complex and a general overhead and administrative charge equal to
two percent (2%) of all Operating Expenses;
(xii) The costs of capital improvements and structural
repairs and replacements made in or to the Building Complex or the cost of any
machinery or equipment installed in the Building Complex in order to conform to
changes, subsequent to the Lease Commencement Date, in any applicable laws,
ordinances, rules, regulations or orders of any governmental or quasi-
governmental authority having jurisdiction over the Building Complex (herein,
"Required Capital Improvements"); the costs of any capital improvements and
structural repairs and replacements designed primarily to reduce Operating
Expenses (herein, "Cost Savings Improvements"); and a reasonable annual reserve
for all other capital improvements and structural repairs and replacements
reasonably necessary to permit Landlord to maintain the Building as a first
class office building. The expenditures for Required Capital Improvements and
Cost Savings Improvements shall be amortized over the useful life of such
capital improvement or structural repair or replacement (as determined by
Landlord's accountants), provided that the amortized amount of any Cost Savings
Improvement shall be limited in any year to the reduction in Operating Expenses
as a result thereof; and
3
<PAGE>
(xiii) "Real Estate Taxes" including all real property
taxes and assessments levied against the Building Complex by any governmental or
quasi-governmental authority, including any taxes, assessments, surcharges, or
service or other fees of a nature not presently in effect which shall hereafter
be levied on the Building Complex as a result of the use, ownership or operation
of the Building Complex or for any other reason, whether in lieu of or in
addition to any current real estate taxes and assessments; provided, however,
that any taxes which shall be levied on the rentals of the Building Complex
shall be determined as if the Building Complex were Landlord's only property and
provided further, that in no event shall the term "Taxes and Assessments", as
used herein, include any federal, state or local income taxes levied or assessed
on Landlord, unless such taxes are a specific substitute for real property
taxes; such term shall, however, include gross taxes on rentals and expenses
incurred by Landlord for tax consultants and in contesting the amount or
validity of any such taxes or Assessments (all of the foregoing are collectively
referred to herein as "Taxes"). "Assessments" shall include any and all so-
called special assessments, license tax, business license fee, business license
tax, commercial rental tax, levy, charge or tax imposed by any authority having
the direct power to tax, including any city, county, state or federal
government, district thereof, against the Premises, the Building or the Building
Complex, or against any legal or equitable interest of Landlord therein. For
the purposes of this Lease, any special assessment shall be deemed payable in
such number of installments as is fully assessed as a completed project, for the
purposes of computing the Real Estate Taxes for any adjustment required herein,
the same shall be increased by Landlord's accountants, in accordance with their
estimate of what the assessment will be, upon full completion of the Building
Complex, including installation of all tenant finish items.
(xiv) Any other expense which under generally accepted
accounting principles would be considered a normal maintenance or operating
expense.
If Landlord selects an accrual accounting basis for calculating Operating
Expenses, Operating Expenses shall be deemed to have been paid when such
expenses have accrued in accordance with generally accepted accounting
principles.
B. Operating Expenses shall expressly exclude Landlord's
income taxes; leasing commissions, advertising and promotional expenses;
interest on debt or amortization payments on any mortgages or deeds of trust
except costs of repairs or other work occasioned by fire, windstorm or other
casualty to the extent of insurance proceeds received; and any other expense
which under generally accepted accounting principles would not be considered a
normal maintenance or operating expense, except as otherwise specifically
provided herein. See Rider Attached
(b) It is hereby agreed that commencing January 1 of the calendar year
following the Commencement Date, Tenant shall pay to Landlord as Additional Rent
during the balance of the term hereof an estimate of Tenant's Pro Rata Share of
Operating Expenses for the calendar year in excess of the Base Operating
Expenses as reasonably estimated by Landlord, payable monthly, at the rate of
one twelfth (1/12) thereof, on the same date and at the same place Base Rent is
payable, with an adjustment to be made between the parties at a later date as
hereinafter provided. Landlord shall deliver to Tenant, as soon as practicable
following the end of any calendar year, an estimate of the Operating Expenses
for the new calendar year (the "Budget Sheet"). Until receipt of the Budget
Sheet, Tenant shall continue to pay its monthly Tenant's Pro Rata Share of
Operating Expenses based upon the estimate for the preceding calendar year. To
the extent that the Budget Sheet reflects an estimate of Tenant's Pro Rata Share
of Operating Expenses for the new calendar year greater than the amount actually
paid to the date of receipt of the Budget Sheet for the new calendar year,
Tenant shall pay such amount to Landlord within thirty (30) days of receipt of
the Budget Sheet. Upon receipt of the Budget Sheet, Tenant shall thereafter pay
the amount of its Tenant's Pro Rata Share of Operating Expenses as set forth in
the Budget Sheet. As soon as practicable following the end of any calendar
year, but not later than May 1st, Landlord shall submit to Tenant a statement in
reasonable detail describing the computations of the Operating Expenses setting
forth the exact amount of Tenant's Pro Rata Share of Operating Expenses for the
calendar year just completed (the "Statement"), and the difference, if any,
between the actual Tenant's Pro Rata Share of Operating Expenses for the
calendar year just completed and the estimated amount of Tenant's Pro Rata share
of Operating Expenses paid by Tenant to Landlord. Notwithstanding the
foregoing, Landlord's failure to deliver the Statement to Tenant on or before
May 1st, shall in no way serve as a waiver of Landlord's rights under this
Paragraph. To the extent that the actual Tenant's Pro Rata
4
<PAGE>
Share of Operating Expenses for the period covered by the Statement is higher
than the estimated Tenant's Pro Rata Share of Operating Expenses which Tenant
previously paid during the calendar year just completed, Tenant shall also
pay to Landlord such balance within thirty (30) days following receipt of the
Statement from Landlord. To the extent that the actual Tenant's Pro Rata
Share of Operating Expenses for the period covered by the Statement is less
than the estimated Tenant's Pro Rata Share of Operating Expenses which Tenant
previously paid during the calendar year just completed, Landlord shall
credit the excess against any sums then owing or next becoming due from
Tenant under the Lease.
(c) If the Lease term hereunder covers a period of less than a full
calendar year during the first or last calendar years of the term hereof,
Tenant's Pro Rata Share of Operating Expenses for such partial year shall be
calculated by proportionately reducing the Base Operating Expenses to reflect
the number of months in such year during which Tenant leased the Premises (the
"Adjusted Base Operating Expenses"). The Adjusted Base Operating Expenses shall
then be compared with the actual Operating Expenses and actual Real Estate Taxes
for said partial year to determine the amount, if any, of any increases in the
actual Operating Expenses for such partial year over the Adjusted Base Operating
Expenses. Tenant shall pay Tenant's Pro Rata Share of any such increases within
ten (10) days following receipt of notice thereof.
(d) Tenant shall have the right at its own expense and at a reasonable
time (after written notice to Landlord) within six (6) months after receipt of
the Statement to audit Landlord's books relevant to the Additional Rent due
under this Paragraph 5. In the event Tenant does not audit Landlord's books and
deliver the result thereof to Landlord within said six (6) month period, the
terms and amounts set forth in the Statement shall be deemed conclusive and
final and Tenant shall have no further right to adjustment. In the event
Tenant's examination reveals that an error has been made in Landlord's
determination of Tenant's Pro Rata Share of Operating Expenses and Landlord
agrees with such determination, then the amount of such adjustment shall be
payable by Landlord or Tenant, to the other party as the case may be. In the
event Tenant's examination reveals an error has been made in Landlord's
determination of Tenant's Pro Rata Share of Operating Expenses, and Landlord
disagrees with the results thereof, Landlord shall have thirty (30) days to
obtain an audit from an accountant of its choice to determine Tenant's Pro Rata
Share of Operating Expenses. In the event Landlord's accountant and Tenant's
accountant are unable to reconcile their audits, both accountants shall mutually
agree upon a third accountant, whose determination of Tenant's Pro Rata Share of
Operating Expenses shall be conclusive. In the event the amount of error by
Landlord is determined to be seven and one half percent (7.5%) or more, the
reasonable costs of the three audits made pursuant to this subparagraph shall be
paid by Landlord. In the event the amount of error by Landlord is determined to
be less than ten percent (10%), the reasonable costs of the three audits made
pursuant to this subparagraph shall be paid to Tenant.
(e) Landlord's failure during the Lease term to prepare and deliver
any statement or bills, or Landlord's failure to make a demand under this
Paragraph or under any other provision of this Lease shall not in any way be
deemed to be a waiver of, or cause Landlord to forfeit or surrender its
rights to collect any items of Additional Rent which may have become due
pursuant to this Paragraph during the term of this Lease. Tenant's liability
for all Additional Rent due under this Paragraph 5 shall survive the
expiration or earlier termination of this Lease.
6. CHARACTER OF OCCUPANCY:
(a) The Premises are to be used for general offices not inconsistent
with the character and type of tenancy found in comparable first-class office
buildings in the Dallas area and for no other purposes without the prior written
consent of Landlord. Tenant shall procure, at its sole expense, all permits or
licenses required for the transaction of business at the Premises.
(b) Tenant shall not suffer nor permit the Premises nor any part
thereof to be used in any manner, nor anything to be done therein, nor suffer or
permit anything to be brought into or kept therein, which would in any way (i)
make void or voidable any fire or liability insurance policy then in force with
respect to the Building Complex, (ii) make unobtainable from reputable insurance
companies authorized to do business in the state where the Premises are located
any fire insurance with extended coverage, or liability, elevator, boiler or
other
5
<PAGE>
insurance required to be furnished by Landlord under the terms of any lease
or mortgage to which this Lease is subordinate at standard rates, (iii) cause
or in Landlord's reasonable opinion be likely to cause physical damage to the
Building Complex or any part thereof, (iv) constitute a public or private
nuisance, (v) impair, in the opinion of Landlord, the appearance, character
or reputation of the Building Complex, (vi) discharge objectionable fumes,
vapors or odors into the Building air conditioning system or into the
Building flues or vents not designed to receive them or otherwise in such
manner as may unreasonably offend other occupants of the Building, (vii)
impair or interfere with the use of any of the other area of the Building by,
or occasion discomfort, or annoyance to Landlord or any of the other tenants
or occupants of the Building Complex, any such impairment or interference to
be based upon the judgment of Landlord, (viii) create waste in, on or around
the Premises, Building, or Building Complex, or (x) make any noise or set up
any vibration which will disturb other tenants, except in the course of
permitted repairs or alterations at times permitted by Landlord. Landlord
agrees that Tenant's use of the Premises is not in violation of the foregoing
character and tenancy type requirements.
(c) Tenant shall not use the Premises nor permit anything to be
done in or about the Premises or Building Complex which will in any way
conflict with any law, statute, ordinance, protective covenants affecting the
Building Complex or governmental or quasi-governmental rules or regulations
now in force or which may hereafter be enacted or promulgated. Tenant shall
give written notice within two (2) days from receipt thereof to Landlord of
any notice it receives of the violation of any law or requirement of any
public authority with respect to the Premises or the use or occupation thereof.
Landlord shall give prompt notice to Tenant of any notice it receives relative
to the violation by Tenant of any law or requirement of any public authority
with respect to the Premises or the use or occupation thereof.
7. SERVICES AND UTILITIES:
(a) Landlord agrees, without charge except as provided herein, and in
accordance with standards from time to time prevailing for first-class office
buildings in the Dallas area, to furnish water to the Building for use in
lavatories and drinking fountains (and to the Premises if the plans for the
Premises so provide); during ordinary business hours to furnish such heated or
cooled air to the Premises as may be reasonably required for the comfortable use
and occupancy of the Premises provided that Tenant complies with the
recommendations of Landlord's engineer or other duly authorized representative,
regarding occupancy and use of the Premises; to provide janitorial services for
the Premises (including such interior and exterior window washing as may be
required), such janitorial services to be provided five days a week, except for
"Holidays" as herein defined ;during ordinary business hours to cause electric
current to be supplied for lighting the Premises and public halls; and to
furnish such snow removal services to the Building Complex as may, in the
judgment of Landlord, e reasonably required for safe access to the Building
Complex.
(b) Landlord shall provide electricity for normal office purposes
including but not limited to fluorescent and incandescent lighting, including
task and task ambient lighting systems and for normal office equipment including
but not limited to duplicating (reproduction) machines, communications and audio
visual equipment, vending machines, personal computers (provided they do not
require any additional voltage or special electrical requirements) executive
kitchen equipment and internal communication systems (which may include piped-in
music). To the extent that electric current is utilized in excess of the
amounts indicated above, Tenant's rent shall be increased from time to time by
Landlord in such amounts to cover the cost of providing such increased use.
Landlord shall have the right, if it determines based on its own judgment that
Tenant is using electric current for purposes other than those described above
or for other than normal office use, to require Tenant to install a check meter
to determine the amount which Tenant is utilizing. The cost of such excess
usage, and check meter, including but not limited to monitoring, installation
and repair thereof, shall be paid by Tenant.
(c) If Tenant requires water in excess of that usually furnished or
supplied for use in the Premises as general office space, Tenant shall first
procure the consent of Landlord for the use thereof. Tenant agrees to pay to
Landlord such amounts as Landlord determines are necessary to cover the costs of
such increased use of water, including, but not limited to, the cost of
installation, monitoring, maintenance and repair of any check meter or other
instrument necessary to measure the use of additional water.
6
<PAGE>
(d) Tenant agrees that Landlord shall not be liable for failure to
supply any heating, air conditioning, elevator, electrical, janitorial, lighting
or other services during any period when Landlord uses reasonable diligence to
supply such services, or during any period Landlord is required to reduce or
curtail such services pursuant to any applicable laws, rules or regulations, now
or hereafter in force or effect, it being understood and agreed to by Tenant
that Landlord may discontinue, reduce or curtain such services, or any of them
at such times as it may be necessary by reason of accident, unavailability of
employees, repairs, alterations, improvements, strikes, lockouts, riots, acts of
God, application of applicable laws, statutes, rules and regulations, or due to
any other happening beyond the reasonable control of Landlord. In the event of
any such interruption, reduction or discontinuance of Landlord's services,
Landlord shall not be liable for damages to persons or property as a result
thereof, nor shall the occurrence of any such event in any way be construed as
an eviction of Tenant or cause or permit an abatement, reduction or setoff of
rent, or operate to release Tenant from any of Tenant's obligations hereunder.
If discontinued services cannot be restored within five (5) business days rent
shall abate for the period subsequent that services are discontinued to the date
services begin again. If service continues to be unavailable for thirty (30)
consecutive days, Tenant shall have the right to terminate lease.
(e) whenever heat generating machines or equipment are used by Tenant
in the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises in the event Landlord's independent
consulting engineer determines same are necessary as a result of Tenant's use of
lights or equipment which generate heat loads in excess of those for which the
HVAC system is designed and the cost therefor, including the cost of
installation, operation and maintenance thereof, shall be paid by Tenant to
Landlord upon demand by Landlord.
(f) In the event that Tenant has any special or additional electrical
or mechanical requirements related to its use of the Premises, any such
electrical or mechanical equipment must be located within the Premises. Such
electrical or mechanical requirements, for the purposes hereof, shall include by
way of example, but not limitation, any internal telephone system. The
foregoing shall in no way be construed as granting to Tenant additional rights
to use any such special or additional electrical or mechanical equipment in its
Premises without the prior written consent of Landlord. Any additional cost or
expense related to or resulting from such electrical or mechanical requirements
shall be the sole obligation of Tenant.
(g) If Tenant requires HVAC service beyond ordinary business hours
(hereafter "After Hours Usage"), such service must be requested from the
Building manager at least twenty-four (24) hours prior thereto. After Hours
Usage shall only be supplied in full floor increments of the Building, for a
minimum of four (4) hour periods, with increments of one half (1/2) hour
thereafter [illegible] Additional Rent, for all costs and expenses for
[illegible] following:
(1) For ventilation: $
and/or
(2) For chiller: $
Notwithstanding the foregoing, if in Landlord's [illegible] demand for After
Hours Usage is or becomes excessive or sufficient [illegible] warrant the same,
Landlord may install, at Tenant's expense, separate meters to monitor or control
Tenant's After Hours Usage, with all costs for the installation, maintenance and
repair of such meter to be paid by Tenant.
8. QUIET ENJOYMENT: Subject to the provisions of this Lease, Landlord
covenants that Tenant on paying the rent and performing the covenants of this
Lease on its part to be performed shall and may peacefully and quietly have,
hold and enjoy the Premises for the term of this Lease. Landlord shall not be
responsible for the acts or omissions of any other tenant or third party which
may interfere with Tenant's use and enjoyment of the Premises. In the event of
any transfer or transfers of Landlord's interest in the Premises or in the real
property of which the Premises are a part, other than a transfer for security
purposes only, the transferor shall be automatically
7
<PAGE>
relieved of any and all obligations and liabilities on the part of Landlord
accruing from and after the date of such transfer.
9. MAINTENANCE AND REPAIRS:
(a) Notwithstanding any other provisions of this Lease, Landlord shall
repair and maintain in a first-class condition the structural portions of the
Building, including the elevators, plumbing, air conditioning, heating and
electrical systems installed or furnished by Landlord, unless such maintenance
and repairs are caused in part or in whole by the act, neglect, fault or
omission of Tenant, its agents, servants, employees, licensees or invitees, in
which case Tenant shall pay to Landlord, on demand, the cost of such maintenance
and repairs less the amount of any insurance proceeds received by Landlord on
account thereof, if applicable. Landlord shall also maintain and keep in good
order and repair the Building roof; the curtain wall, including all glass
connections at the perimeter of the Building; all exterior doors, including any
exterior plate glass within the Building, the Building ventilating systems;
elevators; escalators; Building telephone and electrical closets; public
portions of the Building or Building Complex, including but not limited to the
balconies, landscaping, walkways, and upper floor lobbies and corridors, and
interior portions of the Building above and below grade which are not covered by
leases.
(b) Tenant, at Tenant's sole cost and expense, except for services
furnished by Landlord pursuant to Paragraph 7 hereof, shall maintain, in good
order, condition and repair, the Premises, including the interior surfaces of
the ceilings (if damaged or discolored due in whole or in part to the act,
neglect, omission or fault of Tenant), walls and floors, all doors, interior
glass partitions or glass surfaces (not exterior windows) and pipes, electrical
wiring, switches, fixtures and other special items, subject to the provisions of
Paragraph 15 hereof. In the event Tenant fails to so maintain the Premises in
good order, condition and repair, Landlord shall give Tenant notice to do such
acts as are reasonably required to maintain the Premises. In the event Tenant
fails to promptly commence such work and diligently pursue it to completion,
then landlord shall have the right, but shall not be required, to do such acts
and expend such funds at the expense of Tenant as are reasonably required to
perform such work. The funds so expended plus fifteen percent (15%) of such
amounts as an overhead/administrative charge shall be due and payable by Tenant
within ten (10) days after receipt of Landlord's invoice therefor. Landlord
shall have no liability to Tenant for any damage, inconvenience or interference
with the use of the Premises by Tenant as a result of performing any such work.
(c) Landlord and Tenant shall each do all acts required to comply with
all applicable laws, ordinances, regulations and rules of any public authority
relating to their respective maintenance obligations as set forth herein.
10. ALTERNATIONS AND ADDITIONS:
(a) Tenant shall make no alternations, additions or improvements to
the Premises or any part thereof without obtaining the prior written consent
of Landlord, which will not be unreasonably withheld. Tenant shall submit
any such request to Landlord at least thirty (30) days prior to the proposed
commencement date of such work. Landlord may impose, as a condition to such
consent, and at Tenant's sole cost, such requirements as Landlord may deem
necessary in its judgment, including without limitation, the manner in which
the work is done, a right of approval of the contractor by whom the work is
to be performed and the times during which the work is to be accomplished,
approval of all plans and specifications and the procurement of all licenses
and permits. Landlord shall be entitled to post notices on and about the
Premises with respect to Landlord's non-liability for mechanics' liens and
Tenant shall not permit such notices to be defaced or removed. Tenant
further agrees not to connect any apparatus, machinery or device to the
Building systems, including electric wires, water pipes, fire safety, heating
and mechanical systems, without the prior written consent of Landlord.
(b) All alterations, improvements and additions to the Premises,
including, by way of illustration but not by limitation, all counters, screens,
grilles, special cabinetry work, partitions, paneling, carpeting, drapes or
other window coverings and light fixtures, shall be deemed a part of the real
estate and the property of Landlord and shall remain upon and be surrendered
with the Premises as a part thereof without molestation, disturbance or injury
at the end of the Lease term, whether by lapse of time or otherwise. All
movable partitions,
8
<PAGE>
machines and equipment which are installed in the Premises by or for Tenant,
without expense to Landlord, and can be removed without structural damage to
or defacement of the Building or the Premises, and all furniture, furnishings
and other articles of personal property owned by Tenant and located in the
Premises (all of which are herein called "Tenant's Property") shall be and
remain the property of Tenant and may be removed by it at any time during the
term of this Lease. However, if any of Tenant's Property is removed, Tenant
shall repair or pay the cost of repairing any damage to the Building or the
Premises resulting from such removal. All additions or improvements which are
to be surrendered with the Premises shall be surrendered with the Premises, as
a part thereof, at the end of the term or the earlier termination of this Lease.
(c) If Landlord permits persons requested by Tenant to perform any
alternations, repairs, modifications or additions to the Premises, then prior to
the commencement of any such work, Tenant shall deliver to Landlord certificates
issued by insurance companies qualified to do business in the state where the
Premises are located evidencing that workmen's compensation, public liability
insurance and property damage insurance, all in amounts, with companies and on
forms reasonably satisfactory to Landlord, are in force and maintained by all
such contractors and subcontractors engaged by Tenant to perform such work. All
such policies shall name Landlord as an additional insured and shall provide
that the same may not be canceled or modified without thirty (30) days prior
written notice to Landlord.
(d) Tenant, at its sole cost and expense, shall cause any permitted
alterations, decorations, installations, additions or improvements in or about
the Premises to be performed in compliance with all applicable requirements of
insurance bodies having jurisdiction, and in such manner as not to interfere
with, delay, or impose any additional expense upon Landlord in the construction,
maintenance or operation of the Building, and so as to maintain harmonious labor
relations in the Building.
11. ENTRY BY LANDLORD:
(a) Landlord and its agents shall have the right to enter the Premises
at all reasonable times and upon reasonable notice for the purpose of examining
or inspecting the same, to supply any services to be provided by landlord
hereunder, to show the same to prospective purchasers of the Building, to make
such alterations, repairs, improvements or additions to the Premises or to the
Building as Landlord may deem necessary or desirable, and to show the same to
prospective tenants of the Premises. Landlord and its agent may enter the
Premises at all times and without advance notice for the purpose of responding
to an actual or apparent emergency. Landlord may for the purpose of supplying
scheduled janitorial services and evaluating janitorial services at any time and
from time to time enter the Premises by means of a master key without liability
to Tenant and without affecting this Lease. If, during the last 60 days of the
term hereof, Tenant shall have removed substantially all of its property from
the Premises, Landlord may immediately enter and alter, renovate and redecorate
the Premises without elimination or abatement of rent or incurring liability to
Tenant for any compensation.
(b) Tenant shall be entitled to twelve (12) sets of keys to the
Premises. In the event Tenant needs any additional keys, such keys must be
requested from Landlord. Tenant shall pay to landlord the actual cost of making
such additional keys.
12. MECHANIC'S LIENS: Tenant shall pay or cause to be paid all costs for
work done by or on behalf of Tenant or caused to be done by or on behalf of
Tenant on the Premises of a character which will or may result in liens against
Landlord's interest in the Premises, Building or Building Complex and Tenant
will keep the Premises, Building and Building Complex free and clear of all
mechanic's liens and other liens on account of work done for or on behalf of
Tenant or persons claiming under Tenant. Tenant hereby agrees to indemnify,
defend and save Landlord harmless of and from all liability, loss, damages,
costs or expenses including attorneys' fees, incurred in connection with any
claims of any nature whatsoever for work performed for, or materials or supplies
furnished to Tenant, including lien claims of laborers, materialmen or others.
Should any such liens be filed or recorded against the Premises, Building or
Building Complex with respect to work done for or materials supplied to or on
behalf of Tenant or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be released of record within ten (10) days
after notice thereof. If Tenant desires to contest any such claim of lien,
Tenant shall nonetheless cause such lien to be released of record by the posting
of adequate security with a court of competent
9
<PAGE>
jurisdiction if provided by applicable law or statute of the state where the
Premises are located. If Tenant shall be in default in paying any charge for
which such a mechanic's lien or suit to foreclose such a lien has been
re-recorded or filed and shall not have caused the lien to be released as
aforesaid, Landlord may (but without being required to do so) pay such lien
or claim and any costs associated therewith, and the amount so paid, together
with interest at the Interest Rate and reasonable attorneys' fees incurred in
connection therewith, shall be immediately due and payable from Tenant to
Landlord as Additional Rent.
13. DAMAGE TO PROPERTY, INJURY TO PERSONS:
(a) Tenant, for itself and its legal representatives, successors and
assigns, as a material part of the consideration to be rendered to Landlord
under this Lease, hereby waives all claims of liability against Landlord and
Tenant, for itself and its legal representatives, successors and assigns, hereby
indemnifies and agrees to hold harmless Landlord, its agents, employees,
contractors, legal representatives, successors and assigns, from any and all
claims of liability for any injury or damage to any person or property
whatsoever occurring in, on or about the Premises or the Building Complex or any
part thereof, to the extent such injury or damage is caused by the negligence,
fault or omission of Tenant, its agents, contractors, employees, licensees or
invitees. Tenant further agrees to indemnify and to hold Landlord harmless from
and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, employees, licensees or invitees. Such indemnities shall
include by way of example, but not limitation, all costs, reasonable attorneys'
fees, expenses and liabilities incurred in or about any such claim action or
proceeding.
(b) Landlord shall not be liable to Tenant for any damage by or from
any act or negligence of any company-tenant or other occupant of the Building
Complex, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be liable for any injury or damage to persons or property
resulting in whole or in part from the criminal activities of others. To the
extent not covered by normal fire and extended coverage insurance, Tenant agrees
to pay for all damage to the Building Complex, as well as all damage to persons
or property of other tenants or occupants thereof, caused by the misuse,
neglect, act, omission or negligence of Tenant or any of its agents,
contractors, employees, licensees or invitees.
(c) Tenant hereby releases Landlord, its agents and employees, from
liability occasioned by the act, omission or negligence of Landlord, its agents,
servants and employees, for the following: (i) any damage to property entrusted
to Landlord, its agents or employees; (ii) loss or damage to any property
occurring by theft or otherwise; (iii) any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building Complex
or from the pipes, appliances or plumbing works therein or from the roof, street
or subsurface or from any other place or resulting from dampness, or any other
cause whatsoever; (iv) interference with the lights, view or other incorporeal
hereditaments; provided, however, nothing contained herein shall be construed to
relieve Landlord from liability for any personal injury resulting from its gross
negligence. Tenant shall give prompt notice to Landlord in case of fire or
accidents in or about the Premises or the Building or of defects therein or in
the fixtures or equipment located therein.
(d) In case any claim, demand, action or proceeding is made or brought
against either party, its agents or employees, by reason of any obligation on
either party's part to be performed under the terms of this Lease, or arising
from any act or negligence of either party, its agents or employees, or which
gives rise to either party's obligation to indemnify the other, the prevailing
party shall be responsible for all costs and expenses, including but not limited
to reasonable attorneys' fees incurred in defending or prosecution of the same,
as applicable.
14. INSURANCE:
(a) Landlord agrees to carry and maintain the following insurance
during the term of this Lease and any extension hereof: general public
liability insurance against claims for personal injury, including death and
property damage in or about the Premises and the Building or the Building
Complex (excluding Tenant's Property), such insurance to be in an amount not
less than One Million Dollars ($1,000,000.00) each occurrence,
10
<PAGE>
Two Million Dollars ($2,000,000.00) aggregate. Such insurance may expressly
exclude property paid for by tenants or paid for by Landlord for which
tenants have reimbursed Landlord located in, or constituting a part of the
Building or the Building Complex. Such insurance shall afford coverage for
damages resulting from (a) fire, (b) perils covered by extended coverage
insurance, and (c) explosion of steam and pressure boilers and similar
apparatus located in the Building or the Building Complex. Landlord may
carry such other additional insurance coverage as Landlord or Landlord's
mortgage deems appropriate including coverage for loss of rents. All such
insurance shall be procured from a responsible insurance company or companies
authorized to do business in the State where the Premises are located.
(b) Tenant shall, at its own cost, at all times during the term
of this Lease and any extensions hereof, procure and [illegible] extended
coverage on Tenant's Property and [illegible] equal to full replacement cost
thereof, and [illegible] including coverage for bodily injury, property
[illegible] contractual liability exclusions deleted), product [illegible]
liability, owner's protective liability, host liquor [illegible] damage with
the following limits of liability [illegible] occurrence combined single
limit for bodily injury [illegible] Two Million Dollars ($2,000,000.00)
aggregate [illegible] products and completed operations. All such [illegible]
responsible insurance company or companies [illegible] the Premises are
located, with general policyholder's [illegible] and a financial rating of
not less than "XI" in the most current available Best's Insurance Reports,
and shall be otherwise satisfactory to Landlord. All such policies shall
name Landlord as an additional insured, and shall provide that the same may
not be canceled or altered except upon thirty (30) days prior written notice
to Landlord. All insurance maintained by Tenant shall be primary to any
insurance provided by Landlord. If Tenant obtains any general liability
insurance policy on a claims-made basis, Tenant shall provide continuous
liability coverage for claims arising during the entire term of this Lease,
regardless of when such claims are made, either by obtaining an endorsement
providing for an unlimited extended reporting period in the event such policy
is canceled or not renewed for any reason whatsoever or by obtaining new
coverage with a retroactive date the same as or earlier than the expiration
date of the canceled or expired policy. Tenant shall provide certificate(s)
of such insurance to Landlord upon commencement of the Lease term and at
least thirty (30) days prior to any annual renewal date thereof and upon
request from time to time and such certificate(s) shall disclose that such
insurance names Landlord as an additional insured, in addition to the other
requirements set forth herein. The limits of such insurance shall not, under
any circumstances, limit the liability of Tenant hereunder.
(c) Each party agrees to use its best efforts to include in each
of its policies insuring against loss, damage or destruction by fire or other
casualty a waiver of the insurer's right of subrogation against the other
party, or if such waiver should be unobtainable or unenforceable (i) an
express agreement that such policy shall not be invalidated if the insured
waives the right of recovery against any party responsible for a casualty
covered by the policy before the casualty; or (ii) any other form of
permission for the release of the other party. If such waiver, agreement or
permission shall not be, or shall cease to be, obtainable without additional
charge or at all, the insured party shall so notify the other party promptly
after learning thereof. In such case, if the other party shall so elect and
shall pay the insurer's additional charge therefor, such waiver, agreement or
permission shall be included in the policy, or the other party shall be named
as an additional insured in the policy. Each such policy which shall so name
a party hereto as an additional insured shall contain, if obtainable,
agreements by the insurer that the policy will not be canceled without at
least thirty (30) days prior notice to both insureds and that the act or
omission of one insured will not invalidate the policy as to the other
insured. Any failure by either party, if named as an additional insured,
promptly to endorse to the other of the other party, without recourse, any
instrument for the payment of money under or with respect to the policy of
which the other party is the owner or original or primary insured, shall be
deemed a default under this Lease.
(d) Each party hereby releases the other party with respect to
any claim (including a claim for negligence) which it might otherwise have
against the other party for loss, damage or destruction with respect to its
property (including the Building, Building Complex, the Premises and rental
value or business interruption) occurring during the term of this Lease to
the extent to which it is insured under a policy or policies containing a
waiver of subrogation or permission to release liability or naming the above
party as an additional insured as provided above.
11
<PAGE>
15. DAMAGE OR DESTRUCTION TO BUILDING:
(a) In the event that the Premises or the Building are damaged by
fire or other insured casualty and the insurance proceeds have been made
available therefor by the holder or holders of any mortgages or deeds of
trust covering the Building, the damage shall be repaired by and at the
expense of Landlord to the extent of such insurance proceeds available
therefor, provided such repairs and restoration can, in Landlord's reasonable
opinion, be made within two hundred ten (210) days after the occurrence of
such damage without the payment of overtime or other premiums, and until such
repairs and restoration are completed, the Base Rent shall be abated in
proportion to the part of the Premises which is unusable by Tenant in the
conduct of its business (but there shall be no abatement of Base Rent by
reason of any portion of the Premises being unusable for a period equal to
one day or less). Landlord agrees to notify Tenant within forty-five (45)
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said two hundred ten (210) day period. Such
notice shall set forth the approximate length of time Landlord estimates will
be required to complete such repairs and restoration. Notwithstanding
anything to the contrary contained herein, if Landlord cannot or estimates it
cannot make such repairs and restoration within said two hundred ten (210)
day period, then Tenant may, by written notice to Landlord cancel this Lease,
provided such notice is given to Landlord within fifteen (15) days after
Landlord notifies Tenant of the estimated time for completion of such repairs
and restoration. Notwithstanding the preceding sentence, Tenant may not
cancel this lease as hereinabove stated if the damage to the Premises or the
Building is in whole or in part the result of the act, omission, fault or
negligence of Tenant, its agents, contractors, employees, licensees or
invitees. Except as provided in this Paragraph 15, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business or property arising from the making of
any such repairs, alterations or improvements in or to the Building, Premises
or fixtures, appurtenances and equipment, except for Landlord's negligence,
Tenant understands that Landlord will not carry insurance of any kind on
Tenant's Property, including furniture and furnishings, or on any fixtures or
equipment removable by Tenant under the provisions of this Lease, or any
improvement installed in the Premises by or on behalf of Tenant, and that
Landlord shall not be obligated to repair any damage thereto or replace the
same unless damage is due to negligence of Landlord.
(b) In case the Building throughout shall be so injured or
damaged, whether by fire or otherwise (though the Premises may not be
affected, or if affected, can be repaired within said 210 days) that
Landlord, within sixty (60) days after the happening of such injury, shall
decide not to reconstruct or rebuild the Building, then notwithstanding
anything contained herein to the contrary, upon notice in writing to that
effect given by Landlord to Tenant within said sixty (60) days, Tenant shall
pay the rent, properly apportioned up to date of such casualty, this Lease
shall terminate from the date of delivery of said written notice, and both
parties hereto shall be released and discharged from all further obligations
hereunder (except those obligations which expressly survive termination of
the Lease term). A total destruction of the Building shall automatically
terminate this Lease.
16. CONDEMNATION:
(a) If the whole of the Premises or so much thereof as to render
the balance unusable by Tenant for the proper conduct of its business shall
be taken under power of eminent domain or transferred under threat thereof,
then this Lease, at the option of either Landlord or Tenant exercised by
either party giving notice to the other of such election within thirty (30)
days after such conveyance or taking possession, whichever is earlier, shall
forthwith cease and terminate and the rent shall be duly apportioned as of
the date of such taking or conveyance. No award for any partial or entire
taking shall be apportioned and Tenant hereby assigns to Landlord any award
which may be made in such taking or condemnation, together with any and all
rights of Tenant now or hereafter arising in or to the same or any part
thereof. Notwithstanding the foregoing, Tenant shall be entitled to seek,
directly from the condemning authority, an award for its removable trade
fixtures, equipment and personal property and relocation expenses, if any.
In the event of a partial taking which does not result in a termination of
this Lease, Base Rent shall be reduced in proportion to the reduction in the
size of the Premises so taken and this Lease shall be modified accordingly.
Promptly after obtaining knowledge thereof, Landlord or Tenant, as the case
may be, shall notify the other of any pending or threatened condemnation or
taking affecting the Premises or the Building.
12
<PAGE>
(b) If all or any portion of the Premises shall be condemned or
taken for governmental occupancy for a limited period, this Lease shall not
terminate and Landlord shall be entitled to receive the entire amount of any
such award or payment thereof as damages, rent or otherwise. Tenant hereby
assigns to Landlord any award which may be made in such temporary taking,
together with any and all rights of Tenant now or hereafter arising in or to
the same or any part thereof. Tenant shall be entitled to receive an
abatement of Base Rent in proportion to the reduction in the size of the
Premises so taken.
17. ASSIGNMENT AND SUBLETTING:
(a) Tenant shall not permit any part of the Premises to be used
or occupied by any persons other than Tenant and its employees nor shall
Tenant permit any part of the Premises to e used or occupied by any licensee
or concessionaire or permit any persons other than Tenant, its employees and
invitees, to be upon the Premises. Tenant shall not voluntarily, by
operation of law, or otherwise, assign, transfer or encumber this Lease or
any interest herein nor sublet or part with possession of all or any part of
the Premises (any and all of which shall hereinafter be referred to as
"Transfer") without Landlord's prior written consent, which will not be
unreasonably withheld. Any Transfer without the prior written consent of
Landlord shall constitute a default hereunder and shall be void ab initio and
shall confer no rights upon any third party, notwithstanding Landlord's
acceptance of rent payments from any purported transferee. Landlord's
consent to any requested assignment of this Lease or subletting of all or any
part of the Premises shall be subject to the following conditions:
(1) such consent and resulting subletting or assignment
shall not relieve Tenant of its primary obligations hereunder, including the
obligation for payment of all rents due hereunder;
(2) Landlord, at its option and from time to time, may
collect the rent from the subtenant or assignee, and apply the net amount
collected to the rent herein reserved, but no such collection shall be deemed
an acceptance by Landlord of the subtenant or assignee as the tenant hereof,
or a release of Tenant from further performance of covenants on the part of
Tenant herein contained;
(3) any such subtenant or assignee shall be a company or
other entity of good repute, engaged in a business or profession compatible
with and in keeping with the then standards of the Building and financially
capable of performing its obligations with respect to the Premises;
(4) such subtenant or assignee shall assume and agree to
perform all of Tenant's obligations under this Lease insofar as they pertain
to the space so sublet or assigned; and
(5) Tenant is not in default of any term or condition of
this lease at the time it requests Landlord's consent.
(b) In the event of any Transfer of this Lease or all or any part
of the Premises by Tenant, Landlord in addition to any rights contained
herein, shall have the option, at its discretion, to collect and receive the
excess of rent due to Tenant from any sublessee or assignee over the Base
Rent due hereunder. Further, in the event of any Transfer of this Lease of
all or any part of the Premises by Tenant without the prior written consent
of Landlord, Landlord, in addition to any rights contained herein shall have
the following options, at its discretion:
(1) To give Tenant written notice of Landlord's intention to
terminate this Lease on the date such notice is given or on any later date
specified therein, whereupon, on the date specified in such notice, Tenant's
right to possession of the Premises shall cease and this Lease shall
thereupon be terminated, except as to any incompleted obligations of Tenant;
or
(2) To re-enter and take possession of the Premises or the
part thereof subject to such Transfer, and to enforce all rights of Tenant,
and receive and collect all rents and other payments due to Tenant, in
accordance with such sublet or assignment of the Premises, or any part
thereof, as if Landlord was the sublettor or assignor, and to do whatever
Tenant is permitted to do pursuant to the terms of such sublease or
assignment.
13
<PAGE>
(c) The sale of all or a majority of the stock of Tenant, if
Tenant is a corporation, or the sale of all or a majority of the ownership
interest in Tenant, if Tenant is a partnership, or the sale of all or
substantially all of the assets of Tenant shall constitute a Transfer for
purposes of this Lease.
(d) At the time of making a request for Landlord's consent to a
Transfer and not less than ten (10) business days prior to the proposed
effective date thereof, Tenant shall provide to Landlord such information as
Landlord, its accountants and attorneys, shall reasonably require with
respect to such proposed Transfer, including but not limited to name and
address of the proposed transferee, description of business operations,
financial information and certificate of corporate authority and good
standing or partnership certificate, as applicable. Landlord must respond
within ten (10) business days or it is deemed to have approved transferee.
(e) Consent of Landlord to a Transfer shall not relieve Tenant
from seeking consent to any subsequent Transfers.
(f) Subletting or assignments by subtenants or assignees shall
not be permitted under any circumstances, nor shall Tenant e permitted to
assign this Lease or sublet all or part of the Premises during any period of
time that all or any portion of the Base Rent is abated. Further, no option
to renew or extend the term of this Lease or to lease additional space, if
any, shall be exercisable by any subtenant or assignor.
(g) All subleases or assignments shall be in writing and a copy
thereof provided to Landlord within ten (10) days of its effective date. All
subleases shall further contain an express provision that in the event of any
default by Tenant under this Lease and upon notice thereof to the subtenant
from Landlord, all rentals payable by the subtenant shall be paid directly to
Landlord, for the Tenant's account, until subsequent notice from Landlord
that such default has been cured. Notwithstanding the foregoing, receipt by
Landlord of rent directly from the subtenant shall not be considered a waiver
of the default on the part of Tenant, nor an acceptance of such subtenant.
18. ESTOPPEL CERTIFICATE: Tenant further agrees at any time and from
time to time on or before ten (10) business days after written request by
landlord, to execute, acknowledge and deliver to Landlord an estoppel
certificate certifying (to the extent it believes the same to be true) that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications), that there have been no defaults thereunder by
Landlord or Tenant (or if there have been defaults, setting forth the nature
thereof), the date to which the rent and other charges have been paid, if
any, that Tenant claims no present charge, lien, claim or offset against
rent, the rent is not prepaid for more than one month in advance and such
other matters as may be reasonably required by Landlord, Landlord's
mortgagee, or any potential purchaser of the Building, it being intended that
any such statement delivered pursuant to this Paragraph may be relied upon by
any prospective purchaser of all or any portion of Landlord's interest
herein, or a holder of any mortgage or deed of trust encumbering any portion
of the Building Complex. Tenant's failure to deliver such statement within
such time shall be a default under this Lease. Notwithstanding the foregoing,
in the event that Tenant does not execute the statement required by this
paragraph, Tenant hereby grants to Landlord a power of attorney coupled with
an interest to act as Tenant's attorney in fact for the purpose of executing
such statement or statements required by this Paragraph.
19. DEFAULT:
(a) The following events (herein referred to as an "event of
default") shall constitute a default by Tenant hereunder;
(1) Tenant shall fail to pay when due any installment of
Base Rent, Additional Rent or any other amounts payable hereunder, and
continues for three (3) days after receipt of written notice from Landlord.
(2) This Lease or the estate of Tenant hereunder shall be
transferred to or pass to or devolve upon any other person or party in
violation of the provisions of this Lease, except as permitted herein;
14
<PAGE>
(3) This Lease or the Premises or any part thereof shall be
taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within fifteen (15) days after the levy thereof;
(4) Tenant shall file a petition in bankruptcy or insolvency
or for reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or shall voluntarily take
advantage of any such law or act by answer or otherwise, or shall be
dissolved or shall make an assignment for the benefit of creditors;
(5) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee shall be appointed of all or substantially
all of the property of Tenant, and such proceedings shall not be dismissed or
such receivership or trusteeship vacated within thirty (30) days after such
institution or appointment;
(6) Tenant shall fail to take possession of the Premises
within thirty (30) days of the Commencement Date;
(7) Tenant shall fail to perform any of the other
agreements, terms, covenants and conditions hereof on Tenant's part to be
performed (other than the obligation to pay rent or any other charges payable
hereunder), and such nonperformance shall continue for a period of fifteen
(15) days after written notice thereof by Landlord to Tenant; provided,
however, that if Tenant cannot reasonably cure such nonperformance within
fifteen (15) days, Tenant shall not be in default if it commences cure within
said fifteen (15) days and diligently pursues the same to completion, with
completion occurring in all instances within sixty (60) days;
(8) Tenant shall fail to obtain a release of any mechanic's
lien, as required herein;
(9) All or any substantial part of the personal property of
Tenant is seized, subject to levy or attachment, or similarly repossessed or
removed from the Premises.
(b) Upon the occurrence of an event of default, Landlord shall
have the right, at its election, then or at any time thereafter and while any
such event of default shall continue, either;
(1) To give Tenant written notice of Landlord's intention to
terminate this Lease on the date such notice is given or on any later date
specified therein, whereupon, on the date specified in such notice, Tenant's
rights to possession of the Premises shall cease and this Lease shall
thereupon be terminated; provided, however, that if Tenant's default is by
reason of Tenant's failure to pay Base Rent, Additional Rent or any other
amounts payable hereunder, or Tenant's failure to pay Base Rent, Additional
Rent or any other amounts payable hereunder, or Tenant's violation of
paragraph 17 hereof, then all of Tenant's obligations, including but not
limited to, the amount of Base Rent and other obligations reserved in this
Lease for the balance of the term hereof, shall immediately be accelerated
and due and payable.
(2) To re-enter and take possession of the Premises or any
part thereof and repossess the same as Landlord's former estate and expel
Tenant and those claming through or under Tenant, and remove the effects of
both or either, using such force for such purposes as may be reasonably
necessary, without being liable for prosecution thereof, without being deemed
guilty of any manner of trespass and without prejudice to any remedies for
arrears of rent or preceding breach of covenants or conditions. Should
Landlord elect to re-enter the Premises as provided in this Paragraph
19(b)(2) or should Landlord take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, Landlord may, from time to time,
without terminating this Lease, relet the Premises or any part thereof in
Landlord's or Tenant's name, but for the amount of Tenant, for such term or
terms (which may be greater or less than the period which would otherwise
have constituted the balance of the terms of this Lease) and on such
conditions and upon such other terms (which may include concessions of free
rent and alteration and repair of the Premises) as Landlord, in its
discretion, may determine, and Landlord may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any
15
<PAGE>
failure to relet the Premises or any part thereof or for any failure to
collect any rent due upon such reletting. No such re-entry or taking
possession of the Premises by Landlord shall be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention be given to Tenant. No notice from Landlord hereunder or under a
forcible entry and detainer statute or similar law shall constitute an election
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such re-entry and/or reletting, to
exercise its right to terminate this Lease by giving Tenant such written notice,
in which event, this Lease will terminate as specified in said notice.
(c) In the event that Landlord does not elect to terminate this
Lease as permitted in Paragraph 19(b)(1) hereof, but on the contrary, elects
to take possession as provided in Paragraph 19(b)(2), Tenant shall pay to
Landlord (i) the rent and other sums as herein provided, which would be
payable hereunder if such repossession had not occurred, less (ii) the net
proceeds, if any, of any reletting, including but without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration and repair costs and expenses of
preparation for such reletting. If, in connection with any reletting, the
new lease term extends beyond the existing term, or the premises covered
thereby include other premises not part of the Premises, a fair apportionment
of rent received from such reletting and the expenses incurred in connection
therewith as provided aforesaid will be made in determining the net proceeds
from such reletting. Tenant shall pay such rent and other sums to Landlord
monthly on the days on which the rent would have been payable hereunder if
possession had not been retaken.
(d) In the event this Lease is terminated, Landlord shall be
entitled to recover forthwith against Tenant as damages for loss of the
bargain and not as a penalty, an aggregate sum which, at the time of such
termination of this Lease, represents the excess, if any, of the aggregate of
the rent and all other sums payable by Tenant hereunder that would have
accrued for the balance of the term over the aggregate rental value of the
Premises (such rental value to be computed on the basis of tenant paying not
only a rent to Landlord for the use and occupation of the Premises, but also
such other charges as are required to be paid by Tenant under the terms of
this Lease) for the balance of such term , both discounted to present worth
at the rate of eight percent (8%) per annum. Alternatively, at Landlord's
option, Tenant shall remain liable to Landlord for damages in an amount equal
to the rent and other sums arising under the Lease for the balance of the
term had the Lease not been terminated, less the net proceeds, if any, from
any subsequent reletting, after deducting all expenses associated therewith
and as listed in subparagraph 19(c) above. Landlord shall be entitled to
receipt of such amounts from Tenant monthly on the days on which such sums
would have otherwise been payable.
(e) Suit or suits for the recovery of the amounts and damages set
forth above may be brought by Landlord, from time to time, at Landlord's
election and nothing herein shall be deemed to require Landlord to await the
date whereupon this Lease or the term hereof, would have expired had there
been no such default by Tenant or no such termination, as the case may be.
(f) After an event of default by Tenant, Landlord may sue for or
otherwise collect all rents, issues and profits payable under all subleases
on the Premises, including those past due and unpaid.
(g) After an event of default by Tenant, Landlord may without
terminating this Lease, enter upon the Premises, with force if necessary,
without being liable for prosecution of any claim for damages, without being
deemed guilty of any manner of trespass and without prejudice to any other
remedies, and do whatever Tenant is obligated to do under the terms of this
Lease. Tenant agrees to reimburse Landlord on demand for any expenses which
Landlord may incur in effecting compliance with the Tenant's obligations under
this Lease; further, Tenant agrees that Landlord shall not be liable for any
damages resulting to Tenant from effecting compliance with Tenant's obligations
under this subparagraph caused by the negligence of Landlord or otherwise.
(h) No failure by Landlord to insist upon the strict performance
of any agreement, term, covenant or condition hereof or to exercise any right
or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by
16
<PAGE>
written instrument executed by Landlord. No waiver of any breach shall
affect or alter this Lease, but each and every agreement, term, covenant and
condition hereof shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof. Notwithstanding any
unilateral termination of this Lease, this Lease shall continue in force and
effect as to any provisions hereof which require observance or performance of
Landlord or Tenant subsequent to termination.
(i) Nothing contained in this Paragraph shall limit or prejudice
the right of Landlord to prove and obtain as liquidated damages in any
bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding, an amount equal to the maximum allowed by any statute or rule of
law governing such proceeding and in affect at the time when such damages are
to be proved, whether or not such amount be greater, equal to or less than
the amounts recoverable, either as damages or rent, referred to in any of the
preceding provisions of this Paragraph.
(j) Any rents or other amounts owing to Landlord hereunder which
are not paid within five (5) days of the date they are due, shall thereafter
bear interest from the due date at a rate equal to the lesser of (i) the
maximum non-usurious rate of interest at which Tenant may legally contract in
the state in which the Premises are located; or (ii) eighteen percent (18%)
per annum ("Interest Rate") until paid. Similarly, any amounts paid by
Landlord to cure any default of Tenant or to perform any obligation of
Tenant, shall, if not repaid by the Tenant within five (5) days of demand by
Landlord, thereafter bear interest from the date paid by Landlord at the
Interest Rate until paid. In addition to the foregoing, Tenant shall pay to
Landlord whenever any Base Rent, Additional Rent or any other sums due
hereunder remain unpaid more than five (5) days thereof, an administrative
charge to compensate Landlord for the costs and expenses associated with
handling a delinquent account equal to ten percent (10%) of the amount due.
Further, in the event of default by Tenant, in addition to all other rights
and remedies, Landlord shall be entitled to receive from Tenant all sums, the
payment of which may previously have been waived or abated by Landlord, or
which may have been paid by Landlord pursuant to any agreement to grant
Tenant a rental abatement or other monetary inducement or concession,
including but not limited to any tenant finish allowance or moving allowance,
together with interest thereon from the date or dates such amounts were paid
by Landlord or would have been due from Tenant but for the abatement, at the
Interest Rate, until paid; it being understood and agreed that such
concession or abatement was made on the condition and basis that Tenant fully
perform all obligations and covenants under the Lease for the entire term.
(k) Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided
for in this Lease now or hereafter existing at law or in equity or by statute
or otherwise, including, but not limited to, suits for injunctive or declaratory
relief and specific performance. The exercise or commencement of the exercise
by Landlord of any one or more of the rights or remedies provided for in this
Lease now or hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or subsequent exercise by Landlord of any
or all other rights, or remedies provided for in this Lease, or now or hereafter
existing at law or in equity or by statute or otherwise. All costs incurred by
Landlord in connection with collecting any amounts and damages owing by Tenant
pursuant to the provisions of this Lease or to enforce any provision of this
Lease, including by way of example, but not limitation, reasonable attorneys'
fees from the date any such matter is turned over to an attorney, shall also be
recoverable by Landlord from Tenant. Landlord and Tenant agree that any action
or proceeding arising out of this Lease shall be heard by a court sitting
without a jury and thus hereby waive all rights to a trial by jury.
20. COMPLETION OF PREMISES:
(a) Landlord has agreed to complete the Premises as more fully set
forth in a work letter (the "Work Letter") attached hereto and incorporated
herein an Exhibit D. Other than as set forth in the Work Letter, Landlord
shall have no obligation for the completion of the Premises, and Tenant shall
accept the Premises in its "as is" condition on the Commencement Date. Landlord
shall not have any obligation for the repair or replacement of any portions of
the interior of the Premises, including but not limited to carpeting, draperies,
window coverings wallcoverings or painting, which are damaged or wear out during
the term hereof, regardless of the cause therefor, except as may otherwise be
specifically set forth in this Lease or in Exhibit D-2 attached hereto. If the
Premises are not Ready for Occupancy (as hereafter defined) on the Commencement
Date, unless such delay is caused by Tenant,
17
<PAGE>
its agents or employees, the rental obligations hereunder shall not commence
until the Premises are Ready for Occupancy, whereupon, this Lease and all
covenants, conditions and terms hereof shall be in full force and effect; and
the Termination Date hereof shall be postponed as set forth in paragraph
2(b). The postponement of the rent and term herein provided for such period
shall be in full settlement for all claims which Tenant might have by reason
of the Premises not being Ready for Occupancy on the Commencement Date. If
Tenant wishes to take possession of all or any part of the Premises prior to
the date the Premises are Ready for Occupancy, it must first secure the prior
written consent of Landlord and such occupancy shall in no way hinder, delay
or interfere with Landlord's work in completion of the Premises, and in such
event, all terms and provisions of this Lease, including the obligation to
pay rent at a rate equal to the monthly rate provided in Paragraph 3(prorated
accordingly) shall apply. "Ready for Occupancy' as that term is used herein
shall mean the date when all major construction aspects of the Premises and
any remodeling work to be performed by Landlord to the extent agreed to in
the Work Letter are completed although minor items are not completed
(including but not limited to, touch-up plastering or repainting which does
not unreasonably interfere with Tenant's ability to carry on its business in
the Premises). The certificate of the architect (or other representative of
Landlord) in charge of supervising the completion or remodeling of the Premises
shall control conclusively the date upon which the Premises are Ready for
Occupancy. If Landlord is delayed in delivering the Premises to Tenant because
the same are not Ready for Occupancy or due to the failure of a prior occupant
to vacate the same, then the rent and term shall be postponed as hereinabove set
forth, and such postponement shall be in full settlement of all claims which
Tenant may otherwise have by reason of the delay of delivery.
(b) Landlord, at its sole option, may allow Tenant to enter into
the Premises for the purpose of installing furniture, fixtures and equipment
and other leasehold improvements, including, but not limited to, wall and
floor coverings, millwork and draperies, subject to the terms of the Work
Letter prior to the Commencement Date at its sole risk and with no obligation
to pay rent provided that such entry and work do not unreasonably interfere
in any way with the performance of Landlord's work or other workers in and
about the Building. At any time during such period of early entry, if
Landlord notifies Tenant that Tenant's entry or work is interfering with or
delaying the performance of work to be performed by Landlord or other workers
in and about the Building, or causing any disruption whatsoever, Tenant shall
forthwith discontinue any further work and shall vacate the Premises, and
shall cause its workmen or contractors to remove therefrom, any equipment,
materials or installations which are the subject of Landlord's notice.
21. REMOVAL OF TENANT'S PROPERTY: All movable furniture and personal
effects of Tenant not removed from the Premises upon the vacation or abandonment
thereof or upon the termination of this Lease for any cause whatsoever shall
conclusively be deemed to have been abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without notice to Tenant
and without obligation to account therefor, and Tenant shall reimburse Landlord
for all expenses incurred in connection with the disposition of such property.
22. HOLDING OVER: Should Tenant hold over after the termination of
this Lease without Landlord's consent, Tenant shall be deemed a holdover
tenant at will. During such holdover period, Tenant shall be liable for all
damages incurred by Landlord as a result of Tenant's withholding of the
Premises. Should Tenant holdover after the termination of this Lease, with
Landlord's consent, Tenant shall become a tenant from month to month only
upon each and all of the terms herein provided as may be applicable to "such
month to month tenancy and any such holding over shall not constitute an
extension of this Lease. During such holding over, without Landlord's consent,
Tenant shall pay monthly rent equal to one hundred fifty percent (150%) of the
last monthly rental rate plus all other monetary charges as provided herein.
Such tenancy shall continue until terminated by Landlord, beginning with 30 days
written notice, as provided by law, or until Tenant shall have given to Landlord
at least thirty (30) days written notice prior to the last day of the calendar
month intended as the date of termination of such month to month tenancy.
23. PARKING AND COMMON AREAS: Tenant shall have the right to elect to
rent up to one (1) parking space for every one thousand (1,000) square feet
of the Premises on a rentable basis in the parking area or under the Building
as shown on Exhibit E attached hereto and incorporated herein by this
reference during the Primary Lease Term at no charge. Such spaces shall be
located as designated by Landlord. Landlord shall have the right, without
obligation, and from time to time, to change the number, size, location,
shape and arrangement of parking areas and
18
<PAGE>
other common areas, restrict parking of tenants or other guests to designated
areas, designate loading or handicap loading areas, change the level or grade
of parking and to charge for all parking or any portion thereof. Except as
otherwise specifically provided herein, all access roads, courtyards and
other areas, facilities or improvements furnished by Landlord are for the
general and nonexclusive use in common of all tenants of the Building, and
those persons invited upon the land upon which the Building is situated and
shall be subject to the exclusive control and management of Landlord, and
Landlord shall have the right, without obligation to establish, modify and
enforce such rules and regulations, which the Landlord may deem reasonable
and/or necessary. Unless as otherwise provided, Tenant's use of the parking
area, as herein set forth, shall be in common with other tenants of the
Building and any other parties permitted by Landlord to use the parking area.
The parking rights herein granted shall not be deemed a lease but shall be
construed as a license granted by Landlord to Tenant for the term of this
Lease.
24. SURRENDER AND NOTICE: Upon the expiration or earlier termination
of this Lease, Tenant shall promptly quit and surrender to Landlord the
Premises broom clean, in good order and condition, ordinary wear and tear and
loss by fire or other casualty excepted, and Tenant shall remove all of its
movable furniture and other effects and such alterations, additions and
improvements pursuant to Paragraph 10 hereof. In the event Tenant fails to
so vacate the Premises on a timely basis as required, Tenant shall be
responsible to Landlord for all costs and damages, including but not limited
to any amounts required to be paid to third parties who were to have occupied
the Premises, incurred by Landlord as a result of such failure, plus interest
thereon at the Interest Rate on all amounts not paid by Tenant within five
(5) days of demand, until paid in full.
25. ACCEPTANCE OF PREMISES BY TENANT: Taking possession of the
Premises by Tenant shall be conclusive evidence as against Tenant that the
Premises were in the condition agreed upon between Landlord and Tenant, and
acknowledgment of satisfactory completion of the fix-up work which Landlord
has agreed in writing to perform, except as otherwise set forth herein,
subject to Punch List or missing panels and ceiling tiles.
26. SUBORDINATION AND ATTORNMENT:
(a) This Lease, and all rights of Tenant hereunder, are and shall
be subject and subordinate in all respects to all present and future ground
leases, overriding leases and underlying leases and/or grants of term of the
real property and/or the Building or the Building Complex now or hereafter
existing and to all deeds of trust, mortgages and building loan agreements,
including leasehold mortgages and building loan agreements, which may now or
hereafter affect the Building or the Building Complex or any of such leases,
whether or not such deeds of trust or mortgages shall also cover other lands
or buildings, to each and every advance made or hereafter to be made under
such deeds of trust or mortgages, and to all renewals, modifications,
replacements and extension of such leases, deeds of trust and mortgages. The
provisions of this Paragraph shall be self-operative and no further
instrument of subordination shall be required. However, in confirmation of
such subordination, Tenant shall promptly execute and deliver to Landlord (or
such other party so designated by Landlord) at Tenant's own cost and expense,
within five (5) days after request from Landlord an instrument, in recordable
form if required, that Landlord, the lessor of any such lease or the holder
of any such deed of trust or mortgage or any of their respective successors
in interest or assigns may request evidencing such subordination. Failure by
Tenant to comply with the requirements of this Paragraph shall be a default
hereunder. Notwithstanding the foregoing, in the event that Tenant does not
execute such documents as may be required to confirm the subordination set
forth in this Paragraph, Tenant hereby grants to Landlord a power of attorney
coupled with an interest to act as Tenant's attorney in fact for the purpose
of executing whatever documents are necessary to evidence such subordination.
The leases to which this lease is, at the time referred to, subject and
subordinate pursuant to this Paragraph are hereinafter sometimes called
"superior leases" and the deeds of trust or mortgages to which this Lease is,
at the time referred to, subject and subordinate are hereinafter sometimes
called "superior deeds of trust" or "superior mortgages". The lessor of a
superior lease or the beneficiary of a superior deed of trust or superior
mortgage or their successors in interest or assigns are hereinafter sometimes
collectively referred to as a "superior party". Notwithstanding the
foregoing, upon Tenant's request, Landlord agrees to request such superior
party grant to Tenant a non-disturbance agreement in the form then being used
by such superior party for such purposes, providing that Tenant,
notwithstanding a default by Landlord, shall be entitled to remain in
possession of the Premises in accordance with the terms of this Lease for so
long as Tenant shall not be in default of any term, condition or covenant of
this Lease. Further, Tenant shall attorn to such superior party.
19
<PAGE>
(b) Tenant shall take no steps to terminate this Lease, without
giving written notice to such superior party, and a reasonable opportunity to
cure (without such superior party being obligated to cure), any default on
the part of Landlord under this Lease, provided Landlord has given Tenant the
name and address of such party(ies).
(c) If, in connection with the procurement, continuation or
renewal of any financing for which the Building or the Building Complex or of
which the interest of the lessee therein under a superior lease represents
collateral in whole or in part, a lender shall request reasonable
modifications of this Lease as a condition of such financing, Tenant will not
unreasonably withhold its consent thereto provided that such modifications do
not increase the obligations of Tenant under this Lease or adversely affect
any rights of Tenant or decrease the obligations of Landlord under this Lease.
27. PAYMENTS AFTER TERMINATION: No payments of money by Tenant to
Landlord after the termination of this Lease, in any manner, or after giving
of any notice (other than a demand for payment of money) by Landlord to
Tenant, shall reinstate, continue or extend the term of this Lease or affect
any notice given to Tenant prior to the payment of such money, it being
agreed that after the service of notice of the commencement of a suit or
other final judgment granting Landlord possession of the Premises, Landlord
may receive and collect any sums of rent due, or any other sums of money due
under the terms of this Lease or otherwise exercise its rights and remedies
hereunder. The payment of such sums of money, whether as rent or otherwise,
shall not waive said notice or in any manner affect any pending suit or
judgment theretofore obtained.
28. AUTHORITIES FOR ACTION AND NOTICE:
(a) Except as otherwise provided herein, Landlord may, for any
matter pertaining to this Lease, act by and through its Building manager or
any other person designated in writing from time to time.
(b) All notions or demands required or permitted to be given to
Landlord hereunder shall be in writing, and shall be served by hand delivery
or by deposit in the United States mail, with proper postage prepaid,
certified or registered, return receipt requested, addressed as follows:
150 W. John Carpenter Freeway
Suite 150, Irving, Texas 75039
With a copy to:
3300 East First Avenue
Suite 390, Denver Colorado 80206
All notices or demands or permitted to be given to Tenant hereunder shall be
in writing and shall be served by hand delivery or by deposit in the United
States Mail, with proper postage prepaid, certified or registered, return
receipt requested, addressed to Tenant at the Premises.
With a copy to:
150 W. John Carpenter Freeway
Suite 100, Irving, Texas 75039
Either party shall have the right to designate in writing, served as above
provided, a different address to which notice is to be provided. All notices
or demands shall be deemed served on the day of delivery if hand delivered,
or three (3) days after deposit in the U.S. Mail, if sent by registered or
certified mail. The foregoing shall in no event prohibit notice from being
given as provided by the federal or state Rules of Civil Procedure, as the
same may be amended from time to time.
20
<PAGE>
29. LIABILITY OF LANDLORD: Landlord's liability under this Lease
shall be limited to Landlord's estate and interest in the Building (or to the
proceeds thereof) and no other property or other assets of Landlord or its
partners (if Landlord is a partnership, agents, employees, legal
representatives, successors or assigns, shall be subject to levy, execution
or other enforcement procedure for the satisfaction of Tenant's remedies
under or with respect to this Lease, the relationship of Landlord and Tenant
hereunder or Tenant's use and occupancy of the Premises. Nothing contained
in this Paragraph shall be construed to permit Tenant to offset against rents
due a successor landlord, a judgment (or other judicial process) requiring
the payment of money by reason of any default of a prior landlord, except as
otherwise specifically set forth herein.
30. BROKERAGE: Tenant represents and warrants that it has dealt only
with Rob Neblett/Michael Stevens Properties (the "Broker") in the negotiation
of this Lease. Landlord shall make payment of the brokerage fee due to the
Broker pursuant to and in accordance with Landlord's separate agreement with
the Broker. Tenant hereby agrees to indemnify and hold the Landlord harmless
of and from any and all loss, costs, damages or expenses (including, without
limitation, all attorneys' fees and disbursements) by reason of any claim of
or liability to any other broker or person claiming through Tenant and
arising out of or in connection with the negotiation, execution and delivery
of this Lease. Additionally, Tenant acknowledges and agrees that Landlord
shall have no obligation for payment of any brokerage fee or similar
compensation to any person with whom Tenant has dealt or may in the future
deal with respect to this Lease. In the event any claim shall be made
against Landlord by any other broker who shall claim to have negotiated this
Lease on behalf of Tenant or to have introduced Tenant to the Building or to
Landlord, Tenant shall be liable for payment of all reasonable attorneys'
fees, costs and expenses incurred by Landlord in defending against the same,
and in the event such broker shall be successful in any such action, Tenant
shall, in addition, make payment to such Broker.
31. TAXES:
(a) Tenant shall be liable for and shall pay at least ten (10)
days before delinquency and Tenant hereby agrees to indemnify and hold
Landlord harmless from and against all liability in connection with, all
taxes levied against any personal property, fixtures, machinery, equipment,
apparatus, systems and appurtenances placed by or on behalf of Tenant in or
about or "utilized by Tenant in, upon or in connection with the Premises
("Equipment Taxes"). If any Equipment Taxes are levied against Landlord or
Landlord's property or if the assessed value of Landlord's property is
increased by the inclusion therein of a value placed upon such personal
property, fixtures, machinery, equipment, apparatus, systems or appurtenances
of Tenant, and if Landlord, after written notice to Tenant, pays the
Equipment Taxes or taxes based upon such an increased assessment (which
Landlord shall have the right to do regardless of the validity of such levy,
but under proper protest if requested by Tenant prior to such payment and if
payment under protest is permissible), Tenant shall pay to Landlord upon
demand, as Additional Rent hereunder, the taxes so levied against Landlord or
the proportion of such taxes resulting from such increase in the assessment;
provided, however, that in any such event, Tenant shall have the right, on
behalf of Landlord and with Landlord's full cooperation, but at no cost to
Landlord, to bring suit in any court of competent jurisdiction to recover the
amount of any such tax so paid under protest, and any amount so recovered
shall belong to Tenant (provided Tenant has previously paid such amount to
Landlord). Notwithstanding the foregoing to the contrary, Tenant shall
cooperate with Landlord to the extent reasonably necessary to cause the
fixtures, furnishings, equipment and other personal property to be assessed
and billed separately from the real property of which the Premises form a
part, and Landlord shall use reasonable efforts to treat all other Tenants on
the same basis.
(b) Tenant shall pay to Landlord, as Additional Rent, any excise,
sales, privilege or other tax, assessment or levied by any governmental or
quasi-governmental authority or agency upon Landlord on account of this
Lease, the rent or other payments made by Tenant hereunder, any other benefit
received by Landlord hereunder, Landlord's business as a lessor hereunder, or
other in respect of or as a result of the agreement or relationship of
Landlord and Tenant hereunder.
21
<PAGE>
32. RIGHTS RESERVED TO LANDLORD:
(a) All portions of the Building are reserved to Landlord except the
Premises and the inside surfaces of all walls, windows and doors bounding in the
Premises, but including exterior building walls, core corridor walls and doors
and any core corridor entrance. Landlord also reserves any space in or adjacent
to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks or other building facilities, and the use
thereof, as well as the right to access thereto through the Premises for the
purposes of operation, maintenance and repair, upon written notice of not less
than twenty-four (24) hours, except in the event of emergencies or apparent
emergencies, when no prior notice shall be required.
(b) Landlord shall have the following rights without liability to
Tenant for damage or injury to property, person or business (all claims for
damage being hereby waived and released), and without effecting an eviction or
disturbance of Tenant's use or possession of the Premises or giving rise to any
claim for setoffs or abatement of rent:
(1) To enter the Premises as more fully provided in this Lease.
(2) To install and maintain signs on the exterior and interior of
the Building, except within the Premises, provided the signs do not block either
completely or partially the exterior windows of the Premises.
(3) To have pass keys to the Premises.
(4) To have access to all mail chutes according to the rules of
the United States Postal Service.
(5) To do or permit to be done any work in or about the exterior
of the Building or any adjacent or nearby building, land, street or alley.
(6) To grant to anyone the exclusive right to conduct any
business or render any service in the Building, provided such exclusive right
shall not operate to exclude Tenant from the use expressly permitted by this
Lease.
33. FORCE MAJEURE CLAUSE: Wherever there is provided in this Lease a time
limitation for performance by Landlord of any obligation, including but not
limited to obligations related to construction, repair, maintenance or service,
the time provided for shall be extended for as long as and to the extent that
delay in compliance with such limitation is due to an act of God, governmental
control or other factors beyond the reasonable control of Landlord.
34. SIGNAGE:
(a) No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building as shall be
first, designated by Landlord, but there shall be no obligation or duty on
Landlord to allow any sign, advertisement or notice to be inscribed, painted or
affixed on any part of the inside or outside of the Building. A directory in a
conspicuous place, with the names of Tenant, not to exceed one (1) name(s),
shall be provided by Landlord on a one time basis. Any necessary revision to
such directory shall be made by Landlord, at Tenant's expense, within a
reasonable time after written notice from Tenant of the change making the
revision necessary. Landlord shall have the right to remove all nonpermitted
signs without notice to Tenant and at the expense of Tenant, Landlord will allow
Tenant to erect building mounted signage. All signage is subject to approval by
Landlord and the Las Colinas Architectural Control Committee.
(b) Tenant shall only be permitted to install building standard signs
and logos, subject to Landlord's prior written consent and criteria as to size,
design, materials and location.
22
<PAGE>
35. ATTORNEYS' FEES: In the event of any dispute hereunder, or any default
in the performance of any term or condition of this Lease, the prevailing party
shall be entitled to recover all costs and expenses associated therewith,
including reasonable attorneys' fees.
36. HAZARDOUS MATERIALS:
(a) Tenant shall (i) not cause or permit any Hazardous Material to be
brought upon, kept, or used in or about the Premises by Tenant, its agents,
employees, contractors, licensees or invitees, without the prior written consent
of Landlord (which Landlord shall not unreasonably withhold as long as Tenant
demonstrates to Landlord's reasonable satisfaction that such Hazardous Material
is necessary or useful to Tenant's business and will be used, kept and stored in
a manner that complies with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises). If Tenant breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material on the Premises caused or permitted by Tenant results in contamination
of the Premises or Building Complex by Hazardous Material otherwise occurs for
which Tenant is legally liable to Landlord for damage resulting therefrom, then
Tenant shall indemnify, defend and hold Landlord, its agents, employees, legal
representatives, successors and assigns, harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses (including,
without limitation, diminution in value of the Premises and Building Complex,
damages for the loss or restriction on use of any rentable or usable space or of
any amenity of the Premises or Building Complex, damages arising from any
adverse impact on marketing of space in the Building, and sums paid in
settlement of claims, attorneys' fees, consultant fees and expert fees) which
arise during or after the Lease term as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in or about the Building Complex or the soil or ground water on or under
the Building Complex. Without limiting the foregoing, if the presence of any
Hazardous Material on or about the Building Complex caused or permitted by
Tenant results in any contamination of any portion thereof, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Building Complex to the condition existing prior to the introduction of any such
Hazardous Material, subject to obtaining Landlord's prior written consent t the
actions to be taken by Tenant. Landlord may properly require its consent to the
selection of the contractors and other experts involved in the inspection,
testing and removal or abatement activities, the scope of activities to be
performed, the manner and method for performance of such activities, and such
other matters as may be required or requested by Landlord for the safety of and
continued use of the Building Complex and all occupants thereof. The
obligations and liabilities of Tenant herein shall survive expiration or
termination of this Lease.
(b) "Hazardous Material", as used in this Lease, shall be construed in
its broadest sense and shall include asbestos, other asbestotic material (which
is currently or may be designated in the future as a Hazardous Mateiral0, any
petroleum base products, pesticides, paints and solvents, polychlorinated
biphenyl, lead, cyanide, DDT, acids, ammonium compounds and other chemical
products (excluding commercially used cleaning materials in ordinary quantities)
and any substances or material if defined or designated as a hazardous or toxic
substance, or other similar term, by any federal, state or local law, statute,
regulation, or ordinance affecting the Building Complex or Premises presently in
effect or that may be promulgated in the future, as such statutes, regulations
and ordinances may be amended from time to time.
37. BANKRUPTCY OR INSOLVENCY: If the Tenant becomes a debtor under Chapter
7 of the United States Bankruptcy Code, or in the event that a petition for
reorganization or adjustment of debts is filed concerning the Tenant under
Chapter 11 or Chapter 13 of the Bankruptcy Code, or a proceeding filed under
Chapter 7 is transferred to Chapter 11 or 13, the Trustee or the Tenant, as
Debtor-in-Possession, shall be deemed to have rejected this Lease. No election
by the Trustee or Debtor-in-Possession to assume this Lease shall be effective
unless each of the following conditions, which Landlord and Tenant hereby
acknowledge to be commercially reasonable in the context of a bankruptcy
proceeding, has been satisfied, and the Landlord has so acknowledged in writing:
(a) The Trustee or Debtor-in-Possession has cured, or has provided the
Landlord "adequate assurance" (as hereinafter defined) that from the date of
such assumption, the Trustee or Debtor-in-Possession will promptly cure all
monetary and non-monetary defaults under this Lease.
23
<PAGE>
(b) The Trustee or Debtor-in-Possession has compensated, or has
provided to the Landlord adequate assurance that within ten (10) days of the
date of assumption, the Landlord will be compensated, for any pecuniary loss
incurred by the Landlord arising from default of the Tenant, the Trustee or the
Debtor-in-Possession as recited in the Landlord's written statement of pecuniary
loss sent to the Trustee or Debtor-in-Possession.
(c) The Trustee or Debtor-in-Possession has provided the Landlord with
adequate assurance of future performance of each of the Tenant's, the Trustee's,
or Debtor-in-Possession's obligations under this Lease; provided, however that:
(1) The Trustee or Debtor-in-Possession shall also deposit with
the Landlord, as security for the timely payment of rent and other sums due
hereunder, an amount equal to three months Base Rent, Additional Rent and other
monetary charges accruing under this Lease; and
(2) The obligations imposed upon the Trustee or Debtor-in-
Possession shall continue with respect to the Tenant or any assignee of this
Lease after the completion of the bankruptcy proceedings.
(d) For purposes of this Paragraph, Landlord and Tenant acknowledge
that, in the context of the bankruptcy proceeding of the Tenant, at a minimum,
"adequate assurance" shall mean:
(1) The Trustee or Debtor-in-Possession will continue to have
sufficient unencumbered assets after the payment of all secured, obligations and
administrative expenses to assure the Landlord that the Trustee or Debtor-in-
Possession will have sufficient funds to fulfill all of the obligations of
Tenant under this Lease; or
(2) The Bankruptcy Court shall have entered an order aggregating
sufficient cash payable to the Landlord, and the Trustee or Debtor-in-Possession
shall have granted to the Landlord, a valid and perfected first lien and
security interest or mortgage in property of the Tenant, the Trustee or Debtor-
in-Possession, acceptable as to value and kind to the Landlord, in order to
secure to the Landlord the obligation of the Tenant, Trustee or Debtor-in-
Possession to cure the monetary or non-monetary defaults under the Lease within
the time period set forth above.
(e) The following conditions shall apply to any assignment of this
Lease in Bankruptcy Proceedings:
(1) If the Trustee or Debtor-in-Possession has assumed this
Lease and elects to assign the Lease to any other person, such interest or
estate of Tenant in this Lease may be so assigned only if the Landlord has
acknowledged in writing that the intended assignee can provide to the
Landlord "adequate assurance of future performance" (as hereinafter defined)
of all of the terms, covenants and conditions of this Lease to be performed
by the Tenant.
(2) For the purposes of this provision, Landlord and Tenant
acknowledge that, in the context of a bankruptcy proceeding, at a minimum
"adequate assurance of future performance" shall mean that each of the following
conditions has been satisfied, and the Landlord has so acknowledged in writing:
A. The proposed assignee has submitted a current financial
statement audited by a "Certified Public Accountant which shows the net worth
and working capital and amounts determined by Landlord to be sufficient to
assure the future performance by such assignee of all of Tenant's obligations
under this Lease;
B. The proposed assignee, if requested by the Landlord,
shall have obtained guarantees in form and substance satisfactory to the
Landlord from one or more persons who satisfy the Landlord's standards of
creditworthiness;
24
<PAGE>
C. The Landlord has obtained all consents or waivers from
any third party required under any lease, mortgage, financing arrangement, or
other agreement by which the Landlord is bound, in order to permit the
Landlord to consent to such assignment.
38. MISCELLANEOUS:
(a) The rules and regulations attached hereto as Exhibit F, as well as
such rules and regulations as may hereafter be adopted by Landlord for the
safety, care and cleanliness of the Premises and the Building and the
preservation of good order thereon are hereby expressly made a part hereof, and
Tenant agrees to obey all such rules and regulations. The violation of any of
such rules and regulations by Tenant shall be deemed a breach of this Lease by
Tenant affording Landlord all the remedies set forth herein. Landlord shall not
be responsible to Tenant for the nonperformance by any other tenant or occupant
of the Building of any of said rules and regulations.
(b) The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners of the Building at the time in question, and in
the event of any transfer or transfers of the title therein, Landlord herein
named (and in the case of any subsequent transfers or conveyances, the then
grantor) shall be automatically released from and after the date of such
transfer or conveyance of all liability in respect to the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed and relating to events occurring thereafter; provided
that any funds in the hands of Landlord or the then grantor at the time of such
transfer in which Tenant has an interest shall be turned over to the grantee,
and any amount then due and payable to Tenant by Landlord or the then grantor
under any provisions of this Leases shall be paid to Tenant.
(c) As used in this Lease, the term "ordinary business hours" shall
mean the hours from 7:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m.
to 1:00 p.m. on Saturday, except for New year's Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and any other
national or state holiday as may be established from time to time ("Holidays").
(d) This Lease shall be construed as though the covenants herein
between Landlord and Tenant are independent and not dependent and Tenant shall
not be entitled to any setoff of the rent or other amounts owing hereunder
against Landlord, if Landlord fails to perform its obligations set forth herein,
except as herein specifically set forth; provided, however, the foregoing shall
in no way impair the right of Tenant to commence a separate action against
Landlord for any violation by Landlord of the provisions hereof so long as
notice is first given to Landlord and any holder of a mortgage or deed of trust
covering the Building Complex or any portion thereof whose address Tenant has
been notified in writing and so long as an opportunity has been granted to
Landlord and such holder to correct such violation as provided in Paragraph
40(h) hereof.
(e) If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby.
(f) The captions of each paragraph are added as a matter of
convenience only and shall be considered of no effect in the construction of
any provision or provisions of this Lease.
(g) Except as herein specifically set forth, all terms, conditions and
covenants to be observed and performed by the parties hereto shall be applicable
to and binding upon their respective heirs, administrators, executors,
successors and assigns. The terms, conditions and covenants hereof shall also
be considered to be covenants running with the land.
(h) Except as otherwise specifically provided herein, in the event
Landlord shall fail to perform any of the agreements, terms, covenants or
conditions hereof on Landlord's part to be performed, and such nonperformance
shall continue for a period of thirty (30) days after written notice thereof,
from Tenant to Landlord, or if such performance cannot be reasonably had within
such thirty (30) day period, and Landlord shall not in good
25
<PAGE>
faith have commenced such performance within such thirty (30) day period and
proceed therewith to completion, it shall be considered a default of Landlord
under this Lease. Tenant shall give written notice to Landlord in the matter
herein set forth and shall afford Landlord a reasonable opportunity to cure
any such default. In addition, Tenant shall send notice of such default by
certified or registered mail, with proper postage prepaid, to the holder of
any mortgages or deeds of trust covering the Building Complex or any portion
thereof of whose address Tenant has been notified in writing and shall afford
such holder a reasonable opportunity to cure any alleged default on
Landlord's behalf.
(i) If there is more than one entity or person which or who are the
Tenants under this Lease, the obligations imposed upon Tenant under this Lease
shall be joint and several.
(j) No act or thing done by Landlord or Landlord's agent during the
term hereof, including but not limited to any agreement to accept surrender of
the Premises or to amend or modify this Lease, shall be deemed to be binding
upon Landlord unless such act or things shall be by an officer of Landlord or a
party designated in writing by Landlord as so authorized to act. The delivery
of keys to Landlord, or Landlord's agent, employees or officers shall not
operate as a termination of this Lease or a surrender of the Premises. No
payment by Tenant or receipt by Landlord of a lessor amount than the monthly
rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as rent be deemed an accord and
satisfaction and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
available to Landlord.
(k) Landlord shall have the right to construct other buildings or
improvements in any common area, or any other area designated by Landlord for
use by tenants or to change the location, character or make alterations of or
additions to any of said common areas or other areas. Landlord, during the
entire term of this Lease, shall have the right to change the number and name of
the Building at any time without liability to Tenant, if so ordered by
governmental authority.
(l) Tenant acknowledges and agrees that it has not relied upon any
statements, representations, agreements or warranties, except such as are
expressed in this Lease.
(m) Notwithstanding anything to the contrary contained herein,
Landlord's liability under this Lease shall be limited to its interests in this
building.
(n) Time is of the essence hereof.
(o) Tenant and Landlord and the party executing this Lease on
behalf of each of them represent to each other that such party is authorized
to do so by requisite action of the board of directors or partners, as the
case may be, and agree upon request to deliver to each other a resolution or
similar document to that effect.
(p) This Lease shall be governed by and construed in accordance with
the laws of the State where the Premises are located.
(q) This Lease, together with the exhibits attached hereto, contains
the entire agreement of the parties and may not be amended or modified in any
manner except by an instrument in writing signed by both parties. Tenant shall
not record this Lease or a memorandum hereof.
(r) Tenant shall not use the name of the Building, the Building
Complex or the development in which the Building is situated as part of its
legal or trade name, nor for any purpose other than as an address for the
business to be conducted by Tenant in the Premises.
(s) In the event Landlord makes available to Tenant and its employees
any area of the Building Complex for use as an athletic/health facility, Tenant
agrees, on behalf of itself and its employees, that
26
<PAGE>
Landlord shall have no liability for any damages or injuries incurred by any
person as a result of the use of such facility.
(t) The submission or delivery of this document for examination and
review does not constitute an option, an offer to lease space in the Building or
an agreement to lease. This document shall have no binding effect on the
parties unless and until executed by both Landlord and Tenant.
27
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
LANDLORD:
COSCAN COMMERCIAL PROPERTIES, INC.,
a Colorado corporation
By:
---------------------------------
Title
-------------------------------
By:
---------------------------------
Title
-------------------------------
TENANT:
INTERNATIONAL RETAIL SYSTEMS, INC.
------------------------------------
a
-----------------------------------
ATTEST:
By: By:
------------------------------ ---------------------------------
Title: Title:
--------------------------- ------------------------------
28
<PAGE>
LANDLORD NOTARY
STATE OF COLORADO )
)
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ____ day of
_________, 1997, by _______________________________ as ____________ of COSCAN
COMMERCIAL PROPERTIES, INC., a Colorado corporation.
Witness my hand and official seal
My Commission expires: ______________.
------------------------------
Notary Public
STATE OF COLORADO )
)
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ____ day of
_________, 1997, by _______________________________ as ____________ of COSCAN
COMMERCIAL PROPERTIES, INC., a Colorado corporation.
Witness my hand and official seal
My Commission expires: ______________.
------------------------------
Notary Public
TENANT NOTARY
STATE OF _________ )
)
COUNTY OF _______ )
The foregoing instrument was acknowledged before me this ____ day of
_________, 1997, by _______________________________ as ________________ of
_______________________________, a __________________________________.
Witness my hand and official seal
My Commission expires: ______________.
------------------------------
Notary Public
29
<PAGE>
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT, dated as of June 30, 1997, between CANMAX RETAIL
SYSTEMS, INC., a Texas corporation with offices at 150 West Carpenter Freeway,
Irving, Texas 75039 (the "Company"), CANMAX INC., a Wyoming corporation
("Canmax") and ROGER D. BRYANT, residing at 815 Cambridge Manor Lane, Coppell,
Texas 75019 (the "Executive").
RECITALS:
A. The Company desires to continue to employ Executive as an executive
officer of the Company.
B. Executive has agreed to continue his employment with the Company
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company, Canmax and Executive hereby agree as follows:
1. TERM AND RENEWAL.
The Company agrees to employ Executive, and the Executive agrees to
serve, on the terms and conditions of this Agreement for a period commencing
on July 1, 1997 and ending June 30, 1999, or such shorter period as may be
provided for herein. On each anniversary of this Agreement, the term shall be
extended for an additional period of one (1) year unless the Board of
Directors of Canmax elects, at the directors' meeting immediately following
the annual stockholders' meeting, not to extend this Agreement. In the event
that this Agreement is not extended by the Board of Directors of Canmax, this
Agreement shall remain in effect for only the remainder of the term then in
effect. Notwithstanding the foregoing, this Agreement shall not be extended
beyond the time that Executive has attained the normal retirement age (which
shall be no earlier than age 65) established by the Board of Directors of
Canmax for the Company's executives. The period during which Executive is
employed hereunder is hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES.
During the Employment Period, Executive shall be employed as the
President and Chief Executive Officer of the Company and Canmax and shall
also perform services in a responsible executive or managerial capacity for
any of the Company's or Canmax's subsidiary corporations when and as
requested by the Company. In performance of his duties, Executive shall be
subject to the direction of the Board of Directors of Canmax. Executive
agrees to his employment as
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 1
<PAGE>
described in this Section 2 and agrees to devote substantially all of his
time and efforts to the performance of his duties under this Agreement.
Executive shall be available to travel as the needs of the business require.
3. COMPENSATION.
(a) As compensation for his services hereunder, the Company shall pay
Executive, during the Employment Period, a base salary payable in equal
monthly installments at the annual rate of $185,000. Executive shall also
participate in any bonus programs for the Company's executive officers, as
provided by the Board of Directors of Canmax, including, without limitation,
the Company's current Management Incentive Plan. During the term of this
Agreement, the Company may increase the base salary payable to the Executive,
but cannot reduce the base amount of Executive's salary. Executive will also
be eligible to participate in the regular employee benefit programs and stock
option plans now or hereafter established by the Company and in any special
executive benefits and perquisites established by the Board of Directors of
Canmax.
(b) Executive shall be entitled to receive warrants ("Performance
Warrant") to acquire 250,000 shares of common stock of Canmax. The
Performance Warrant will have an exercise price equal to the closing price of
the common stock of Canmax as reported on the Nasdaq SmallCap Market on the
date that the issuance of such Warrant is approved by the Company's
compensation committee and shall provide for the registration of the shares
of common stock issuable upon the exercise of such Performance Warrant, as
set forth therein. The Performance Warrant will expire ten (10) years from
the date of issuance, and shall vest as follows:
(i) fifty percent (50%) upon the occurrence of the earlier of the
following (such date being referenced to herein as the "Trigger Date"):
(A) the earning per share (after tax) of Canmax equals or
exceeds $.30 per share during any fiscal year;
(B) the closing price of the common stock of Canmax as reported
on the Nasdaq SmallCap Market (or other national automated quotation
system or national stock exchange on which the common stock of Canmax
may be listed) equals or exceeds $8.00 per share for a period of
sixty-five (65) consecutive trading days; or
(C) the occurrence of a Change of Control (as defined below);
and
(ii) the remaining fifty percent (50%) on the date which is one (1)
year following the Trigger Date.
(c) The number of shares of Canmax common stock issuable upon the
exercise of the Performance Warrant, the exercise price thereof, and the
earnings per share and closing price targets set forth in Section 3(b) above
shall each be subject to appropriate adjustment for stock splits, stock
dividends or similar recapitalizations.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 2
<PAGE>
4. EXPENSES.
Executive shall be entitled to reimbursement for travel and other
out-of-pocket expenses incurred by Executive in the performance of his duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company. Executive shall
be entitled to reasonable vacations in accordance with the then regular
procedures of the Company governing executives.
5. NONCOMPETITION; NON-SOLICITATION.
Executive agrees that he will not during the Employment Period engage
in, or otherwise directly or indirectly be employed by, or act as a
consultant or lender to, or be a director, officer, employee, owner or
partner of, any other business or organization that directly or indirectly
competes with the business of the Company or any of its subsidiaries;
provided, however, that notwithstanding the foregoing, the provisions of this
Section 5 will not be deemed breached merely because Executive owns not more
than 1 percent of the outstanding equity securities of an entity, if, at the
time of its acquisition by Executive, such securities are listed on a
national securities exchange, is reported on the Nasdaq Stock Market, or is
regularly traded in the over-the-counter market by a member of a national
securities exchange. Executive agrees that he shall not, during the two-year
period after he voluntarily terminates this Agreement or is terminated
pursuant to this Agreement for "cause" (as defined in Section 7(d) below),
solicit or encourage any employee, consultant, vendor, supplier or customer
of the Company or Canmax to leave the employment of, or cease or diminish its
relations with, the Company or Canmax.
6. CONFIDENTIAL INFORMATION.
All confidential information which Executive may now possess, may obtain
from the Company or its subsidiaries during or after the Employment Period,
or may create prior to the end of the Employment Period or otherwise relating
to the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company or of any customer or
supplier of any of them shall not be published, disclosed, or made accessible
by him to any other person or entity either during or after the termination
of his employment or used by him except during the Employment Period in the
business and for the benefit of the Company and its subsidiaries, in each
case without prior written permission of the Company. Executive shall deliver
to the Company all tangible evidence of such confidential information prior
to or at the termination of his employment. The provisions of this Section 6
shall survive the termination of this Agreement by either party.
7. TERMINATION.
(a) EXECUTIVE'S DEATH. If Executive shall die during the Employment
Period, this Agreement shall terminate, except that Executive's estate
("Estate") shall be entitled to receive (i) the base salary payable to
Executive, accrued to the last day of the month in which his death occurs,
(ii) for a period of six (6) months following death, payments equal to fifty
percent (50%)
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 3
<PAGE>
of the payments of Executive's base salary effective at the time of death,
each in accordance with the Company's regular payroll cycle, and (iii) any
death benefits provided under employee benefit plans maintained by the
Company. In addition, if Executive shall die during the Employment Period
and notwithstanding any contrary provisions of any Company stock option,
warrant or stock option plan, the Estate shall have the right to retain and
exercise (y) any vested options or warrants outstanding on the date of death
and (z) any unvested options or warrants outstanding on the date of death
that vest within one year of the date of death, in each case in accordance
with their respective terms.
(b) EXECUTIVE'S DISABILITY. If, during the Employment Period,
Executive shall become Disabled (as defined below), this Agreement shall
terminate effective on such incapacity and Executive (or his legal
representatives) shall be entitled only to the base compensation earned
through the date of termination with no entitlement to any base salary after
the date of termination; provided, however, that (i) Executive shall be
entitled to receive all benefits to which he may be entitled pursuant to the
Company's employee benefit plans; and (ii) the Company shall not be obligated
to make any payments to Executive under this Section 7(b) to the extent that
such payments, when aggregated with all other salary or disability payments
received by Executive (whether from disability programs maintained by the
Company or otherwise) exceed the then current base salary of Executive. As
used herein, the term "Disabled" or "Disability" shall mean a mental or
physical condition that prevents Executive from performing his usual duties
and services hereunder for a period of six (6) consecutive months or six (6)
non-consecutive months in any twelve (12) month period, as determined in the
reasonable discretion of the Board of Directors of Canmax; provided that if
Executive disputes such determination by the Board of Directors, Executive
(or his legal representatives) shall notify the Board of Directors in writing
and (x) the Board of Directors and Executive (or his legal representatives)
shall each designate a licensed physician practicing in the field to which
the alleged Disability relates within fifteen (15) days of the delivery of
such notice, (y) the designated physicians shall within fifteen (15) days
select a third physician practicing in the field to which the alleged
Disability relates, and (z) the third physician shall determine whether
Executive is or has been Disabled within the meaning of this Agreement.
(c) TERMINATION WITHOUT CAUSE. This Agreement may be terminated by the
Company or Canmax without cause upon thirty (30) days' prior written notice
thereof given to Executive. In the event of termination without cause, the
Company shall (i) for a period of two (2) years continue to pay Executive the
base salary effective at the time of termination in accordance with the
Company's regular payroll cycle and (ii) for a period of one year pay
Executive a monthly amount equal to one twelfth of any bonuses paid during
the twelve-month period preceding the date of termination. Additionally,
Executive shall be entitled to continue to participate in all regular
employee benefit plans of the Company for a period of two (2) years following
termination without cause; provided, however, that if Executive accepts
another job during such period that provides employee benefits comparable to
those offered by the Company at such time at a cost to Executive no greater
than the cost of the benefits provided by the Company, the Company's
obligation to extend such benefits to Executive shall cease.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 4
<PAGE>
(d) TERMINATION FOR CAUSE. This Agreement may be terminated by the
Company or Canmax "for cause", as defined below, by delivering to Executive
written notice describing the cause and granting Executive thirty (30) days
to respond to the Board of Directors of Canmax. If this Agreement is
terminated by the Company for cause, Executive shall only be entitled to the
base salary earned by him to the date of termination with no entitlement to
any base salary continuation payments or benefits continuation (except as
otherwise provided by the terms of an employee benefit plan of the Company).
The determination as to whether termination shall be for cause shall be made
by the Board of Directors of Canmax in the exercise of its business judgment.
Termination of this Agreement by the Company for cause shall be deemed to
have occurred only if:
(i) termination shall have been the result of an act or acts of
dishonesty on the Executive's part constituting a felony or intended to
result directly or indirectly in substantial gain or personal enrichment
to him at the expense of the Company; or
(ii) termination shall have been the result of the Executive's willful
and continued failure substantially to perform his duties and
responsibilities as an officer of the Company (other than such failure
resulting from his incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to the Executive by the
Board of Directors of Canmax which specifically identifies the manner in
which such Board believes that the Executive has not substantially
performed his duties and the Executive is given a reasonable time after
such demand substantially to perform his duties.
Executive's employment shall in no event be considered to have been
terminated by the Company for cause if the act or failure to act upon which
the termination is based (A) was done or omitted to be done without intent of
gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled and as a result of his good faith belief that such act
or failure to act was in or was not opposed to the interests of the Company,
or (B) is an act or failure to act in respect of which the Executive meets
the applicable standard of conduct prescribed for indemnification or
reimbursement of expenses under the Bylaws of the Company or the laws of its
state of incorporation.
(e) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate this
Agreement at any time upon delivering thirty (30) days' written notice to the
Company. In the event of such voluntary termination other than for "good
reason", as hereinafter defined, Executive shall be entitled to his base
salary earned to the date of his resignation, but no base salary continuation
payment or benefits continuation (except as provided by the terms of the
Company's employee benefit plans). On or after the date the Company receives
notice of Executive's resignation (other than resignation for good reason),
the Company may, at its option, pay Executive his base salary through the
effective date of his resignation and terminate his employment immediately.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may at any time
voluntarily terminate his employment for "good reason", as defined below,
upon thirty (30) days written notice thereof to the Company; provided that
the Company may, at its option, pay
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 5
<PAGE>
Executive his base salary through the effective date of his resignation,
terminate his employment immediately (except for the provision of non
monetary benefits) and, following the effective date of such resignation,
provide the payments and benefits provided in Section 7(c). In the event of
such voluntary termination for "good reason", Executive shall be deemed to
have been terminated without cause with the same payments and benefits set
forth in Section 7(c) being applicable to Executive's termination under this
Section 7(f).
For purposes of this Agreement, "good reason" shall mean the
occurrence of any of the following events:
(i) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility, but not including termination of Executive "for cause";
(ii) reduction in the base salary payable to Executive; or
(iii) the Company otherwise commits a material breach of this Agreement;
provided that "good reason" shall not include the temporary appointment of
another person to fulfill Executive's responsibilities during any period of
disability of Executive.
8. CHANGE OF CONTROL
(a) CONCERNS REGARDING CHANGE OF CONTROL. Executive and the Company
agree that the circumstances surrounding a "Change of Control," as
hereinafter defined, impose unique risks to the Company and the Executive and
that in response to the unique circumstances surrounding a Change of Control,
the provisions of this Agreement shall separately consider the parties
rights' and obligations in the event that a Change of Control occurs. This
Section 8 shall be applicable whether or not a Change of Control is
contemplated at this time. Notwithstanding any other provision of this
Agreement, the severance payments and benefits, if any, payable to Executive
shall be determined solely by reference to this Section 8 in the event that a
Change of Control has occurred, or if Executive is "involuntarily
terminated," as hereinafter defined, in contemplation of a Change of Control.
(b) VOLUNTARY TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change
of Control has occurred, Executive shall have ninety (90) days in which to
terminate his employment. If Executive voluntarily terminates his employment
within ninety (90) days following a Change of Control he shall be entitled to
receive one (1) year's base salary as a lump sum payment. Upon payment of the
severance compensation described in the preceding sentence, the Company will
have no future obligation to Executive under this Agreement. Except as
otherwise provided in Section 8(c), if Executive does not voluntarily
terminate his employment within ninety (90) days of a Change of Control,
Executive shall not be entitled to any severance compensation if he
voluntarily terminates his employment after that time.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 6
<PAGE>
(c) INVOLUNTARY TERMINATION IN CONTEMPLATION OF, OR WITHIN TWO YEARS
FOLLOWING, A CHANGE OF CONTROL. If Executive is involuntarily terminated,
other than "for cause" (as defined in Section 7(d)) in contemplation of, or
within two (2) years following, a Change of Control, the Company shall pay
Executive (i) a lump sum severance payment equal to (A) two (2) times
Executive's base salary in effect at the time of involuntary termination plus
(B) any bonus paid during the preceding twelve-month period, payable as a
lump sum, and (ii) continuation of all employee benefits, executive benefits
and perquisites, or benefits reasonably equivalent thereto, for a period of
two (2) years; provided, however, that if Executive accepts another job
during such period that provides employee benefits comparable to those
offered by the Company at such time at a cost to Executive no greater than
the cost of the benefits provided by the Company, the Company's obligation to
extend such benefits to Executive shall cease.
For purposes of this Agreement, the following shall be deemed to
constitute involuntary termination:
(i) dismissal of Executive (except termination for cause as defined
in Section 7(d) hereof);
(ii) reduction in Executive's base salary;
(iii) reduction in the level of employee benefits received by
Executive, unless substituted with reasonably comparable benefits;
(iv) requesting Executive to relocate more than 100 miles from his
current location other than the relocation of Executive in connection with
the relocation of the Company's corporate headquarters or relocation to
another existing facility of the Company;
(v) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility; or
(vi) the Company otherwise commits a material breach of this
Agreement.
In the event that within two (2) years following a Change of
Control, Executive is terminated for cause, Executive shall only be entitled
to his base salary up until the last date of employment pursuant to the date
of termination for cause.
(d) TERMINATION OF THIS AGREEMENT MORE THAN TWO YEARS AFTER A CHANGE OF
CONTROL. The parties' rights and obligations arising from a termination of
this Agreement, whether by Executive or the Company, that occurs more than
two (2) years following a Change of Control shall be governed by Section 7 of
this Agreement.
(e) DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a
Change of Control shall be deemed to exist upon the occurrence of any of the
following:
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 7
<PAGE>
(i) any "Person" (as such term is used in Section 13(d) and Section
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes a "beneficial owner" (as defined in Section 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company or Canmax representing more than thirty percent (30%) of the
combined voting power of the outstanding securities of the Company or
Canmax;
(ii) at any time during the twenty-four (24) month period following
a merger, tender offer, consolidation, sale of assets or contested
election, or any combination of such transactions, at least a majority of
the Board of Directors of the Company or Canmax shall cease to be
"continuing directors" (meaning directors of the Company or Canmax prior
to such transaction or who subsequently became directors and whose
election or nomination for election by the stockholders of the Company or
Canmax, was approved by a vote of at least two-thirds of the directors
then still in office prior to such transaction);
(iii) the stockholders approve an agreement of sale or disposition by
the Company or Canmax of all or substantially all of the assets of the
Company or Canmax;
provided, however, that no Change of Control shall be deemed to have occurred
for purposes of this Agreement by reason of the anticipated merger of
Auto-Gas Systems, Inc. into the Company or the related issuance of shares of
Canmax common stock.
(f) VESTING OF OPTIONS AND WARRANTS. Upon any Change of Control, any
unvested options or warrants held by Executive to acquire shares of Canmax
common stock shall be immediately vested and exercisable by Executive, and
Canmax undertakes to amend any existing stock option or warrant agreements
between Canmax and/or the Company and Executive consistent with this Section
8(f).
(g) NO MITIGATION OF COMPENSATION. Executive shall not be required to
mitigate any severance payments received under this Section 8 due to his
employment with a successor organization.
9. SURVIVAL.
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive Executive's termination of
employment.
10. MODIFICATION.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements
between them concerning such subject matter, and may be modified only by a
written instrument duly executed by each party.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 8
<PAGE>
11. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 11). Any notice
given to the Company shall be addressed to the attention of the Corporate
Secretary. Notice to the estate of Executive shall be sufficient if addressed
to Executive as provided in this Section 11. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means permitted by this Section 11 shall be deemed given at the time of
receipt thereof.
12. WAIVER.
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
13. BINDING EFFECT.
Executive's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Executive's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Executive and his
heirs and personal representatives, shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. HEADINGS.
The headings of this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
15. ATTORNEYS' FEES.
In the event that any person commences any action or proceeding to
enforce the terms of this Agreement, the prevailing party shall be entitled
to recover from the other his or its reasonable attorney's fees.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 9
<PAGE>
16. COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to the
conflict of laws rules. Any action, suit, or proceeding arising out of, based
on, or in connection with this Agreement, any document or instrument
delivered pursuant to, in connection with, or simultaneously with this
Agreement, any breach of this Agreement or any such document or instrument,
or any transaction contemplated hereby or thereby may be brought only in the
District Courts of Dallas County, Texas or the United States District Court
for the Northern District of Texas, Dallas Division and each party covenants
and agrees not to assert, by way of motion, as a defense, or otherwise, in
any such action, suit, proceeding, any claim that such party is not subject
personally to the jurisdiction of such court, that such party's property is
exempt or immune from attachment or execution, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit, or proceeding is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
COMPANY:
CANMAX RETAIL SYSTEMS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXECUTIVE:
--------------------------------------
ROGER D. BRYANT
CANMAX INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 11
<PAGE>
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT, dated as of June 30, 1997, between CANMAX RETAIL
SYSTEMS, INC., a Texas corporation with offices at 150 West Carpenter Freeway,
Irving, Texas 75039 (the "Company"), CANMAX INC., a Wyoming corporation
("Canmax") and PHILIP M. PARSONS, residing at 3814 W. Beverly Drive, Dallas,
Texas 75209 (the "Executive").
RECITALS:
A. The Company desires to continue to employ Executive as an executive
officer of the Company.
B. Executive has agreed to continue his employment with the Company
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company, Canmax and Executive hereby agree as follows:
1. TERM AND RENEWAL.
The Company agrees to employ Executive, and the Executive agrees to
serve, on the terms and conditions of this Agreement for a period commencing
on July 1, 1997 and ending June 30, 1998, or such shorter period as may be
provided for herein. On each anniversary of this Agreement, the term shall be
extended for an additional period of one (1) year unless the Board of
Directors of Canmax elects, at the directors' meeting immediately following
the annual stockholders' meeting, not to extend this Agreement. In the event
that this Agreement is not extended by the Board of Directors of Canmax, this
Agreement shall remain in effect for only the remainder of the term then in
effect. Notwithstanding the foregoing, this Agreement shall not be extended
beyond the time that Executive has attained the normal retirement age (which
shall be no earlier than age 65) established by the Board of Directors of
Canmax for the Company's executives. The period during which Executive is
employed hereunder is hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES.
During the Employment Period, Executive shall be employed as an
Executive Vice President and the Chief Financial Officer of the Company and
Canmax and shall also perform services in a responsible executive or
managerial capacity for any of the Company's or Canmax's subsidiary
corporations when and as requested by the Company. In performance of his
duties, Executive shall be subject to the direction of the Chief Executive
Officer of the Company and Board of Directors of Canmax. Executive agrees to
his employment as described
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 1
<PAGE>
in this Section 2 and agrees to devote substantially all of his time and
efforts to the performance of his duties under this Agreement. Executive
shall be available to travel as the needs of the business require.
3. COMPENSATION.
(a) As compensation for his services hereunder, the Company shall pay
Executive, during the Employment Period, a base salary payable in equal
monthly installments at the annual rate of $125,000. Executive shall also
participate in any bonus programs for the Company's executive officers, as
provided by the Board of Directors of Canmax, including, without limitation,
the Company's current Management Incentive Plan. During the term of this
Agreement, the Company may increase the base salary payable to the Executive,
but cannot reduce the base amount of Executive's salary. Executive will also
be eligible to participate in the regular employee benefit programs and stock
option plans now or hereafter established by the Company and in any special
executive benefits and perquisites established by the Board of Directors of
Canmax.
(b) Executive shall be entitled to receive warrants ("Performance
Warrant") to acquire 100,000 shares of common stock of Canmax. The
Performance Warrant will have an exercise price equal to the closing price of
the common stock of Canmax as reported on the Nasdaq SmallCap Market on the
date that the issuance of such Performance Warrant is approved by the
Company's compensation committee and shall provide for the registration of
any shares of common stock issuable upon the exercise of such Performance
Warrant, as further set forth therein. The Performance Warrant will expire
ten (10) years from the date of issuance, and shall vest as follows:
(i) fifty percent (50%) upon until the occurrence of the earlier of
the following (such date being referenced to herein as the "Trigger Date"):
(A) the earning per share (after tax) of Canmax equals or
exceeds $.30 per share during any fiscal year;
(B) the closing price of the common stock of Canmax as
reported on the Nasdaq SmallCap Market (or other national
automated quotation system or national stock exchange on which
the common stock of Canmax may be listed) equals or exceeds $8.00
per share for a period of sixty-five (65) consecutive trading
days; or
(C) the occurrence of a Change of Control (as defined below);
and
(ii) the remaining fifty percent (50%) on the date which is one (1)
year following the Trigger Date.
(c) The number of shares of Canmax common stock issuable upon the
exercise of the Performance Warrant, the exercise price thereof, and the
earnings per share and closing price targets set forth in Section 3(b) above
shall each be subject to appropriate adjustment for stock splits, stock
dividends or similar recapitalizations.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 2
<PAGE>
4. EXPENSES.
Executive shall be entitled to reimbursement for travel and other
out-of-pocket expenses incurred by Executive in the performance of his duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company. Executive shall
be entitled to reasonable vacations in accordance with the then regular
procedures of the Company governing executives.
5. NONCOMPETITION; NON-SOLICITATION.
Executive agrees that he will not during the Employment Period engage
in, or otherwise directly or indirectly be employed by, or act as a
consultant or lender to, or be a director, officer, employee, owner or
partner of, any other business or organization that directly or indirectly
competes with the business of the Company or any of its subsidiaries;
provided, however, that notwithstanding the foregoing, the provisions of this
Section 5 will not be deemed breached merely because Executive owns not more
than 1 percent of the outstanding equity securities of an entity, if, at the
time of its acquisition by Executive, such securities are listed on a
national securities exchange, is reported on the Nasdaq Stock Market, or is
regularly traded in the over-the-counter market by a member of a national
securities exchange. Executive agrees that he shall not, during the two-year
period after he voluntarily terminates this Agreement or is terminated
pursuant to this Agreement for "cause" (as defined in Section 7(d) below),
solicit or encourage any employee, consultant, vendor, supplier or customer
of the Company or Canmax to leave the employment of, or cease or diminish its
relations with, the Company or Canmax.
6. CONFIDENTIAL INFORMATION.
All confidential information which Executive may now possess, may obtain
from the Company or its subsidiaries during or after the Employment Period,
or may create prior to the end of the Employment Period or otherwise relating
to the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company or of any customer or
supplier of any of them shall not be published, disclosed, or made accessible
by him to any other person or entity either during or after the termination
of his employment or used by him except during the Employment Period in the
business and for the benefit of the Company and its subsidiaries, in each
case without prior written permission of the Company. Executive shall deliver
to the Company all tangible evidence of such confidential information prior
to or at the termination of his employment. The provisions of this Section 6
shall survive the termination of this Agreement by either party.
7. TERMINATION.
(a) EXECUTIVE'S DEATH. If Executive shall die during the Employment
Period, this Agreement shall terminate, except that Executive's estate
("Estate") shall be entitled to receive (i) the base salary payable to
Executive, accrued to the last day of the month in which his death occurs,
(ii) for a period of three (3) months following death, payments equal to
fifty percent (50%) of the payments of Executive's base salary effective at
the time of death, each in
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 3
<PAGE>
accordance with the Company's regular payroll cycle, and (iii) any death
benefits provided under employee benefit plans maintained by the Company. In
addition, if Executive shall die during the Employment Period and
notwithstanding any contrary provisions of any Company stock option, warrant
or stock option plan, the Estate shall have the right to retain and exercise
(y) any vested options or warrants outstanding on the date of death and (z)
any unvested options or warrants outstanding on the date of death that vest
within one year of the date of death, in each case in accordance with their
respective terms.
(b) EXECUTIVE'S DISABILITY. If, during the Employment Period,
Executive shall become Disabled (as defined below), this Agreement shall
terminate effective on such incapacity, and Executive (or his legal
representatives) shall be entitled only to the base compensation earned
through the date of termination with no entitlement to any base salary after
the date of termination; provided, however, that (i) Executive shall be
entitled to receive all benefits to which he may be entitled pursuant to the
Company's employee benefit plans; and (ii) the Company shall not be obligated
to make any payments to Executive under this Section 7(b) to the extent that
such payments, when aggregated with all other salary or disability payments
received by Executive (whether from disability programs maintained by the
Company or otherwise) exceed the then current base salary of Executive. As
used herein, the term "Disabled" or "Disability" shall mean a mental or
physical condition that prevents Executive from performing his usual duties
and services hereunder for a period of six (6) consecutive months or six (6)
non-consecutive months in any twelve (12) month period, as determined in the
reasonable discretion of the Board of Directors of Canmax; provided that if
Executive disputes such determination by the Board of Directors, Executive
(or his legal representatives) shall notify the Board of Directors in writing
and (x) the Board of Directors and Executive (or his legal representatives)
shall each designate a licensed physician practicing in the field to which
the alleged Disability relates within fifteen (15) days of the delivery of
such notice, (y) the designated physicians shall within fifteen (15) days
select a third physician practicing in the field to which the alleged
Disability relates, and (z) the third physician shall determine whether
Executive is or has been Disabled within the meaning of this Agreement.
(c) TERMINATION WITHOUT CAUSE. This Agreement may be terminated by the
Company or Canmax without cause upon thirty (30) days' prior written notice
thereof given to Executive. In the event of termination without cause, the
Company shall (i) for a period of one (1) year continue to pay Executive the
base salary effective at the time of termination in accordance with the
Company's regular payroll cycle and (ii) for a period of six (6) months pay
to Executive a monthly amount equal to one twelfth of any bonuses paid during
the twelve-month period preceding the date of termination. Additionally,
Executive shall be entitled to continue to participate in all regular
employee benefit plans of the Company for a period of one (1) year following
termination without cause; provided, however, that if Executive accepts
another job during such period that provides employee benefits comparable to
those offered by the Company at such time at a cost to Executive no greater
than the cost of the benefits provided by the Company, the Company's
obligation to extend such benefits to Executive shall cease.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 4
<PAGE>
(d) TERMINATION FOR CAUSE. This Agreement may be terminated by the
Company or Canmax "for cause", as defined below, by delivering to Executive
written notice describing the cause and granting Executive thirty (30) days
to respond to the Chief Executive Officer of the Company or the Board of
Directors of Canmax. If this Agreement is terminated by the Company for
cause, Executive shall only be entitled to the base salary earned by him to
the date of termination with no entitlement to any base salary continuation
payments or benefits continuation (except as otherwise provided by the terms
of any employee benefit plan of the Company). The determination as to whether
termination is for cause shall be made by the Chief Executive Officer of the
Company or the Board of Directors of Canmax in the exercise of its business
judgment. Termination of this Agreement by the Company for cause shall be
deemed to have occurred only if:
(i) termination shall have been the result of an act or acts of
dishonesty on the Executive's part constituting a felony or intended to
result directly or indirectly in substantial gain or personal
enrichment to him at the expense of the Company; or
(ii) termination shall have been the result of the Executive's
willful and continued failure substantially to perform his duties and
responsibilities as an officer of the Company (other than such failure
resulting from his incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to the Executive by
the Chief Executive Officer of the Company or the Board of Directors of
Canmax which specifically identifies the manner in which such Board
believes that the Executive has not substantially performed his duties
and the Executive is given a reasonable time after such demand
substantially to perform his duties.
Executive's employment shall in no event be considered to have been
terminated by the Company for cause if the act or failure to act upon which
the termination is based (A) was done or omitted to be done without intent of
gaining therefrom directly or indirectly a profit to which the Executive was
not legally entitled and as a result of his good faith belief that such act
or failure to act was in or was not opposed to the interests of the Company,
or (B) is an act or failure to act in respect of which the Executive meets
the applicable standard of conduct prescribed for indemnification or
reimbursement of expenses under the Bylaws of the Company or the laws of its
state of incorporation.
(e) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate this
Agreement at any time upon delivering thirty (30) days' written notice to the
Company. In the event of such voluntary termination other than for "good
reason", as hereinafter defined, Executive shall be entitled to his base
salary earned to the date of his resignation, but no base salary continuation
payment or benefits continuation (except as provided by the terms of the
Company's employee benefit plans). On or after the date the Company receives
notice of Executive's resignation (other than resignation for good reason),
the Company may, at its option, pay Executive his base salary through the
effective date of his resignation and terminate his employment immediately.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 5
<PAGE>
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may at any time
voluntarily terminate his employment for "good reason", as defined below,
upon thirty (30) days written notice thereof to the Company; provided that
the Company may, at its option, pay Executive his base salary through the
effective date of his resignation, terminate his employment immediately
(except for the provision of non monetary benefits) and, following the
effective date of such resignation, provide the payments and benefits
provided in Section 7(c). In the event of such voluntary termination for
"good reason", Executive shall be deemed to have been terminated without
cause with the same payments and benefits set forth in Section 7(c) being
applicable to Executive's termination under this Section 7(f).
For purposes of this Agreement, "good reason" shall mean the
occurrence of any of the following events:
(i) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility, but not including termination of Executive "for cause";
(ii) reduction in the base salary payable to Executive; or
(iii) the Company otherwise commits a material breach of this
Agreement;
provided that "good reason" shall not include the temporary appointment of
another person to fulfill Executive's responsibilities during any period of
disability of Executive.
8. CHANGE OF CONTROL
(a) CONCERNS REGARDING CHANGE OF CONTROL. Executive and the Company
agree that the circumstances surrounding a "Change of Control," as
hereinafter defined, impose unique risks to the Company and the Executive and
that in response to the unique circumstances surrounding a Change of Control,
the provisions of this Agreement shall separately consider the parties
rights' and obligations in the event that a Change of Control occurs. This
Section 8 shall be applicable whether or not a Change of Control is
contemplated at this time. Notwithstanding any other provision of this
Agreement, the severance payments and benefits, if any, payable to Executive
shall be determined solely by reference to this Section 8 in the event that a
Change of Control has occurred, or if Executive is "involuntarily
terminated," as hereinafter defined, in contemplation of a Change of Control.
(b) VOLUNTARY TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change
of Control has occurred, Executive shall have ninety (90) days in which to
terminate his employment. If Executive voluntarily terminates his employment
within ninety (90) days following a Change of Control he shall be entitled to
receive one (1) year's base salary as a lump sum payment. Upon payment of the
severance compensation described in the preceding sentence, the Company will
have no future obligation to Executive under this Agreement. Except as
otherwise provided in Section 8(c), if Executive does not voluntarily
terminate his employment within ninety (90) days
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 6
<PAGE>
of a Change of Control, Executive shall not be entitled to any severance
compensation if he voluntarily terminates his employment after that time.
(c) INVOLUNTARY TERMINATION IN CONTEMPLATION OF, OR WITHIN TWO YEARS
FOLLOWING, A CHANGE OF CONTROL. If Executive is involuntarily terminated,
other than "for cause" (as defined in Section 7(d)) in contemplation of, or
within two (2) years following, a Change of Control, the Company shall pay
Executive (i) a lump sum severance payment equal to (A) the Executive's
annualized base salary in effect at the time of involuntary termination plus
(B) fifty percent (50%) of any bonus paid during the preceding twelve-month
period, payable as a lump sum, and (ii) continuation of all employee
benefits, executive benefits and perquisites, or benefits reasonably
equivalent thereto, for a period of one (1) year; provided, however, that if
Executive accepts another job during such period that provides employee
benefits comparable to those offered by the Company at such time at a cost to
Executive no greater than the cost of the benefits provided by the Company,
the Company's obligation to extend such benefits to Executive shall cease.
For purposes of this Agreement, the following shall be deemed to
constitute involuntary termination:
(i) dismissal of Executive (except termination for cause as
defined in Section 7(d) hereof);
(ii) reduction in Executive's base salary;
(iii)reduction in the level of employee benefits received by
Executive, unless substituted with reasonably comparable benefits;
(iv) requesting Executive to relocate more than 100 miles from his
current location other than the relocation of Executive in connection
with the relocation of the Company's corporate headquarters or
relocation to another existing facility of the Company;
(v) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility; or
(vi) the Company otherwise commits a material breach of this
Agreement.
In the event that within two (2) years following a Change of
Control, Executive is terminated for cause, Executive shall only be entitled
to his base salary up until the last date of employment pursuant to the date
of termination for cause.
(d) TERMINATION OF THIS AGREEMENT MORE THAN TWO YEARS AFTER A CHANGE OF
CONTROL. The parties' rights and obligations arising from a termination of
this Agreement, whether by Executive or the Company, that occurs more than
two (2) years following a Change of Control shall be governed by Section 7 of
this Agreement.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 7
<PAGE>
(e) DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a
Change of Control shall be deemed to exist upon the occurrence of any of the
following:
(i) any "Person" (as such term is used in Section 13(d) and
Section 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is or becomes a "beneficial owner" (as defined in
Section 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company or Canmax representing more than thirty
percent (30%) of the combined voting power of the outstanding
securities of the Company or Canmax;
(ii) at any time during the twenty-four (24) month period
following a merger, tender offer, consolidation, sale of assets or
contested election, or any combination of such transactions, at least a
majority of the Board of Directors of the Company or Canmax shall cease
to be "continuing directors" (meaning directors of the Company or
Canmax prior to such transaction or who subsequently became directors
and whose election or nomination for election by the stockholders of
the Company or Canmax, was approved by a vote of at least two-thirds of
the directors then still in office prior to such transaction);
(iii) the stockholders approve an agreement of sale or disposition
by the Company or Canmax of all or substantially all of the assets of
the Company or Canmax;
provided, however, that no Change of Control shall be deemed to have occurred
for purposes of this Agreement by reason of the anticipated merger of
Auto-Gas Systems, Inc. into the Company or the related issuance of shares of
Canmax common stock.
(f) VESTING OF OPTIONS AND WARRANTS. Upon any Change of Control, any
unvested options or warrants held by Executive to acquire shares of Canmax
common stock shall be immediately vested and exercisable by Executive, and
Canmax undertakes to amend any existing stock option or warrant agreements
between Canmax and/or the Company and Executive consistent with this Section
8(f).
(g) NO MITIGATION OF COMPENSATION. Executive shall not be required to
mitigate any severance payments received under this Section 8 due to his
employment with a successor organization.
9. SURVIVAL.
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive Executive's termination of
employment.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 8
<PAGE>
10. MODIFICATION.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements
between them concerning such subject matter, and may be modified only by a
written instrument duly executed by each party.
11. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 11). Any notice
given to the Company shall be addressed to the attention of the Corporate
Secretary. Notice to the estate of Executive shall be sufficient if addressed
to Executive as provided in this Section 11. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means permitted by this Section 11 shall be deemed given at the time of
receipt thereof.
12. WAIVER.
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
13. BINDING EFFECT.
Executive's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Executive's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Executive and his
heirs and personal representatives, shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. HEADINGS.
The headings of this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 9
<PAGE>
15. ATTORNEYS' FEES.
In the event that any person commences any action or proceeding to
enforce the terms of this Agreement, the prevailing party shall be entitled
to recover from the other his or its reasonable attorney's fees.
16. COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to the
conflict of laws rules. Any action, suit, or proceeding arising out of, based
on, or in connection with this Agreement, any document or instrument
delivered pursuant to, in connection with, or simultaneously with this
Agreement, any breach of this Agreement or any such document or instrument,
or any transaction contemplated hereby or thereby may be brought only in the
District Courts of Dallas County, Texas or the United States District Court
for the Northern District of Texas, Dallas Division and each party covenants
and agrees not to assert, by way of motion, as a defense, or otherwise, in
any such action, suit, proceeding, any claim that such party is not subject
personally to the jurisdiction of such court, that such party's property is
exempt or immune from attachment or execution, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit, or proceeding is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
COMPANY:
CANMAX RETAIL SYSTEMS, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title
----------------------------------------
EXECUTIVE:
-----------------------------------------------
PHILIP M. PARSONS
CANMAX INC.
By:
----------------------------------------
Name:
----------------------------------------
Title
----------------------------------------
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 11
<PAGE>
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT, dated as of June 30, 1997, between CANMAX RETAIL
SYSTEMS, INC., a Texas corporation with offices at 150 West Carpenter Freeway,
Irving, Texas 75039 (the "Company"), CANMAX INC., a Wyoming corporation
("Canmax") and DEBRA L. BURGESS, residing at 724 Castle Creek, Coppell, Texas
75019 (the "Executive").
RECITALS:
A. The Company desires to continue to employ Executive as an executive
officer of the Company.
B. Executive has agreed to continue her employment with the Company
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the sufficiency of which is hereby acknowledged, the
Company, Canmax and Executive hereby agree as follows:
1. TERM AND RENEWAL.
The Company agrees to employ Executive, and the Executive agrees to serve,
on the terms and conditions of this Agreement for a period commencing on July 1,
1997 and ending June 30, 1998, or such shorter period as may be provided for
herein. On each anniversary of this Agreement, the term shall be extended for an
additional period of one (1) year unless the Board of Directors of Canmax
elects, at the directors' meeting immediately following the annual stockholders'
meeting, not to extend this Agreement. In the event that this Agreement is not
extended by the Board of Directors of Canmax, this Agreement shall remain in
effect for only the remainder of the term then in effect. Notwithstanding the
foregoing, this Agreement shall not be extended beyond the time that Executive
has attained the normal retirement age (which shall be no earlier than age 65)
established by the Board of Directors of Canmax for the Company's executives.
The period during which Executive is employed hereunder is hereafter referred to
as the "Employment Period."
2. DUTIES AND SERVICES.
During the Employment Period, Executive shall be employed as an Executive
Vice President and the Chief Operating Officer of the Company and Canmax and
shall also perform services in a responsible executive or managerial capacity
for any of the Company's or Canmax's subsidiary corporations when and as
requested by the Company. In performance of her duties, Executive shall be
subject to the direction of the Chief Executive Officer of the Company and Board
of Directors of Canmax. Executive agrees to her employment as described in this
Section 2 and agrees to devote substantially all of her time and efforts to the
performance
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 1
<PAGE>
of her duties under this Agreement. Executive shall be available to travel as
the needs of the business require.
3. COMPENSATION.
(a) As compensation for her services hereunder, the Company shall pay
Executive, during the Employment Period, a base salary payable in equal monthly
installments at the annual rate of $140,000. Executive shall also participate
in any bonus programs for the Company's executive officers, as provided by the
Board of Directors of Canmax, including, without limitation, the Company's
current Management Incentive Plan. During the term of this Agreement, the
Company may increase the base salary payable to the Executive, but cannot reduce
the base amount of Executive's salary. Executive will also be eligible to
participate in the regular employee benefit programs and stock option plans now
or hereafter established by the Company and in any special executive benefits
and perquisites established by the Board of Directors of Canmax.
(b) Executive shall be entitled to receive warrants ("Performance
Warrant") to acquire 125,000 shares of common stock of Canmax. The Performance
Warrant will have an exercise price equal to the closing price of the common
stock of Canmax as reported on the Nasdaq SmallCap Market on the date that the
issuance of such Performance Warrant is approved by the Company's compensation
committee and shall provide for the registration of any shares of common stock
issuable upon the exercise of such Performance Warrant, as further set forth
therein. The Performance Warrant will expire ten (10) years from the date of
issuance, and shall vest as follows:
(i) fifty percent (50%) upon the occurrence of the earlier of the
following (such date being referenced to herein as the "Trigger Date"):
(A) the earning per share (after tax) of Canmax equals or
exceeds $.30 per share during any fiscal year;
(B) the closing price of the common stock of Canmax as reported
on the Nasdaq SmallCap Market (or other national automated quotation
system or national stock exchange on which the common stock of Canmax
may be listed) equals or exceeds $8.00 per share for a period of
sixty-five (65) consecutive trading days; or
(C) the occurrence of a Change of Control (as defined below);
and
(ii) the remaining fifty percent (50%) on the date which is one (1)
year following the Trigger Date.
(c) The number of shares of Canmax common stock issuable upon the exercise
of the Performance Warrant, the exercise price thereof, and the earnings per
share and closing price targets set forth in Section 3(b) above shall each be
subject to appropriate adjustment for stock splits, stock dividends or similar
recapitalizations.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 2
<PAGE>
4. EXPENSES.
Executive shall be entitled to reimbursement for travel and other out-of-
pocket expenses incurred by Executive in the performance of her duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company. Executive shall be
entitled to reasonable vacations in accordance with the then regular procedures
of the Company governing executives.
5. NONCOMPETITION; NON-SOLICITATION.
Executive agrees that she will not during the Employment Period engage in,
or otherwise directly or indirectly be employed by, or act as a consultant or
lender to, or be a director, officer, employee, owner or partner of, any other
business or organization that directly or indirectly competes with the business
of the Company or any of its subsidiaries; provided, however, that
notwithstanding the foregoing, the provisions of this Section 5 will not be
deemed breached merely because Executive owns not more than 1 percent of the
outstanding equity securities of an entity, if, at the time of its acquisition
by Executive, such securities are listed on a national securities exchange, is
reported on the Nasdaq Stock Market, or is regularly traded in the over-the-
counter market by a member of a national securities exchange. Executive agrees
that she shall not, during the two-year period after she voluntarily terminates
this Agreement or is terminated pursuant to this Agreement for "cause" (as
defined in Section 7(d) below), solicit or encourage any employee, consultant,
vendor, supplier or customer of the Company or Canmax to leave the employment
of, or cease or diminish its relations with, the Company or Canmax.
6. CONFIDENTIAL INFORMATION.
All confidential information which Executive may now possess, may obtain
from the Company or its subsidiaries during or after the Employment Period, or
may create prior to the end of the Employment Period or otherwise relating to
the financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company or of any customer or supplier
of any of them shall not be published, disclosed, or made accessible by her to
any other person or entity either during or after the termination of her
employment or used by her except during the Employment Period in the business
and for the benefit of the Company and its subsidiaries, in each case without
prior written permission of the Company. Executive shall deliver to the Company
all tangible evidence of such confidential information prior to or at the
termination of her employment. The provisions of this Section 6 shall survive
the termination of this Agreement by either party.
7. TERMINATION.
(a) EXECUTIVE'S DEATH. If Executive shall die during the Employment
Period, this Agreement shall terminate, except that Executive's estate
("Estate") shall be entitled to receive (i) the base salary payable to
Executive, accrued to the last day of the month in which her death occurs, (ii)
for a period of three (3) months following death, payments equal to fifty
percent (50%) of the payments of Executive's base salary effective at the time
of death, each in
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 3
<PAGE>
accordance with the Company's regular payroll cycle, and (iii) any death
benefits provided under employee benefit plans maintained by the Company. In
addition, if Executive shall die during the Employment Period and
notwithstanding any contrary provisions of any Company stock option, warrant
or stock option plan, the Estate shall have the right to retain and exercise
(y) any vested options or warrants outstanding on the date of death and (z)
any unvested options or warrants outstanding on the date of death that vest
within one year of the date of death, in each case in accordance with their
respective terms.
(b) EXECUTIVE'S DISABILITY. If, during the Employment Period, Executive
shall become Disabled (as defined below), this Agreement shall terminate
effective on such incapacity, and Executive (or her legal representatives) shall
be entitled only to the base compensation earned through the date of termination
with no entitlement to any base salary after the date of termination; provided,
however, that (i) Executive shall be entitled to receive all benefits to which
she may be entitled pursuant to the Company's employee benefit plans; and (ii)
the Company shall not be obligated to make any payments to Executive under this
Section 7(b) to the extent that such payments, when aggregated with all other
salary or disability payments received by Executive (whether from disability
programs maintained by the Company or otherwise) exceed the then current base
salary of Executive. As used herein, the term "Disabled" or "Disability" shall
mean a mental or physical condition that prevents Executive from performing his
usual duties and services hereunder for a period of six (6) consecutive months
or six (6) non-consecutive months in any twelve (12) month period, as determined
in the reasonable discretion of the Board of Directors of Canmax; provided that
if Executive disputes such determination by the Board of Directors, Executive
(or his legal representatives) shall notify the Board of Directors in writing
and (x) the Board of Directors and Executive (or his legal representatives)
shall each designate a licensed physician practicing in the field to which the
alleged Disability relates within fifteen (15) days of the delivery of such
notice, (y) the designated physicians shall within fifteen (15) days select a
third physician practicing in the field to which the alleged Disability relates,
and (z) the third physician shall determine whether Executive is or has been
Disabled within the meaning of this Agreement.
(c) TERMINATION WITHOUT CAUSE. This Agreement may be terminated by the
Company or Canmax without cause upon thirty (30) days' prior written notice
thereof given to Executive. In the event of termination without cause, the
Company shall (i) for a period of one (1) year continue to pay Executive the
base salary effective at the time of termination in accordance with the
Company's regular payroll cycle and (ii) for a period of six (6) months pay to
Executive a monthly amount equal to one twelfth of any bonuses paid during the
twelve-month period preceding the date of termination. Additionally, Executive
shall be entitled to continue to participate in all regular employee benefit
plans of the Company for a period of one (1) year following termination without
cause; provided, however, that if Executive accepts another job during such
period that provides employee benefits comparable to those offered by the
Company at such time at a cost to Executive no greater than the cost of the
benefits provided by the Company, the Company's obligation to extend such
benefits to Executive shall cease.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 4
<PAGE>
(d) TERMINATION FOR CAUSE. This Agreement may be terminated by the Company
or Canmax "for cause", as defined below, by delivering to Executive written
notice describing the cause and granting Executive thirty (30) days to respond
to the Chief Executive Officer of the Company or the Board of Directors of
Canmax. If this Agreement is terminated by the Company for cause, Executive
shall only be entitled to the base salary earned by her to the date of
termination with no entitlement to any base salary continuation payments or
benefits continuation (except as otherwise provided by the terms of any employee
benefit plan of the Company). The determination as to whether termination is
for cause shall be made by the Chief Executive Officer of the Company or the
Board of Directors of Canmax in the exercise of its business judgment.
Termination of this Agreement by the Company for cause shall be deemed to have
occurred only if:
(i) termination shall have been the result of an act or acts of
dishonesty on the Executive's part constituting a felony or intended to
result directly or indirectly in substantial gain or personal enrichment to
her at the expense of the Company; or
(ii) termination shall have been the result of the Executive's willful
and continued failure substantially to perform her duties and
responsibilities as an officer of the Company (other than such failure
resulting from her incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to the Executive by the
Chief Executive Officer of the Company or the Board of Directors of Canmax
which specifically identifies the manner in which such Board believes that
the Executive has not substantially performed her duties and the Executive
is given a reasonable time after such demand substantially to perform her
duties.
Executive's employment shall in no event be considered to have been
terminated by the Company for cause if the act or failure to act upon which the
termination is based (A) was done or omitted to be done without intent of
gaining therefrom directly or indirectly a profit to which the Executive was not
legally entitled and as a result of her good faith belief that such act or
failure to act was in or was not opposed to the interests of the Company, or (B)
is an act or failure to act in respect of which the Executive meets the
applicable standard of conduct prescribed for indemnification or reimbursement
of expenses under the Bylaws of the Company or the laws of its state of
incorporation.
(e) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate this
Agreement at any time upon delivering thirty (30) days' written notice to the
Company. In the event of such voluntary termination other than for "good
reason", as hereinafter defined, Executive shall be entitled to her base salary
earned to the date of her resignation, but no base salary continuation payment
or benefits continuation (except as provided by the terms of the Company's
employee benefit plans). On or after the date the Company receives notice of
Executive's resignation (other than resignation for good reason), the Company
may, at its option, pay Executive her base salary through the effective date of
her resignation and terminate her employment immediately.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 5
<PAGE>
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may at any time
voluntarily terminate her employment for "good reason", as defined below, upon
thirty (30) days written notice thereof to the Company; provided that the
Company may, at its option, pay Executive her base salary through the effective
date of her resignation, terminate her employment immediately (except for the
provision of non monetary benefits) and, following the effective date of such
resignation, provide the payments and benefits provided in Section 7(c). In the
event of such voluntary termination for "good reason", Executive shall be deemed
to have been terminated without cause with the same payments and benefits set
forth in Section 7(c) being applicable to Executive's termination under this
Section 7(f).
For purposes of this Agreement, "good reason" shall mean the occurrence of
any of the following events:
(i) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility, but not including termination of Executive "for cause";
(ii) reduction in the base salary payable to Executive; or
(iii) the Company otherwise commits a material breach of this
Agreement;
provided that "good reason" shall not include the temporary appointment of
another person to fulfill Executive's responsibilities during any period of
disability of Executive.
8. CHANGE OF CONTROL
(a) CONCERNS REGARDING CHANGE OF CONTROL. Executive and the Company agree
that the circumstances surrounding a "Change of Control," as hereinafter
defined, impose unique risks to the Company and the Executive and that in
response to the unique circumstances surrounding a Change of Control, the
provisions of this Agreement shall separately consider the parties rights' and
obligations in the event that a Change of Control occurs. This Section 8 shall
be applicable whether or not a Change of Control is contemplated at this time.
Notwithstanding any other provision of this Agreement, the severance payments
and benefits, if any, payable to Executive shall be determined solely by
reference to this Section 8 in the event that a Change of Control has occurred,
or if Executive is "involuntarily terminated," as hereinafter defined, in
contemplation of a Change of Control.
(b) VOLUNTARY TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of
Control has occurred, Executive shall have ninety (90) days in which to
terminate her employment. If Executive voluntarily terminates her employment
within ninety (90) days following a Change of Control she shall be entitled to
receive one (1) year's base salary as a lump sum payment. Upon payment of the
severance compensation described in the preceding sentence, the Company will
have no future obligation to Executive under this Agreement. Except as
otherwise provided in Section 8(c), if Executive does not voluntarily terminate
her employment within ninety (90) days
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 6
<PAGE>
of a Change of Control, Executive shall not be entitled to any severance
compensation if she voluntarily terminates her employment after that time.
(c) INVOLUNTARY TERMINATION IN CONTEMPLATION OF, OR WITHIN TWO YEARS
FOLLOWING, A CHANGE OF CONTROL. If Executive is involuntarily terminated, other
than "for cause" (as defined in Section 7(d)) in contemplation of, or within two
(2) years following, a Change of Control, the Company shall pay Executive (i) a
lump sum severance payment equal to (A) the Executive's annualized base salary
in effect at the time of involuntary termination plus (B) fifty percent (50%) of
any bonus paid during the preceding twelve-month period, payable as a lump sum,
and (ii) continuation of all employee benefits, executive benefits and
perquisites, or benefits reasonably equivalent thereto, for a period of one (1)
year; provided, however, that if Executive accepts another job during such
period that provides employee benefits comparable to those offered by the
Company at such time at a cost to Executive no greater than the cost of the
benefits provided by the Company, the Company's obligation to extend such
benefits to Executive shall cease.
For purposes of this Agreement, the following shall be deemed to
constitute involuntary termination:
(i) dismissal of Executive (except termination for cause as defined
in Section 7(d) hereof);
(ii) reduction in Executive's base salary;
(iii) reduction in the level of employee benefits received by
Executive, unless substituted with reasonably comparable benefits;
(iv) requesting Executive to relocate more than 100 miles from her
current location other than the relocation of Executive in connection with
the relocation of the Company's corporate headquarters or relocation to
another existing facility of the Company;
(v) removal from the offices Executive holds on the date of this
Agreement or a material reduction in Executive's authority or
responsibility; or
(vi) the Company otherwise commits a material breach of this
Agreement.
In the event that within two (2) years following a Change of Control,
Executive is terminated for cause, Executive shall only be entitled to her base
salary up until the last date of employment pursuant to the date of termination
for cause.
(d) TERMINATION OF THIS AGREEMENT MORE THAN TWO YEARS AFTER A CHANGE OF
CONTROL. The parties' rights and obligations arising from a termination of this
Agreement, whether by Executive or the Company, that occurs more than two (2)
years following a Change of Control shall be governed by Section 7 of this
Agreement.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 7
<PAGE>
(e) DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a
Change of Control shall be deemed to exist upon the occurrence of any of the
following:
(i) any "Person" (as such term is used in Section 13(d) and Section
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes a "beneficial owner" (as defined in Section 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company or Canmax representing more than thirty percent (30%) of the
combined voting power of the outstanding securities of the Company or
Canmax Inc.;
(ii) at any time during the twenty-four (24) month period following a
merger, tender offer, consolidation, sale of assets or contested election,
or any combination of such transactions, at least a majority of the Board
of Directors of the Company or Canmax shall cease to be "continuing
directors" (meaning directors of the Company or Canmax prior to such
transaction or who subsequently became directors and whose election or
nomination for election by the stockholders of the Company or Canmax, was
approved by a vote of at least two-thirds of the directors then still in
office prior to such transaction);
(iii) the stockholders approve an agreement of sale or disposition
by the Company or Canmax of all or substantially all of the assets of the
Company or Canmax;
provided, however, that no Change of Control shall be deemed to have occurred
for purposes of this Agreement by reason of the anticipated merger of Auto-Gas
Systems, Inc. into the Company or the related issuance of shares of Canmax
common stock.
(f) VESTING OF OPTIONS AND WARRANTS. Upon any Change of Control, any
unvested options or warrants held by Executive to acquire shares of Canmax
common stock shall be immediately vested and exercisable by Executive, and
Canmax undertakes to amend any existing stock option or warrant agreements
between Canmax and/or the Company and Executive consistent with this Section
8(f).
(g) NO MITIGATION OF COMPENSATION. Executive shall not be required to
mitigate any severance payments received under this Section 8 due to her
employment with a successor organization.
9. SURVIVAL.
The covenants, agreements, representations, and warranties contained in or
made pursuant to this Agreement shall survive Executive's termination of
employment.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 8
<PAGE>
10. MODIFICATION.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
11. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 11). Any notice given to the
Company shall be addressed to the attention of the Corporate Secretary. Notice
to the estate of Executive shall be sufficient if addressed to Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 11 shall be deemed given at the time of receipt thereof.
12. WAIVER.
Any waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
13. BINDING EFFECT.
Executive's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Executive's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Executive and her
heirs and personal representatives, shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
14. HEADINGS.
The headings of this Agreement are solely for the convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 9
<PAGE>
15. ATTORNEYS' FEES.
In the event that any person commences any action or proceeding to enforce
the terms of this Agreement, the prevailing party shall be entitled to recover
from the other his or its reasonable attorney's fees.
16. COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. It shall be governed by and construed in accordance with
the laws of the State of Texas, without giving effect to the conflict of laws
rules. Any action, suit, or proceeding arising out of, based on, or in
connection with this Agreement, any document or instrument delivered pursuant
to, in connection with, or simultaneously with this Agreement, any breach of
this Agreement or any such document or instrument, or any transaction
contemplated hereby or thereby may be brought only in the District Courts of
Dallas County, Texas or the United States District Court for the Northern
District of Texas, Dallas Division and each party covenants and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit,
proceeding, any claim that such party is not subject personally to the
jurisdiction of such court, that such party's property is exempt or immune from
attachment or execution, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
COMPANY:
CANMAX RETAIL SYSTEMS, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
EXECUTIVE:
------------------------------------------------
DEBRA L. BURGESS
CANMAX INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
- -------------------------------------------------------------------------------
EMPLOYMENT CONTRACT - PAGE 11
<PAGE>
AMENDMENT NO. 3
TO MASTER AGREEMENT FOR
COMPUTER SOFTWARE DEVELOPMENT, LICENSE AND MAINTENANCE
This Amendment No. 3 ("Amendment"), by and between THE SOUTHLAND
CORPORATION, a Texas corporation ("SLC") and CANMAX RETAIL SYSTEMS, INC., a
Texas corporation ("Canmax") is entered into as of this ___ day of
_______________, 1997, and amends and supplements that certain Master
Agreement for Computer Software Development, License and Maintenance as
restated pursuant to the October 4, 1994 Amendment, as amended by Amendment
dated July 31, 1996 and Amendment No. 2 dated September 7, 1996 (collectively
the "Master Agreement").
RECITALS:
SLC and Canmax desire to further amend the Master Agreement to provide
for the purchase by SLC of the right to use, possess, copy and modify the
C-Serve Software and Project Software and related documentation, in
accordance with the terms and conditions set forth herein.
Now, therefore, for and in consideration of the mutual covenants and
other agreements contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to such terms in the Master Agreement.
2. LICENSE FEE. SLC will pay to Canmax, as provided below, the
total sum of One Million Dollars ($1,000,000.00) as a one time license fee
for a license, as further described below, to use, possess, copy and modify
the C-Serve Software and the Project Software, whether currently existing or
created in the future, including, without limitation, (i) the source code and
Project Materials and all technical and operational documentation and
materials related thereto, (ii) any modifications, improvements, enhancements
or replacements and any newly developed software or materials related thereto
or to SLC's Retail Information System (RIS) project (including updates,
enhancements or error corrections referenced in Section 10 of the Master
Agreement and including any software or materials pertaining to version 2.1
of Phase 2B or development for subsequent phases of the RIS, if SLC retains
Canmax to perform such development) and (iii) any work in process being
performed by Canmax for SLC (collectively, the "Source Code Materials"). The
Source Code Materials in existence as of the date of this Amendment are
described on Exhibit A.
Immediately upon execution of this Amendment, Canmax will provide SLC
with all Source Code Materials. Within five (5) days after SLC's receipt of
the Source Code Materials, SLC will pay to Canmax one half ($500,000.00) of
the license fee. Within five (5) business days of completion by Canmax of
the Source Code Reconciliation as described in Section 5, Canmax will provide
SLC with written certification from the President of Canmax that Canmax
1
<PAGE>
has paid in full all charges and fees owed by Canmax to any third party in
connection with SLC's RIS project or the Source Code Materials, including,
(i) any third party vendors who performed work on or in connection with, or
provided hardware in connection with, the RIS project or the Source Code
Materials on behalf of Canmax, (ii) third party licensors, (iii) the
providers of the CTI boards or (iv) sales taxes or other payments owed to any
governmental authority in connection with services, software or hardware
provided by Canmax to SLC. Within five (5) days of SLC's receipt of the
certification SLC will pay to Canmax the remaining one half of the license
fee ($500,000.00).
If Canmax is unable to provide the certificate, Canmax will provide
SLC, within five (5) business days after completion of the Source Code
Reconciliation, a correct and complete list of all outstanding creditors as
described above and the amounts owed by Canmax to each creditor certified in
writing by the President of Canmax. SLC may thereafter, at its option, pay
to the Canmax creditors the amounts claimed against Canmax, offset such
payment against the second $500,000.00 installment and disburse the
remainder, if any, to Canmax. If the third party claims paid by SLC exceed
$500,000.00, SLC will credit such excess against invoices submitted by
Canmax. SLC shall have no obligation to pay such creditors and the
creditors shall not be third party beneficiaries of this Amendment. If
Canmax subsequently provides the President's certificate to SLC, SLC shall
remit to Canmax within five (5) days of SLC's receipt of the certificate
described in the preceding paragraph, any portion of the second installment
not previously paid to a Canmax creditor by SLC pursuant to this paragraph.
3. LICENSE. In consideration of the payment of the license fee,
Canmax hereby grants to SLC a worldwide, perpetual, non-exclusive,
irrevocable, royalty-free license to use, possess, copy and modify the Source
Code Materials for use in connection with SLC's business operations and those
of its SLC Affiliates, franchisees and area licensees, both foreign and
domestic. SLC may sell, market or distribute the Source Code Materials, and
software or materials derived therefrom, to its SLC Affiliates, franchisees
and foreign or domestic licensees, but SLC may not otherwise commercially
market or sell the Source Code Materials. SLC's right to provide the Source
Code Materials to licensees may, at Canmax's option, be conditioned upon the
licensee's acceptance of Canmax's development rights as set forth in Section
15.14 of the Master Agreement. Canmax acknowledges that SLC may modify or
enhance the Source Code Materials or provide the Source Code Materials to
third parties to modify or enhance; provided that, prior to any third party's
access to the Source Code Materials, such third party shall have executed a
confidentiality/non-disclosure agreement in substantially the form attached
hereto as Exhibit B. Any modifications or enhancements to the Source Code
Materials made by or on behalf of SLC (other than modifications or
enhancements made by Canmax which shall be part of the Source Code Materials)
and all proprietary rights relating thereto, shall be owned solely by SLC,
and Canmax shall have no rights with respect thereto. Canmax agrees to
provide SLC with all source and object code and other documentation and
materials developed by Canmax for SLC or to which SLC is otherwise entitled
pursuant to the terms of this Agreement after the date of this Amendment
which constitute Source Code Materials, on a calendar quarterly basis or upon
SLC's written request. Subject to the provisions of the Master Agreement and
this Amendment, SLC's license rights shall not be transferable except as
provided in Section 15.01 of the Master Agreement. Notwithstanding anything
in the Master Agreement to the contrary, SLC's license rights granted
pursuant to this Amendment shall be unlimited and without restriction except
as expressly set forth in this Amendment and shall not be affected or limited
by any contrary terms or provisions contained in the Master Agreement
including, but not limited to, Sections 2.01 and 2.03.
2
<PAGE>
Canmax represents and warrants to SLC (i) that Canmax has sole and
exclusive ownership interest in the Source Code Materials (other than Third
Party Software), (ii) that Canmax had the full right and authority to grant
the license rights granted hereunder to the Source Code Materials and that
such license grant has been duly authorized by all necessary action on the
part of Canmax and is not in conflict with the articles of incorporation or
bylaws of Canmax, (iii) that the execution and performance of this Amendment
by Canmax will not result in any conflict with or breach or violation of any
agreement with any third party (including any loan agreement) and that any
consents required from any third party (including any lender) in connection
with the execution or performance of this Amendment have been obtained; (iv)
that, except as disclosed to SLC in writing pursuant to Section 2 above, as
of the date of the disclosure, all fees or charges owed by Canmax to any
third party in connection with the RIS project or development or other work
of or on the RIS project or the Source Code Materials, and any license fees
owed to any third party in connection with the Source Code Materials or the
license thereof, will have been paid in full, (v) that there are no liens or
encumbrances (including liens securing the repayment of borrowed funds)
affecting or applicable to the Source Code Materials or any proprietary
rights relating thereto and (vi) that the Source Code Materials do not
infringe upon any intellectual property right of any third party, including
trade secrets, copyright or patent rights. CANMAX AGREES TO INDEMNIFY, DEFEND
AND HOLD SLC HARMLESS FROM ANY CLAIMS, SUITS, LIABILITIES, CAUSES OF ACTION,
DAMAGES, EXPENSES OR LOSSES ASSOCIATED WITH OR ARISING OUT OF ANY BREACH BY
CANMAX OF THE REPRESENTATIONS SET FORTH IN SUBPARTS (i), (ii), (iii), (iv)
and (v) OF THE PRECEDING SENTENCE REGARDLESS OF ANY NEGLIGENCE OR OTHER FAULT
ON THE PART OF SLC. Canmax further agrees to indemnify and defend SLC from
and against any intellectual property infringement claim relating to the
Source Code Materials, in the manner set forth in Section 12 of the Master
Agreement. The warranties contained in this Amendment will not diminish the
warranties given by Canmax in the Master Agreement.
The license grant contained in this Amendment will not diminish or
supersede SLC's ownership rights in the exclusive Project Materials as
contained in the Master Agreement or Canmax's oblations with respect thereto,
provided however, that SLC's right to use, possess and modify the exclusive
Project Software component of the Source Code Materials will not be subject
to the limitations contained in Section 2.04 of the Master Agreement.
4. THIRD PARTY SOFTWARE. SLC and Canmax acknowledge that the
Source Code Materials may include certain Third Party Software. Canmax
warrants that Exhibit A contains a complete list of all such Third Party
Software which is currently part of the Source Code Materials (the "Current
Third Party Software"). Canmax represents that, (i) apart from the Current
Third Party Software, there are no other third party software products that
comprise part of the Source Code Materials, and (ii) Canmax has previously
obtained for SLC a license to use such Current Third Party Software pursuant
to the terms of the Master Agreement. Within thirty (30) days from the
effective date of this Amendment, Canmax will provide SLC with a listing of
the number of Current Third Party Software licenses which Canmax has obtained
for SLC. SLC will be responsible to obtain any development licenses required
by SLC in connection with any development undertaken by or on behalf of SLC,
except development work performed by Canmax.
3
<PAGE>
5. SOURCE CODE RECONCILIATION. For and in consideration of the
license fee described in Section 2, at no additional cost to SLC and as a
condition to SLC's obligation to pay the second half of the license fee
referenced in Section 2, Canmax, agrees, immediately upon execution of this
Amendment and at its expense, to provide SLC with Canmax resources necessary
to perform source code reconciliation of the Source Code Materials, including
support, testing and verification necessary to assure that the source code is
complete and matches the object code that SLC utilizes in its Retail
Information System (RIS) production environment (the "Source Code
Reconciliation"). As soon as practicable after execution of this Amendment,
Canmax will provide SLC with all Source Code Materials listed on Exhibit A.
Canmax will advise Linda Svehlak and Pat Lopez with SLC in writing when
Canmax has delivered to SLC all Source Code Materials. SLC will, in
conjunction with Canmax, promptly review the Source Code Materials and advise
Canmax in writing of any Source Code Materials which are not included in the
submission or any discrepancies. Canmax will promptly obtain the missing
materials or resolve the discrepancies, advise SLC as provided above and the
parties will again review the submission for completeness and discrepancies.
When the parties have agreed in writing that the submission is complete (the
"Reconciliation Commencement Date"), SLC, in conjunction with Canmax will
promptly conduct the Source Code Reconciliation. Provided that Canmax
provides adequate resources to SLC in connection therewith, SLC agrees to
complete the Source Code Reconciliation within three (3) weeks after the
Reconciliation Commencement Date. Any problems discovered during the
reconciliation will be referred back to Canmax for solution. Canmax will
advise SLC in writing when such problems have been resolved and the date SLC
receives such notice will be the new Reconciliation Commencement Date. The
Source Code Reconciliation shall be deemed completed when approved in writing
by Pat Lopez and Linda Svehlak of SLC. The Source Code Reconciliation will be
performed at no additional cost to SLC.
6. RIGHTS OF CANMAX. Subject to the provisions of this Amendment,
Canmax shall retain the rights, and be subject to the obligations (including
the Exclusive Period obligations), with respect to the Source Code Materials
as contained in the Master Agreement.
7. FUTURE CANMAX SERVICES. SLC agrees to utilize Canmax services in
connection with SLC's Retail Information System, including but not limited
to, CTI boards or other third party hardware, Software Maintenance services,
Help Desk services and other services specified in the Master Agreement and,
at SLC's option, development or other services or as may otherwise be
negotiated between the parties, up to a total of not less than Four Million
Dollars ($4,000,000.00) in fees over the period commencing on the effective
date of this Amendment and ending December 7, 1998. The fees for services or
hardware provided or performed by Canmax for SLC pursuant to a contract
between SLC and an intermediary (such as NCR or EDS) shall be included for
purposes of this Section. SLC's obligations as contained in this Section
shall be subject to performance by Canmax of its covenants, obligations,
representations and warranties applicable to such services pursuant to the
Master Agreement. If SLC provides Canmax the right to perform services or
hardware of a type generally consistent with the type of services or hardware
previously performed by Canmax for SLC, but Canmax is unwilling or unable to
provide those services or hardware, the estimated fees or costs for those
services or hardware will be included for purposes of this Section.
Canmax will not have any liability or responsibility under the Master
Agreement or this Amendment (i) for warranty obligations contained in Section
10.01(a), (b), (c) and (d) of the Master Agreement or indemnification
obligations or (ii) for its failure to provide or delay in
4
<PAGE>
providing training services or Software Maintenance, in each case to the
extent attributable to development of subsystems by or on behalf of SLC by an
entity other than Canmax, unless Canmax agrees thereto in writing.
Additionally, Canmax will not be obligated to meet the production support
resolution time requirements contained in Exhibit N to the Master Agreement
with respect to subsystems developed by or on behalf of SLC by an entity
other than Canmax.
8. TERMINATION OF ESCROW. SLC and Canmax hereby agree that, upon
acceptance by SLC of the Source Code Reconciliation, the escrow established
pursuant to Section 9 of the Master Agreement shall terminate and that the
parties shall jointly instruct the escrow agent to disburse all escrowed
materials to SLC.
9. AMENDMENT TO SOFTWARE VERSION CONTROL PROCEDURE. The memorandum
dated November 21, 1996, regarding software version control (PVCS) at the
application source code level, attached to Amendment No. 2, is hereby
deleted. The parties agree that the source code referenced in the
memorandum, and all future modifications to such source code will, at a time
specified by SLC in consultation with Canmax, reside at the SLC test lab or
at another location specified by SLC and that SLC, or its agent, shall assume
responsibility for creation and maintenance of the "Golden Master" for store
system deployment and all version control administration. The SLC test lab
(or other location specified by SLC) described above will be the single
master source for all software maintenance, Golden Master creation, Third
Party Software, new development and related items as identified on Exhibit A.
As part of the services referenced in Section 7 above, Canmax will, upon
SLC's request, continue to assist SLC in connection with the maintenance of
the Golden Master. SLC will provide access to source code to Canmax, from the
SLC test lab (or other location specified by SLC), as required by Canmax in
connection with any changes or modifications to the Source Code Materials
requested by SLC.
10. LIMITATION OF RECOVERY. Because SLC has obtained, pursuant to
this Amendment, the license rights with respect to the Source Code Materials,
the third sentence of Section 12.04(a) and the phrase "AND CANMAX ELECTS NOT
TO GRANT THE SOURCE CODE LICENSE" contained in the second paragraph of
Section 12.04(a) of the Master Agreement are hereby deleted.
11. REMOVAL OF WITHOUT CAUSE TERMINATION. Section 13.03.6 of the
Master Agreement pertaining to without cause termination is hereby deleted.
12. LOCATION OF SOURCE CODE. Upon Canmax written request, SLC will
advise Canmax of each location of the source code as of the date of the
request.
13. BANKRUPTCY. Should Canmax, voluntarily or involuntarily, become
subject to the protection of the United States bankruptcy laws, SLC shall be
entitled to all of the benefits of such bankruptcy laws. Pending the
assumption or rejection of the Master Agreement, as amended by this
Amendment, Canmax shall perform all of its obligations. If Canmax or the
trustee rejects the Master Agreement pursuant to such bankruptcy laws, SLC
may elect to retain its rights under the Master Agreement and this Amendment,
including all rights relating to the Source Code Materials and all other
software or materials licensed by Canmax to SLC or owned jointly by Canmax
and SLC. If SLC elects to retain its rights, Canmax and/or the trustee shall
allow SLC to exercise all such rights and Canmax and/or the trustee shall not
interfere with the rights of SLC as provided in the Master Agreement and this
Amendment to the Source Code
5
<PAGE>
Materials and all other software or materials licensed by Canmax to SLC or
owned jointly by Canmax and SLC.
14. COUNTERPARTS: FACSIMILE SIGNATURES. This Amendment may be
executed in two or more counterparts, each of which, taken together, shall
constitute one in the same original document. This Amendment may be executed
by facsimile originals.
15. GOVERNING LAW. This Amendment shall be governed and construed in
accordance with the laws of the State of Texas.
16. INCONSISTENCY/EFFECT OF AMENDMENT. This Amendment will control
over any inconsistent provisions contained in the Master Agreement. Except
as modified by this Amendment, the Master Agreement shall remain in full
force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
executed by their duly authorized officers on the dates set forth below their
respective signatures. The effective date of this Amendment will be the date
it is fully executed.
THE SOUTHLAND CORPORATION CANMAX RETAIL SYSTEMS, INC.
By: By:
------------------------------- -----------------------------
Executive Vice President Name:
--------------------------
Title:
--------------------------
Attest:
By: Date:
------------------------------- --------------------------
J. Donald Stevenson, Jr.
Assistant Secretary
Date:
-----------------------------
6
<PAGE>
EXHIBIT B
CONFIDENTIALITY/NON-DISCLOSURE AGREEMENT
This Confidentiality Agreement/Non-Disclosure Agreement is given by
________________________________ ("Recipient") as of the ___ day of ___________,
to Canmax Retail Systems, Inc. ("Canmax") and The Southland Corporation
("Southland").
WHEREAS, Southland, pursuant to a license with Canmax, has obtained the
right to certain software and related materials developed by Canmax,
including rights to use, possess and modify the source code component thereof
(the "Source Code Materials"), and
WHEREAS, Southland intends to retain Recipient to make modifications
and/or enhancements to the Source Code Materials.
WHEREAS, for and in consideration of these premises, Southland's
agreement to retain Recipient to make the modifications or enhancements, and
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, Recipient agrees as follows:
Recipient agrees that the Source Code Materials constitute proprietary
information of Canmax and (i) shall not be used by Recipient for any purpose
other than that of rendering service to Southland or its franchisees,
affiliates or licensees; (ii) shall not be disclosed, sold, assigned, leased
or otherwise disposed of to third parties by Recipient or commercially
exploited by or on behalf of Recipient; (iii) shall be treated by Recipient
as confidential information in the same manner as Recipient treats its own
confidential information of a similar nature; (iv) shall not be reverse
engineered, reverse compiled or reverse assembled; and (v) shall be copied by
Recipient only for archival or backup purposes only. Recipient agrees to take
appropriate action by instruction, agreement or otherwise for those of its
employees or third party agents having access to the Source Code Materials
and restrict and control its use and security as provided in this Agreement.
Recipient will leave intact in the confidential or proprietary rights notice
placed on the Source Code Materials by Canmax. Recipient agrees that this
Agreement may be enforced directly by Canmax.
Recipient shall indemnify Canmax and its successors and assigns for any
losses, liabilities, damages, costs and expenses (including, without
limitation, attorneys' fees) arising from Recipient's breach of any covenants
contained in this letter.
Recipient agrees to indemnify, defend and hold Southland, its
affiliates, shareholders, directors, officers and employees, harmless from
and against any suit, claim or demand by Canmax, its successors or assigns,
arising from or related to Recipient's breach of this Agreement or other
misappropriation or misuse by Recipient of the Source Code Materials or other
proprietary rights of Canmax.
Executed as of the day and year first above written.
[Recipient]
7
<PAGE>
By:
----------------------------------
Title:
-------------------------------
8
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-33523) and
related Prospectus of Canmax Inc. for the registration of 863,364 shares of
its common stock and to the incorporation by reference therein of our
report dated December 19, 1996, with respect to the consolidated financial
statements of Canmax Inc. included in its annual Report on Form 10-K for
the year ended October 31, 1996, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
------------------------------
ERNST & YOUNG LLP
Dallas, Texas
October 31, 1997
