<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period ended September 30, 1999
------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
----------------------
BRAINTECH, INC.
----------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 98-0168932
- ---------------------- ---------------------- ----------------------
(State or jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
930 West 1st St. #102, North Vancouver, B.C., Canada, V7P 3N4
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(Address of Principal Executive offices)
Issuer's Telephone Number: (604) 988-6440
--------------
Securities registered pursuant to section 12(b) of the Act:
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None
Securities registered pursuant to section 12(g) of the Act:
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Common Stock, $0.001 par value
(Title of Class)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities
<PAGE>
Exchange Act of 1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 39,271,333 Common shares, par value
$0.001, as at November 12, 1999.
Transitional Small Business Disclosure Format (check one):
Yes No x
---- ----
Index to Exhibits on Page 8
ii
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BrainTech, Inc.
Form 10-QSB
TABLE OF CONTENTS
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements......................................1
Item 2. Management's Discussion and
Analysis or Plan of Operation.............................1
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................6
Item 2. Changes in Securities and Use of Proceeds.................8
Item 3. Defaults upon Senior Securities...........................8
Item 4. Submission of Matters to a Vote of
Securities Holders........................................8
Item 5. Other Matters.............................................8
Item 6. Exhibits and Reports on Form 8-K..........................8
</TABLE>
iii
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Each of the following items are contained in the Company's
Consolidated Financial Statements and are set forth herein.
(i) Consolidated Balance Sheets as of September 30, 1998 and 1999;
(iii) Consolidated Statements of Operations for the nine month periods
ended September 30, 1998 and 1999;
(iv) Statements of Stockholders' Deficit for the period beginning
January 3, 1994 and ending September 30, 1999;
(v) Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 1998 and 1999; and
(vi) Notes to Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
OVERVIEW
The Company was incorporated in 1987. Since the first quarter of
1994, the Company has been engaged in the development of products to be used in
creating visual recognition systems, and in designing visual recognition
systems.
As of September 30, 1999 the Company had incurred an aggregate deficit
of approximately $6,691,531 during the development stage. The Company expects to
continue to incur significant additional operating losses over the foreseeable
future as its product development, research and development, and marketing
efforts continue to expand. Operating losses may fluctuate from quarter to
quarter as a result of differences in the timing of expenses incurred and
revenue recognised.
1
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RESULTS OF OPERATIONS
The Company believes that its limited history of revenue generation
and recent business developments make the prediction of future results of
operations difficult, and, accordingly, that its operating results should not be
relied upon as an indication of future performance.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED WITH THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1998
During the nine month period ended September 30, 1999, the Company
did not receive any operating revenue. During the nine month period ended
September 30, 1998, the Company recorded revenue from operations totalling
$53,278. This amount included payments from Cordis, a Johnson & Johnson
company, for a feasibility study in respect of a shunt inspection system,
from NGI Technology Inc. for the purchase of a BrainTron processor, and from
Epson Portland Inc. for a demonstration print quality inspection system.
Cost of sales for the nine month period ended September 30, 1998
were $27,006. This figure is an estimate, based on a pro rata portion of the
total cost of sales of $30,005 recorded for the fiscal year ended December
31, 1998. The Company recorded no cost of sales for the nine month period
ended September 30, 1999.
Research and development expenses for the nine month period ended
September 30, 1999 were $442,790, compared with $114,631 for the nine month
period ended September 30, 1998. Research and development expenses (which are
reported net of government grants) were reduced during the period ended
September 30, 1998 by grant funds totalling approximately $44,983 from the
National Research Council of Canada. Those funds were used for the
development of the Odysee Development Studio. Salaries allocated to research
and development increased from approximately $122,716 for the nine month
period ended September 30, 1998 to approximately $286,368 (inclusive of bonus
payments and payments to contract workers) for the nine month period ended
2
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September 30, 1999. In addition, research and development expenses for the
nine month period ended September 30, 1999 included approximately $141,400 in
payments to North Shore Circuit Design of Austin, Texas for work performed on
the IMPAC Accelerator board. There was no similar payment during the nine
month period ended September 30, 1998.
Consulting and contractor expenses decreased to $4,210 for the nine
month period ended September 30, 1999 from $32,900 for the nine month period
ended September 30, 1998. Consulting and contractor expenses for the nine
month period ended September 30, 1998 included the cost of a business plan
prepared for the Company. There was no corresponding expense during the nine
month period ended September 30, 1999.
Salaries and benefits, excluding compensation expenses in respect
of employee stock options, were $92,083 for the nine month period ended
September 30, 1999, compared with $202,517 for the nine month period ended
September 30, 1998. The principal reason for the decrease was the adjustment
made to our cost sharing agreement with Sideware Systems Inc., described
below. The Company's compensation expense for employee stock options was nil
for the nine month period ended September 30, 1999 and approximately $837,800
for the nine month period ended September 30, 1998. Inclusive of stock option
compensation expenses, salaries and benefits were approximately $92,083 for
the nine month period ended September 30, 1999 and $1,040,317 for the nine
month period ended September 30, 1998.
General, selling, and administrative expenses increased to
approximately $396,879 for nine month period ended September 30, 1999 from
approximately $362,351 for the nine month period ended September 30, 1998.
Several factors contributed to the increase. The Company's recorded foreign
exchange expense increased from approximately $18,496 to approximately
$73,287. The Company's foreign exchange expense results principally from
adjusting entries made in respect of transactions recorded in United States
dollars, but actually carried out in Canadian dollars. Accounting costs
increased from approximately $22,528 to approximately $28,500, principally as
a result of costs incurred in resolving accounting issues relating to the
Company's incentive stock options and costs incurred in connection with the
Company becoming a reporting issuer pursuant to the Securities Exchange Act
of 1934. Rent expenses decreased from approximately $37,747 to approximately
$32,960, principally as a result of the adjustment made to our cost sharing
agreement with Sideware Systems Inc., described below. Travel and Promotion
expenses remained
3
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consistent for the nine month periods ended September 30, 1999 and September 30,
1998, being approximately $91,298 and $93,481, respectively.
PLAN OF OPERATION
Subsequent to June 30, 1999 the Company commenced work on the
following projects.
1. The Company entered into an agreement with Mercator Robotec Inc. and
Satisfied Brake Products Inc. to develop a brake shoe sorting system. The
Company will provide the vision system to be included in the brake shoe
sorting system and Mercator Robotec Inc. will provide system integration
services. The price for the system is approximately $66,000, of which the
Company will receive approximately half. As at November 12, 1999, the system
is approximately 50% complete.
2. The Company completed a feasibility study for Toyota Canada Inc. for the
development of a part identification system.
3. The Company entered into a contract with Sideware Systems Inc. to develop
"Wizmaster", an e-commerce software application which Sideware Systems Inc.
intends to incorporate into its Dr. Bean product.
By a Cost Sharing and Allocation Agreement executed in October
1999, the Company agreed with Sideware Systems Inc. to re-allocate certain
common costs, previously shared equally with Sideware Systems Inc. Effective
January 1, 1999 the common costs will be borne by Sideware Systems Inc. as to
80% and by the Company as to 20%. The reason for the reallocation of costs
was the substantially greater level of business conducted by Sideware Systems
Inc., and its corresponding greater use of the common premises and personnel.
By a Lease and Assignment of Lease effective July 1, 1999, the
Company also made arrangements for the use of certain office premises in
Vancouver, B.C. The cost of the premises will be shared with Sideware Systems
Inc. in accordance with the Cost Sharing and Allocation Agreement described
above.
4
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For the balance of its present fiscal year, the Company's efforts will
be directed towards the following projects:
1. Completion of the brake shoe sorting system under development for
Satisfied Brake Products Inc.
2. Marketing and continued development of the Odysee Development Studio.
3. Advancement of the part identification project with Toyota Canada Inc.
4. Design and development of the next generation "Wizmaster"
e-commerce application.
5. Completing the IMPAC Accelerator Board and the BrainTron II processor.
6. Development of the Sorting Precision Quality Recycling ("SPQR")
system.
The Company currently employs 7 full time and 9 part time officers or
employees. The Company's current monthly salary costs are approximately
$30,000.
For the nine month period ended September 30, 1999 the Company's
average monthly cash expenses, inclusive of salary costs, were approximately
$105,000.
As at the end of September 1999, the Company's cash balance was
approximately $134,000. By Press Release dated July 6, 1999 the Company
announced a private placement of 5,000,000 shares at a price of $0.20 per
share, which will be offered pursuant to Rule 506 of Regulation D to the
Securities Exchange Act of 1933. The Company has subsequently re-priced the
private placement at $0.15 per share. The Company has sold 2,350,000 of the
shares and expects to sell another 4,650,000 shares prior to December 31,
1999.
The financing described above will provide the Company with
sufficient capital resources to pay ongoing operating expenses at their
present level for the balance of the current fiscal year, and the first
quarter of the Company's next fiscal year.
5
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During the nine month period ended September 30, 1999, the Company
incurred capital expenditures of approximately $38,006 for computer equipment
and software. The Company does not presently plan to incur significant
additional capital expenses or to increase its salary or other operating
costs significantly during the balance of the current fiscal year. Any
significant capital expenses or increases in operating costs will be
dependent on the Company raising additional capital or generating revenue
from the sales of its products or services.
The Company has not at any time been able to generate sufficient
revenue from sales of its products or services to sustain ongoing operations,
and does not have an established record of sales or established distribution
channels for its products or services. In order for the Company to continue as a
going concern, the Company will have to begin generating significant sales
revenue.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to the following material legal proceedings.
1. JMF Management Inc. et al v. BrainTech, Inc. et al,
British Columbia Supreme Court Action No. C990550
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On February 1, 1999 JMF Management Inc. and Manfred Kurschner
commenced legal proceedings against the Company and TechWest Management Inc. Mr.
Kurschner is the Company's former Manager of Investor Relations and JMF
Management Inc. is Mr. Kurschner's personal management Company. The Plaintiffs
claim approximately $100,000 in damages for alleged breach of a stock option
agreement and approximately $7,500 alleged to be owing pursuant to a consulting
agreement. The Company has filed a defence and counterclaim. The Company's
counterclaim claims damages for breach of fiduciary duty and negligence. No
depositions have been conducted in the action and trial date has been set. The
outcome of the action is uncertain.
6
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2. Cactus Consultants Co. Ltd. v. BrainTech, Inc. et al,
British Columbia Supreme Court Action No. C991377
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On March 16, 1999 Cactus Consultants Co. Ltd., Crystal Securities
Inc., and Elmswell Investments Inc. commenced legal proceedings against the
Company and certain of its present and former directors. The Plaintiffs claim
$606,000 as damages for breach of contract and conversion of stock certificates.
The Company's records show that during the fiscal year ending December 31, 1995,
a total of 3,000,000 shares of Common Stock were subscribed at a price of $0.25
per share, and that the Company received $606,000 of the subscription amount.
Prior to December 31, 1998 the Company recorded $606,000 as "Subscriptions
received" on its financial statements. Subsequent to the commencement of court
action, the Company has recorded the same amount as "Amounts in dispute". The
Company has filed a defence and counterclaim alleging that the plaintiffs and
Jan Olivier, a former promoter of the Company, caused share certificates of the
Defendant to be issued to the plaintiffs improperly, and caused funds of the
Company to be used for unauthorized and improper purposes. The outcome of the
action is uncertain.
3. BrainTech, Inc. v. John Kostiuk, District Court of Harris County
Action 96-55978; British Columbia Supreme Court Action C972736;
British Columbia Court of Appeal Action CA024459
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On May 7, 1997 the Company obtained judgment for damages in the amount
of $300,000 in legal proceedings commenced in the District Court of Harris
County in the State of Texas against John Kostiuk, a resident of British
Columbia, for defamatory and injurious statements which Mr. Kostiuk caused to be
published about the Company over the Internet. On April 2, 1998 the Company
obtained a judgement of the Supreme Court of British Columbia enforcing the
Texas judgment.
Effective October 31, 1998 Sideware Systems Inc. purchased a 50%
interest in the judgment for a purchase price of $200,000. The agreement between
the Company and Sideware Inc. provided that the purchase price would be adjusted
depending on the benefit ultimately received by Sideware Systems Inc. On March
18, 1999, the British Columbia Court of Appeal reversed the judgment of the
British Columbia Supreme Court, rendering the judgment
7
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(subject to any further appeal) unenforceable against any assets of John Kostiuk
in British Columbia. Subsequent to the decision of the British Columbia Court of
Appeal, the Company returned the $200,000 paid by Sideware Systems Inc. The
Company has filed an Application for Leave to Appeal to the Supreme Court of
Canada. Any recovery in the proceeding must be considered speculative.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 5. OTHER MATTERS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
<TABLE>
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NUMBER EXHIBIT
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3.1(1) Articles of Incorporation, dated February 27, 1987
3.2(1) Articles of Amendment, dated July 14,1998
3.3(1) Articles of Amendment, dated June 28, 1990
3.4(1) Articles Of Amendment of the Company, dated February 8, 1993
3.5(1) Articles of Amendment of the Company, dated April 6, 1993
3.6(1) Articles of Amendment of the Company, dated December 6, 1993
3.7(1) By-Laws of the Company
4.1(1) Specimen Stock Certificate
10.1(1) License Agreement between the Company and Willard W. Olson,
dated January 5, 1995.
8
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10.2(1) Product Development Agreement between the Company and
United Technologies Microelectronic Systems Inc., dated
July 6, 1998.
10.3(1) Manufacturing and Sales Agreement between the Company and
United Technologies Microelectronic Systems Inc., dated
July 6, 1998.
10.4(1) Operating Agreement between the Company and Sideware Systems
Inc., dated November 1, 1995
10.5 Cost Sharing and Allocation Agreement between the Company and
Sideware Systems Inc.
10.6(1) Assignment of Lease and Modification of Lease Agreement dated
August 17, 1998 between
HOOPP Realty Inc., Techwest Management Inc., Sideware Systems
Inc., and BrainTech, Inc.
10.7 Software Development and License Agreement dated September 20,
1999 between the Company and Sideware Systems Inc.
10.8 Lease effective as of July 1, 1999 between the Company, Techwest
Management Ltd., Sideware Systems Inc. and Pacific Centre
Leaseholds Ltd.
10.9 Assignment Agreement effective as of July 1, 1999 between the
Company, Techwest Management Ltd., Sideware Systems Inc., and
SJM Management Ltd.
10.10 Agreement between the Company, Mercator Robotec Inc. and
Satisfied Brake Products Inc.
11.1 Computation of net loss per share
21.1(1) Subsidiaries of the Registrant
27.1 Summary Financial Data for the month nine month period ended
September 30, 1999.
</TABLE>
(1) Exhibit already on file.
The Company did not file any reports on Form 8-K during the period covered by
this Quarterly Report.
9
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SIGNATURES
In accordance with Section 13 of the Securities Exchange Act of 1934, the
registrant caused this Quarterly Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 12, 1999 BrainTech, Inc.
"W. Grant Sutherland"
---------------------
W. Grant Sutherland
Director
Chairman of the Board of Directors
Chief Financial Officer
<PAGE>
Consolidated Financial Statements of
BRAINTECH, INC.
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
<PAGE>
BRAINTECH, INC.
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
September 30, 1999 and 1998
<TABLE>
<CAPTION>
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1999 1998
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 134,375 $ 89,572
Accounts receivable 15,225 14,966
Share subscriptions receivable - 120,000
Inventory 3,575 38,625
Prepaid expenses 16,596 26,904
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169,771 290,067
Due from directors and officers (note 5(a)) 10,130 10,130
Capital assets (note 6) 92,982 26,082
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$ 272,883 $ 326,279
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- -----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued liabilities $ 61,855 $ 58,732
Due to related companies (note 5(b)) 134,708 158,756
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196,563 217,488
Subscriptions received 20,270 -
Amounts in dispute (note 9(b)) 606,000 606,000
- -----------------------------------------------------------------------------------------------------------
822,833 823,488
Stockholders' deficit:
Common stock (note 7):
Authorized: 50,000,000 shares, with $0.001 par value
Issued 39,721,333 shares (1998 - 30,371,333) 39,721 30,371
Additional paid-in capital (note 7) 6,160,660 4,703,760
Accumulated deficit (58,800) (58,800)
Deficit accumulated during the development stage (6,691,531) (5,172,540)
- -----------------------------------------------------------------------------------------------------------
(549,950) (497,209)
Future operations (note 2)
Contingencies (note 9)
Commitments (note 10)
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$ 272,883 $ 326,279
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</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
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Chairman President
<PAGE>
BRAINTECH, INC.
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
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Period from
inception on
January 3, 1994 Nine months ended September 30,
to September 30, ---------------------------------
1999 1999 1998
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<S> <C> <C> <C>
Sales $ 57,510 $ - $ 53,278
Cost of sales 30,005 - 27,006
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Gross margin 27,505 - 26,272
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Expenses:
Research and development 1,582,350 442,790 114,631
Consulting and contractors 740,771 4,210 32,900
Salaries and benefits (note 11) 1,942,019 92,083 1,040,317
Selling, general and administrative 2,299,140 396,879 362,351
Non-operating expenses:
Loss on disposal of capital assets 20,136 - -
Write-down of marketable securities 100,000 - 3,600
Write-down of intangible assets 17,189 - -
Write-down of organization costs 17,431 - -
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(6,719,036) (935,962) (1,553,799)
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Net loss $(6,691,531) $ (935,962) $(1,527,527)
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Loss per share information:
Basic $ (0.30) $ (0.03) $ ( 0.05)
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Weighted average number of common
shares outstanding: 22,217,371 33,470,783 27,892,117
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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BRAINTECH, INC.
Consolidated Statements of Stockholders' Deficit
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
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Deficit
accumulated
Additional during the
Common paid-in Accumulated development
Shares stock capital deficit stage
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<S> <C> <C> <C> <C> <C>
Balance, January 3, 1994 17,400,000 $17,400 $1,039,271 $(58,800) $ -
Loss for the period - - - - (1,006,716)
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Balance, December 31, 1994 17,400,000 17,400 1,039,271 (58,800) (1,006,716)
Loss for the period - - - - (748,310)
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Balance, December 31, 1995 17,400,000 17,400 1,039,271 (58,800) (1,755,026)
Common stock transactions
(net of issue costs):
Issued for cash at $.1895 per share 950,000 950 173,440 - -
Issued for cash at $.25 per share 733,333 733 183,167 - -
Issued for cash at $.20 per share 3,000,000 3,000 592,500 - -
Shares issued for services rendered 1,200,000 1,200 238,800 - -
Loss for the period - - - - (959,945)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 23,283,333 23,283 2,227,178 (58,800) (2,714,971)
Common stock transactions
(net of issue costs):
Issued for cash at $.20 per share 2,000,000 2,000 396,991 - -
Issued for cash at $.15 per share 1,000,000 1,000 148,279 - -
Shares issued for services rendered 300,000 300 59,700 - -
Compensatory benefit of employee
stock options - - 200,000 - -
Loss for the period - - - - (930,042)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 26,583,333 26,583 3,032,148 (58,800) (3,645,013)
Common stock transactions
(net of issue costs):
Issued for cash at $.25 per share 1,600,000 1,600 398,400 - -
Issued for cash at $.20 per share 2,188,000 2,188 435,412 - -
Compensatory benefit of employee
stock options - - 927,800 - -
Loss for the period - - - - (2,110,556)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 30,371,333 30,371 4,793,760 (58,800) (5,755,569)
Common stock transactions
(net of issue costs):
Issued for cash at $0.15 per share 9,350,000 9,350 1,366,900 - -
Loss for the period - - - - (935,962)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 39,721,333 $39,721 $6,160,660 $(58,800) $(6,691,531)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BRAINTECH, INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Period from inception on
January 3, 1994 Nine months ended September 30,
to September 30, -------------------------------
1999 1999 1998
- --------------------------------------------------------------------------------------------------------------
(note 1)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(6,691,531) $ (935,962) $(1,527,527)
Items not involving cash:
Amortization 57,716 20,261 9,537
Bad debt 75,108 - -
Write-down of marketable securities 100,000 - 3,600
Write-down of intangible assets 17,189 - -
Write-down of organization costs 17,431 - -
Loss on disposal of capital assets 20,136 - -
Shares issued for services rendered 300,000 - -
Compensatory benefit of
employee stock options 1,127,800 - 837,800
Change in operating assets and liabilities:
Share subscriptions receivable - - (120,000)
Inventory (3,575) (3,575) (38,625)
Accounts receivable (15,225) 7,208 6,496
Prepaid expenses (16,596) (4,252) (25,196)
Accounts payable and accrued liabilities 36,677 (22,146) 38,232
---------------------------------------------------------------------------------------------------------
Net cash used for operating activities (4,974,870) (938,466) (815,683)
---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of marketable securities (100,000) - -
Purchase of capital assets (169,775) (38,006) (22,347)
Proceeds from notes receivable (130,181) - -
Proceeds from disposal of real estate 306,752 - -
---------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing
activities (93,204) (38,006) (22,347)
---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Notes receivable 55,073 - -
Borrowings from directors and officers (2,826) - -
Due to (from) related companies 134,708 (308,152) (52,686)
Mortgages payable (207,739) - -
Share subscriptions received 20,270 20,270 -
Common shares issued, net of issue costs 4,958,851 1,376,250 837,600
---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,958,337 1,088,368 784,914
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (109,737) 111,896 (53,116)
Cash and cash equivalents, beginning of period 244,112 22,479 142,688
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 134,375 $ 134,375 $ 89,572
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Supplemental information:
Interest paid $ 2,902 $ - $ 2,155
Taxes paid $ - $ - $ -
Non-cash financing activities:
Shares issued for services rendered $ 300,000 $ - $ -
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- -------------------------------------------------------------------------------
1. ORGANIZATION:
Braintech, Inc. (the "Company") was incorporated on March 4, 1987 under
the laws of the State of Nevada as Tome Capital, Inc. The Company sold
1,500,000 shares to the public on May 11, 1987, pursuant to Rule 504 of
the Security Act of 1933, as amended.
The Company initially was in the business of real estate development. On
January 3, 1994 the Company changed its name to Braintech Inc. and began
operations as a high tech development Company, developing advanced video
recognition software. All sales of its product and services are made in
this industry segment.
2. FUTURE OPERATIONS:
During the nine months ended September 30, 1999, the Company incurred a
loss of $935,962 and used cash for operating activities of $938,466. From
inception of the business on January 3, 1994, the Company has incurred
cumulative losses of $6,691,531 and used cash for operating activities of
$4,974,870.
These consolidated financial statements have been prepared on the going
concern basis under which an entity is considered to be able to realize its
assets and satisfy its liabilities in the ordinary course of business.
Operations to date have been primarily financed by equity transactions. The
Company's future operations are dependent upon continued support by
shareholders, the achievement of profitable operations and the successful
completion of management's plan to obtain additional equity financing,
although there can be no assurances that the Company will be successful.
The consolidated financial statements do not include any adjustments
relating to the recoverability of assets and classification of assets and
liabilities that might be necessary should the Company be unable to
continue as a going concern.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States and
present the financial position, results of operations and cash flows of
the Company and its wholly owned subsidiary Brainware Systems Inc.,
incorporated under the Company Act of British Columbia on March 30,
1994. All material inter-company balances and transactions have been
eliminated.
Through December 31, 1997, the consolidated financial statements of the
Company issued to shareholders were presented in accordance with
generally accepted accounting principles in Canada. The application of
United States accounting principles to these consolidated financial
statements has been made on a retroactive basis. In addition, to
September 30, 1999, for United States accounting and reporting purposes
the Company was considered to be in the development stage as it was
devoting substantial efforts to developing its business operations.
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- -------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(b) Cash and cash equivalents:
Cash and cash equivalents include highly liquid investments, such as
term deposits, having original maturities of six months or less at
the date of acquisition, that are readily convertible to contracted
amounts of cash.
(c) Research and development costs:
Research and development costs are expensed as incurred.
(d) Revenue recognition:
The Company recognizes revenue when title has passed to the customer,
the collectibility of the consideration is reasonably assured and the
Company has no significant remaining performance obligations. An
allowance for estimated future returns is recorded at the time revenue
is recognized.
(e) Marketable securities:
Marketable securities are comprised of equity securities available
for sale and are stated at market value. Decreases in market value
that are considered to be other than temporary are charged to
operations.
(f) Capital assets:
Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Asset Basis Rate
-------------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining-balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
(g) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenue and
expenses during the reporting period. Actual amounts may differ from
these estimates.
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- -------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(h) Foreign currency:
Transactions denominated in foreign currencies are translated in
U.S. dollars at the rate prevailing at the time of the transactions.
At the balance sheet date, monetary assets and liabilities denominated
in a foreign currency are translated at the current rate of exchange.
Exchange gains and losses arising on translation or settlement of
foreign currency denominated monetary items are included in the
determination of net income for the current period.
(i) Stock-based compensation:
The Company has elected to apply Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and
related interpretations in accounting for its stock options. Under APB
25, compensation expense is only recorded to the extent that the
exercise price is less than fair value on the date of grant. The
Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").
(j) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized based
on the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(k) Concentration of credit risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash equivalents.
The Company maintains cash equivalents with various financial
institutions located in Canada and the United States. The Company's
policy is to limit the exposure at any one financial institution and to
invest solely in highly liquid investments that are readily convertible
to contracted amounts of cash.
(l) Loss per share:
Loss per share is calculated based on the weighted average number of
shares outstanding. Fully diluted loss per share has not been
presented as outstanding options are anti-dilutive.
(m) Comprehensive income:
Net income for the Company is the same as comprehensive income.
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- -------------------------------------------------------------------------------
4. MARKETABLE SECURITIES:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
September 30, September 30,
1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C>
1,600 shares of Beverage Stores Inc., at market $ - $3,600
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
</TABLE>
The Company has recorded losses in prior years for permanent decreases
in value.
5. RELATED PARTY BALANCES AND TRANSACTIONS:
(a) Due from directors and officers:
The amounts due from directors and officers represent cash advances
provided to current directors and officers of the Company.
(b) Due to related companies:
The amount due to related companies under common control results from
inter-company expense allocations and cash advances. On October 29,
1999 the Company agreed with Sideware Systems Inc. to re-allocate
certain common costs effective January 1, 1999. The re-allocation has
been reflected in these financial statements.
(c) Transactions with directors and officers:
During the nine month period ended September 30, 1999, the Company
was charged $24,542 (September 30, 1998 - $21,306) for management
and consulting services provided by directors and officers.
6. CAPITAL ASSETS:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
September 30,
1999
--------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 17,031 $ 4,030 $13,001
Computer equipment 72,383 20,049 52,334
Trade show assets 13,337 2,349 10,988
Computer software 29,929 25,224 4,705
Leasehold improvements 14,733 2,779 11,954
--------------------------------------------------------------------------------
$147,413 $54,431 $92,982
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 3, 1999 and 1998
- --------------------------------------------------------------------------------
6. CAPITAL ASSETS (CONTINUED):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
September 30,
1998
--------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $22,283 $ 2,183 $20,100
Computer software 23,623 17,641 5,982
--------------------------------------------------------------------------------
$45,906 $19,824 $26,082
--------------------------------------------------------------------------------
</TABLE>
7. COMMON STOCK:
(a) Of the shares outstanding at September 30, 1999, 14,630,000 shares
(September 30, 1998 - 6,830,000) are subject to trading restrictions.
These include the 1,500,000 shares retained by the Company, as
described in note 7(b). The Company believes that any hold periods
relating to 3,780,000 shares have expired but the shareholders have not
applied to remove the restrictive designation.
(b) 5,500,000 shares were issued for technology in 1993 and recorded at
par value of $5,500. 1,500,000 shares have been retained by the
Company because the development of the technology had not been
completed.
(c) Additional paid-in capital arises on the issuance of common shares
at a price in excess of par value.
(d) As at September 30, 1999 the Company had received subscriptions for
shares of common stock for aggregate proceeds of $20,270.
(e) Stock options:
The Company has reserved 7,500,000 common shares pursuant to a stock
option plan. Options to purchase common shares of the Company may
be granted by the Board of Directors and vest immediately.
Stock option activity during the nine month period ended September
30, 1999 is as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Weighted
average Weighted Outstanding Outstanding
Expiry exercise average December 31, Forfeited September 30,
dates price fair value 1998 Granted Exercised /expired 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
November 28, 2002 $0.20 $0.19 4,097,000 - - - 4,097,000
November 28, 2002 $0.20 $0.76 1,210,000 - - 35,000 1,175,000
November 28, 2002 $0.20 $0.77 125,000 - - - 125,000
April 19, 2004 $0.20 $0.20 - 1,700,000 - - 1,700,000
-------------------------------------------------------------------------------------------------------------
5,432,000 1,700,000 - 35,000 7,097,000
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended Sepember 30, 1999 and 1998
- -------------------------------------------------------------------------------
7. COMMON STOCK (CONTINUED):
The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" ("FAS 123") but has elected to continue measuring
compensation costs using the intrinsic value based method of
accounting. Under the intrinsic value based method, employee stock
option compensation is the excess, if any, of the quoted market value
of the stock at the date of grant over the amount an optionee must pay
to acquire the stock. Included in expenses for the nine month period
ended September 30, 1999 is $Nil representing a compensatory benefit
(nine months ended September 30, 1998 $837,800)
8. INCOME TAXES:
To December 31, 1996, the Company has incurred losses for income tax
purposes in Canada and the United States of approximately $25,000, which
are available to reduce income for tax purposes through the year 2000.
The unrecorded benefit of these loss carry forwards is approximately
$12,500. Under the provisions of the Statement 109, the effect of this
benefit has been fully offset by a valuation allowance due to the
uncertainty of the realization of the benefits.
9. CONTINGENCIES:
The Company is engaged in the following legal disputes:
(a) On February 1, 1999 a former employee of the Company commenced legal
proceedings against the Company claiming approximately $100,000 in
damages for alleged breach of a stock option agreement and
approximately $7,500 alleged to be owing pursuant to a consulting
agreement. The Company has filed a defence and counterclaim alleging
breach of fiduciary duty and negligence. While the ultimate outcome is
uncertain, management of the Company believes it will be successful in
defending this action and accordingly no amount has been provided in
these financial statements.
(b) On March 16, 1999 three corporations commenced legal proceedings
against the Company and certain of its present and former directors are
claiming damages in the amount of $606,000 for breach of contract and
conversion of stock certificates. The plaintiffs have not sought
recovery of any shares of the Company. The Company has filed a defence
and counterclaim alleging that the plaintiffs and a former promoter of
the Company caused share certificates of the defendant to be issued to
the plaintiffs improperly, and caused funds of the Company to be used
for unauthorized and improper purposes. The Company has recorded the
full amount of the $606,000 contingent claim.
<PAGE>
BRAINTECH, INC.
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
(Unaudited - prepared by management)
Nine months ended September 30, 1999 and 1998
- --------------------------------------------------------------------------------
10. COMMITMENTS:
The Company has the following minimum lease payments under operating
leases for its premises:
<TABLE>
<S> <C>
Three month period to December 31, 1999 $ 16,000
Year ended December 31, 2000 64,500
Year ended December 31, 2001 67,000
Year ended December 31, 2002 61,500
Year ended December 31, 2003 37,500
--------------------------------------------------------------------
$246,500
--------------------------------------------------------------------
</TABLE>
11. SALARIES AND BENEFITS:
Salaries and benefits are comprised of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Period from
Inception on
January 3,
1994 Nine months ended September 30
to September 30, ---------------------------------
1999 1999 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Payments and accrued liabilities $ 814,219 $92,083 $ 202,517
Compensatory benefit of employee
stock options 1,127,800 - 837,800
----------------------------------------------------------------------------------------------------
$1,942,019 $92,083 $1,040,317
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.5
Cost Sharing and Allocation Agreement dated October 29, 1999
between the Company and Sideware Systems Inc.
<PAGE>
COST SHARING AND ALLOCATION AGREEMENT
BETWEEN:
BRAINTECH, INC., a company duly incorporated under the laws
of the State of Nevada, having an office at 1600 - 777
Dunsmuir Street, Vancouver, B.C. V7Y 1K2
("BNTI")
AND:
SIDEWARE SYSTEMS INC., a company duly incorporated under the
laws of the Province of British Columbia, having an office
at 1910 - 777 Hornby Street, Vancouver, B.C. V7Z 1S4
("SYD")
WHEREAS:
A. BNTI and SYD share certain office premises located at 930 West 1st
Street, North Vancouver, British Columbia (the "Shared Premises").
B. BNTI and SYD also share the services of certain personnel (the "Shared
Personnel") presently including, inter alia, the Receptionist, Marketing
Coordinator, Controller, Assistant Accountant, Trade Show Coordinator,
President, and Chairman of BNTI and SYD.
C. BNTI and SYD also share certain equipment (the "Shared Equipment") which
are incidental to the operation of the Shared Premises and the employment of
the Shared Personnel, presently including, inter alia, a telephone system for
voice and internet communication.
D. Pursuant to a Memorandum of Agreement dated October 18, 1996, BNTI and
SYD agreed to share certain costs relating to the Shared Premises, the Shared
Personnel, and the Shared Equipment on a 50 - 50 basis.
E. Subsequent to the Memorandum of Agreement, the business of SYD has
expanded more rapidly than the business of BNTI.
F. As a result of the expansion of the SYD business, SYD now makes greater
use of the Shared Premises, the Shared Personnel, and the Shared Equipment
than BNTI.
G. Following an analysis of their respective accounting records, BNTI and
SYD have concluded that from and after January 1, 1999, the relative use of
the Shared Premises, the Shared Personnel, and the Shared Equipment has been
approximately 80% by SYD and 20% by BNTI.
H. In the circumstances set out herein, SYD and BNTI have agreed that it
would be fair and equitable to re-allocate the costs relating to the Shared
Premises, the Shared Personnel, and the Shared Equipment on an 80 - 20 basis
as between SYD and BNTI, effective January 1, 1999.
NOW THEREFORE the parties hereto, intending to be legally bound, agree as
follows.
1. Effective January 1, 1999, responsibility for costs relating to the
Shared Premises, the Shared Personnel, and the Shared Equipment, shall be
allocated 80% to SYD and 20% to BNTI.
2. As soon as practicable following execution of this Agreement, the
parties shall use their best efforts to make any adjustments required to
their inter-corporate accounts to give effect to this Agreement.
<PAGE>
3. The parties acknowledge and agree that changes in circumstances may
render the cost allocations set out in this Agreement inequitable. In such
event, the parties will negotiate in good faith to adjust the cost
allocations set out in this Agreement on a fair and equitable basis.
4. The parties acknowledge and agree that it is not practical to ensure
that all payments in respect of the costs covered by this Agreement will be
made in specified proportions in the first instance. BNTI and SYD agree that
they shall, from time to time, account to each other for their respective
shares of the costs covered by this Agreement to ensure that the intent of
this Agreement is carried out.
5. BNTI and SYD will deal with each other in good faith with respect to all
matters covered by this Agreement.
Dated: October 29, 1999.
SIDEWARE SYSTEMS INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
BRAINTECH, INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
2
<PAGE>
Exhibit 10.7
Software Development and License Agreement dated September 20, 1999
between the Company and Sideware Systems, Inc.
<PAGE>
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
THIS AGREEMENT is dated as of the 20th day of September, 1999.
BETWEEN:-
BRAINTECH, INC., a company subsisting under the laws of
Nevada and having its head office in British Columbia at
Suite 102, 930 West 1st Street, Vancouver, B.C. V7P 3N4
("BrainTech")
AND:
SIDEWARE SYSTEMS INC., a company duly incorporated under the
laws of the Province of British Columbia having its head
office at Suite 102, 930 West 1st Street, Vancouver, B.C.
V7P 3N4
("SSI")
WHEREAS:-
A. BrainTech has proposed to develop the Software.
B. Sideware is the owner and developer of Dr. Bean, which facilitates
customer care and customer relations management for companies operating
e-business internet web sites.
C. One potential application of the Software is as a component of Dr.
Bean.
D. The parties wish to provide for the development and licensing of the
Software on the terms and conditions set out herein.
NOW THEREFORE WITNESSETH that in consideration of the premises and of
the mutual covenants and agreements set forth herein, the parties hereto
covenant and agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS
1.01 In this Agreement, including the recitals hereto, the following words
and phrases shall have the following meanings:-
(a) "Available Date" means the date on which a version of Dr. Bean
incorporating the Software becomes generally available for sale to the
public;
(b) "Dr. Bean" includes:
(i) the software application currently being marketed by
Sideware under the name "Dr. Bean";
(ii) any modifications or enhancements to the software described
in (i); and
(iii) any other software applications which may be developed or
marketed by Sideware which include functions similar to those
performed by the software described in (i);
(c) "Intellectual Property Rights" includes copyrights, patents, trade
marks, service marks, design rights (whether registered or unregistered),
moral rights, semiconductor topography rights, trade secrets and all
other similar proprietary rights;
(d) "Sideware" includes SSI, Sideware Corp., Sideware International S.R.L.,
and any other affiliates or subsidiaries thereof;
(e) "Software Developer" means any company whose business includes the
development and marketing of software applications;
(f) "Systems Integrator" means any company which is not a Software Developer,
and whose business includes the creation of customised computer systems
using software applications developed by other persons;
(g) "Know How" includes all technical information, procedures, programs,
codes, trade secrets, methods, concepts, ideas, practices, algorithms,
techniques, information, and specifications relating to the Software;
(h) "Software" means the Wizmaster computer program to be developed generally
in accordance with the Specifications; and
2
<PAGE>
(i) "Specifications" means the specifications for the Software set out
Schedule in "A".
CAPTIONS AND SECTION NUMBERS
1.02 The headings and section references in this Agreement are for
convenience of reference only and do not form a part of this Agreement and
are not intended to interpret, define or limit the scope, extent or intent of
this Agreement or any provision thereof.
EXTENDED MEANINGS
1.03 The words "hereof", "herein", "hereunder" and similar expressions used
in any clause, paragraph or section of this Agreement shall relate to the
whole of this Agreement and not to that clause, paragraph or section only,
unless otherwise expressly provided.
NUMBER AND GENDER
1.04 Whenever the singular or masculine or neuter is used in this
Agreement, the same shall be construed to mean the plural or feminine or body
corporate where the context of this Agreement or the parties hereto so
require.
SECTION REFERENCES AND SCHEDULES
1.05 Any reference to a particular "article", "section", "subsection" or
other subdivision is to the particular article, section or other subdivision
of this Agreement and any reference to a schedule by letter shall mean the
appropriate schedule attached to this Agreement and by such reference the
appropriate schedule is incorporated into and made part of this Agreement.
GOVERNING LAW
1.06 This Agreement and all matters arising hereunder shall be governed by,
construed and enforced in accordance with the laws of the Province of British
Columbia, Canada.
SEVERABILITY OF CLAUSES
1.07 In the event that any provision of this Agreement or any part thereof
is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
CURRENCY
1.08 All sums of money to be paid or calculated pursuant to this Agreement
shall be paid or calculated in currency of the United States of America
unless otherwise expressly stated.
3
<PAGE>
SCHEDULES
1.09 The following are the schedules attached to and incorporated in this
Agreement by reference and deemed to be part hereof:-
Schedule "A" - Specifications
Schedule "B" - Hourly charge out rates
ARTICLE 2
DEVELOPMENT OF SOFTWARE
DEVELOPMENT OF THE SOFTWARE
2.01 Following the execution and delivery of this Agreement, BrainTech
shall use diligent and continuous efforts to cause the Software to be
developed generally in accordance with the Specifications. SSI acknowledges
that some or all of the development work may be carried out through BrainWare
Systems Inc., as a sub-contractor to BrainTech.
SSI TO PAY DEVELOPMENT COSTS
2.02 SSI will pay for the development of the Software in accordance with
the following procedure.
(a) At the end of each month, BrainTech shall be entitled to submit an
invoice to SSI in an amount equal to:
(i) the costs incurred by BrainTech during the month in the
development of the Software; plus
(ii) a 10% allowance for profit.
(b) In calculating the costs incurred in the development of the Software,
BrainTech shall be entitled to charge for work done by personnel in the
categories described in Schedule "B" at the charge out rates set out in
Schedule "B".
(c) For work done by personnel not included in the categories set out in
Schedule "B", BrainTech shall include in its invoices such time charges
as it considers reasonable. SSI shall be entitled to dispute the
reasonableness of any such charges by giving notice to BrainTech within
30 days of receiving the invoice. If the parties are unable to resolve
their disagreement within 30 days of SSI giving
4
<PAGE>
such notice, then any dispute shall be resolved by arbitration pursuant
to section 7.07.
(d) BrainTech shall be entitled to include in its invoices other out of
pocket expenses incurred in the development of the Software, plus a 10%
allowance for profit.
(e) SSI shall pay all invoices within 30 days of receipt. If SSI disputes
the amount of any invoice, it shall be entitled either to:
(i) pay such amount as may be in dispute into a lawyer's trust
account pending resolution of the dispute; or
(ii) pay such amount as may be in dispute to BrainTech, subject
to the right of SSI to recover the amount in dispute subsequently,
if the dispute is resolved in SSI's favour.
AUDIT RIGHTS
2.03 SSI shall at any time have the right on reasonable notice to BrainTech
to audit the books and records of BrainTech in respect of the amounts charged
to SSI pursuant to this Agreement for any period. The costs of the audit
shall be borne by BrainTech if the results of such audit disclose that
BrainTech overcharged SSI by 10% or more in respect of the period under
audit. Any dispute arising out of such audit shall be resolved by
arbitration in accordance with section 7.07.
MONTHLY REPORTS
2.04 At the end of each month, BrainTech shall give SSI a report on the
development of Software, which report shall include:
(a) a description of the development work completed to date;
(b) an estimated date for completion of the development; and
(c) an estimated cost for completion of the development.
TERMINATION OF DEVELOMENT
2.05 SSI shall be entitled at any time prior to delivery of the Software to
give notice to BrainTech terminating its involvement in development of the
Software. If SSI gives such notice:
(a) SSI's payment obligations pursuant to section 2.02 shall terminate;
(b) BrainTech's development obligations pursuant to section 2.01 shall
terminate;
5
<PAGE>
(c) Sideware shall not be entitled to any license rights under Article 3; and
(d) If BrainTech subsequently sells or licenses the Software to any other
person, BrainTech shall repay to SSI the amounts paid by SSI pursuant to
section 2.02, except that BrainTech's liability pursuant to this
subsection shall be limited to the greater of:
(i) the total of the amounts paid by SSI pursuant to section 2.02; and
(ii) the total sales and license revenue received by BrainTech
from such third party sales or licenses.
TESTING AND DE-BUGGING OF SOFTWARE
2.06 BrainTech shall notify SSI when development of the Software has
reached the stage where integration of the Software with Dr. Bean, and
testing and de-bugging thereof, is feasible. The parties thereafter will
co-operate to complete integration of the Software with Dr. Bean as soon as
reasonably practicable.
DELIVERY OF SOFTWARE
2.07 Upon completion of the integration of the Software with Dr. Bean, and
provided that SSI shall have paid to BrainTech all amounts owing pursuant to
section 2.02, BrainTech shall deliver to Sideware:
(a) the source code for the Software; and
(b) such other technical data and information relating to the Software
as Sideware may require.
Use of such source code and technical data by Sideware shall be subject to
Article 3.
EXPLOITATION OF SOFTWARE BY SIDEWARE
2.08 Following delivery of the Software to Sideware, Sideware shall use
reasonable commercial efforts to achieve the Availability Date as soon as
reasonably practicable.
SUPPORT FOR SOFTWARE
2.09 Following delivery of the Software BrainTech shall, upon request from
Sideware, give such assistance to Sideware as BrainTech is reasonably able to
give in respect of:
(a) further development or enhancement of the Software by Sideware; and
(b) correcting any defects or errors in the Software.
Sideware will pay BrainTech for the reasonable personnel charges in rendering
such assistance on the same basis as set out in section 2.02.
6
<PAGE>
ARTICLE 3
GRANT OF LICENSE
GRANT OF LICENSE
3.01 Upon completion of the integration of the Software with Dr. Bean, and
provided that SSI shall have paid to BrainTech all amounts owing pursuant to
section 2.02, Sideware shall have and hold a perpetual, irrevocable,
world-wide, fully pre-paid license to use the Software on the terms and
conditions set out herein.
PERMITTED USE AND SUB-LICENSEING
3.02 Sideware may:
(a) use the Software as a component of its Dr. Bean application;
(b) sub-license directly and indirectly the Software to licensees and
purchasers of Dr. Bean for use as part of Dr. Bean;
(c) use the Software and the Know How to develop further enhancements
and modifications of the Software and Dr. Bean; and
(d) use the Software and the Know How for any purposes incidental to
(a) to (d), above.
MODIFICATIONS AND ENHANCEMENTS DEVELOPED BY SIDEWARE
3.03 Any modifications or enhancements to the Software developed by Sideware
will belong to Sideware.
MODIFICATIONS AND ENHANCEMENTS DEVELOPED BY BRAINTECH
3.04 Any modifications or enhancements to the Software developed by
BrainTech will belong to BrainTech. Sideware shall be entitled to acquire
license rights in respect of such modifications or enhancements in accordance
with the following procedure.
(a) Forthwith upon completing any material modification or enhancement to
the Software, BrainTech shall give notice to SSI thereof. Such notice
shall describe in reasonable detail the functions performed or enhanced
by the modifications or enhancements, and shall state the cost incurred
by BrainTech in developing the modifications or enhancements, calculated
as nearly as practicable in accordance with section 2.02.
(b) Sideware shall have 30 days following receipt of any notice delivered
pursuant to (a) to consider whether it wishes to purchase license rights
in the modification or enhancement. During such 30 day period, BrainTech
shall give Sideware such technical and other information as Sideware may
reasonably request concerning the modification or enhancement.
7
<PAGE>
(c) At any time during the 30 day period described in (a), SSI may give
notice to BrainTech that Sideware wishes to acquire license rights in the
modification or enhancement. Concurrently with giving such notice, SSI
must pay the cost stated by BrainTech in the notice given pursuant to
(a) plus a 10% allowance for profit.
(d) Upon giving notice pursuant to (c), Sideware shall acquire license rights
in the modification or enhancement on the same terms and conditions as
set out in sections 3.01 to 3.03.
RESTRICTION ON LICENSING BY BRAINTECH
3.05 For a period of one year following the Availability Date, BrainTech
shall not license the Software to any Software Developer other than Sideware.
For greater clarity, this section shall not prevent BrainTech from licensing
the Software to any Systems Integrator. The restrictions set out in this
section shall also apply to any modification or enhancement to which Sideware
acquires license rights pursuant to section 3.04, except that in such case
the one year period specified in this section shall commence, in respect of
such modification or enhancement, on the date Sideware gives notice pursuant
to subsection 3.04(c).
OWNERSHIP OF SOFTWARE AND KNOW HOW
3.06 Except as expressly set out herein, no provision of this Agreement
shall or shall be construed to assign, transfer, or otherwise convey to
Sideware any ownership right of any sort in the Software or the Know How.
ARTICLE 4
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
ACKNOWLEDGEMENTS OF BRAINTECH
4.01 BrainTech acknowledges that Dr. Bean is the property of Sideware
solely and exclusively, and that:
(a) Dr. Bean and the know how related thereto constitute valuable trade
secrets of Sideware;
(b) all Intellectual Property Rights relating to Dr. Bean (except for those
rights Sideware has licensed from third parties) are the property of
Sideware; and
(c) all technical data relating to Dr. Bean is confidential information
belonging to Sideware and, to the extent that such information is
disclosed to BrainTech, it is disclosed to BrainTech in confidence.
8
<PAGE>
PROTECTION OF CONFIDENTIALITY
4.02 BrainTech shall adopt internal operating procedures and shall take all
other reasonable steps to protect and ensure the confidentiality of
Sideware's confidential information relating to Dr. Bean. Without limiting
the generality of the foregoing, the steps taken by BrainTech shall include
compliance with sections 4.03 to 4.05 of this Agreement.
PROHIBITION ON USE AND DISCLOSURE
4.03 Except as expressly authorized by this Agreement, or except as
expressly authorized in writing in advance by Sideware, BrainTech shall not:-
(a) disclose, provide, or make available any information relating to Dr. Bean
to any person, except to employees of BrainTech for whom access to the
information is necessary to enable BrainTech to perform its obligations
or exercise its rights under this Agreement;
(b) copy, disassemble, decompile, translate or convert into human readable
form, or reverse engineer, all or any part of Dr. Bean;
(c) use Dr. Bean or any information relating to Dr. Bean for any purpose
other than to facilitate development of the Software pursuant to this
Agreement; or
(d) remove any proprietary, copyright or trade secret legend from any copy of
Dr. Bean or from any copy of any technical written material relating to
Dr. Bean.
QUALIFICATION TO SECTION 4.03
4.04 Section 4.03 shall not prevent the disclosure of information which (i)
is or becomes part of the public domain through no act or omission of
BrainTech, (ii) BrainTech receives from a third party acting without any
obligation or restriction of confidentiality in favor of Sideware, (iii)
Sideware releases from confidential treatment by written consent, or (iv)
BrainTech is required by any applicable law or court order to disclose.
CONFIDENTIALITY AGREEMENTS
4.05 Prior to permitting any employee of BrainTech (or any other person, if
access by such other person is authorised by this Agreement) to have access
to Dr. Bean or any technical information relating thereto, BrainTech shall
cause such employee or other person to enter into a confidentiality agreement
pursuant to which the employee (or other person) covenants to protect the
confidentiality of Dr. Bean.
9
<PAGE>
PROTECTION OF CONFIDENTIALITY OF BRAINTECH
4.06 Except as expressly provided in this Agreement, SSI shall keep (and
shall cause the other entities included within Sideware to keep) confidential
all confidential information, trade secrets, or know-how of BrainTech which
is in its possession or hereafter becomes known to Sideware as a result of
this Agreement (the "BrainTech Confidential Information"). Prior to
permitting any employee of SSI (or any other person, if access by such other
person is authorised by this Agreement) to have access to the BrainTech
Confidential Information, SSI shall cause such employee or other person to
enter into a confidentiality agreement pursuant to which the employee (or
other person) covenants to protect the confidentiality of the BrainTech
Confidential Information.
QUALIFICATION TO SECTION 4.06
4.07 Section 4.06 shall only apply to such information relating to the
affairs of BrainTech that BrainTech expressly designates as confidential, or
which is by its nature patently confidential. In addition, section 4.06
shall not apply to any information in respect of which Sideware acquires any
license or right, pursuant to this Agreement, to use or exploit for its own
benefit or advantage, or prevent disclosure of any information which (i) is
or becomes part of the public domain through no act or omission of Sideware,
(ii) Sideware receives from a third party acting without any obligation or
restriction of confidentiality in favor of BrainTech, (iii) BrainTech
releases from confidential treatment by written consent, or (iv) Sideware is
required by any applicable law or court order to disclose.
INFRINGEMENT CLAIMS BY THIRD PARTIES
4.08 Subject to the limitations set out in this section, BrainTech shall at
BrainTech's expense conduct the defence of any action brought by any third
party against Sideware alleging that use by Sideware of the Software or the
Know How constitutes violation of any Intellectual Property Right of such
third party. BrainTech's obligations under this section shall:
(a) only apply if the infringing conduct alleged by the third party arises
from use of the Software or the Know How for a use authorised by this
Agreement, or conduct necessarily incidental thereto;
(b) only apply if Sideware gives BrainTech prompt notice of the claim by the
third party;
(c) not apply to any claim based on use of any modification or enhancement
developed by Sideware; and
(d) not apply to any claim based on the combination or connection of the
Software by Sideware to any other product, device, program, or system
(other than Dr. Bean) which BrainTech did not supply to Sideware.
10
<PAGE>
ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
4.09 Each party acknowledges that damages will not be an adequate remedy
for any infringement or threatened infringement of the Intellectual Property
Rights of the other party. Each party agrees that:
(a) in any proceeding in respect of any infringement or threatened
infringement of the Intellectual Property Rights of the other party, the
party seeking to enforce its Intellectual Property Rights shall be
entitled to interim, interlocutory, and permanent injunctive relief
without regard to the balance of convenience or the adequacy of damages;
(b) each party shall submit to and attorn to, and hereby submits to and
attorns to, the jurisdiction of the Supreme Court of British Columbia in
respect of any such proceeding;
(c) any order or decision of the Supreme Court of British Columbia shall be
enforceable against and binding upon the parties in respect of activities
in any jurisdiction; and
(d) notwithstanding subsections (b) and (c), no party shall be required to
commence proceedings to enforce its Intellectual Property Rights in the
Supreme Court of British Columbia, but shall be entitled to commence such
proceedings in another jurisdiction if such party is of the view that
proceedings in such other jurisdiction might reasonably result in more
effective or valuable relief being granted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BRAINTECH
5.01 BrainTech represents and warrants to Sideware, with the intent that
Sideware will rely thereon in entering into this Agreement and in concluding
the transactions contemplated hereby, that:
(a) BrainTech is duly incorporated and organized under the laws of the State
of Nevada and has the power, authority and capacity to enter into this
Agreement and carry out its terms;
(b) BrainTech has the corporate power and authority to own its property and
to carry on the business now being conducted by it;
(c) this Agreement will constitute legal, valid and binding obligations of
BrainTech enforceable in accordance with its terms; and
11
<PAGE>
(d) the entering into of this Agreement and the performance by BrainTech of
its obligations thereunder do not and will not result in the violation of
any of the terms and provisions of any agreement to which BrainTech is a
party or by which it or any of its properties or assets are bound.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SIDEWARE
6.01 SSI represents and warrants to BrainTech, with the intent that
BrainTech will rely thereon in entering into this Agreement and in concluding
the transactions contemplated hereby, that:
(a) SSI is duly constituted and organised under laws of British Columbia and
has the power, authority and capacity to enter into this Agreement and
carry out its terms;
(b) SSI has the corporate power and authority to own its property and to
carry on the business now being conducted by it;
(c) this Agreement will constitute legal, valid and binding obligations of
SSI enforceable in accordance with its terms; and
(d) the entering into of this Agreement and the performance by SSI of its
obligations thereunder do not and will not result in the violation of any
of the terms and provisions of any agreement to which SSI is a party or
by which it or any of its properties or assets are bound.
NO WARRANTY OF QUALITY
6.02 SSI acknowledges that the Software represents unique and novel
technology. No warranty, covenant, or representation, express or implied, is
given by BrainTech as to the quality or performance characteristics of the
Software, the suitability or fitness of the Software for any use, or the
absence of defects in the Software.
ARTICLE 7
GENERAL PROVISIONS
NOTICES
7.01 All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
by hand or telecopied:
12
<PAGE>
To SSI:
SIDEWARE SYSTEMS INC.
1910 - 777 Hornby St.
Vancouver, B.C.
V6Z 1S4
Fax: (604) 687-2731
To BrainTech:
BRAINTECH, INC.
#102, 903 West 1st Street
North Vancouver, B.C.
V7P 3N4
Fax: (604) 980-7121
or to such other address as may be given in writing by the parties in
accordance with this section, and shall be deemed to have been received, if
delivered by hand, on the date of delivery, if telecopied to the telecopier
numbers set out above, on the business day next following the date of
transmission.
TIME OF ESSENCE
7.02 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations
under this Agreement.
BINDING EFFECT
7.03 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and assigns.
ENTIRE AGREEMENT
7.04 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
expectations, understandings, communications, representations and agreements
whether verbal or written between the parties with respect to the subject
matter hereof.
FURTHER ASSURANCES
7.05 Each of the parties hereby covenants and agrees to execute such
further and other documents and instruments and do such further and other
things as may be necessary or desirable to implement and carry out the intent
of this Agreement.
AMENDMENTS
13
<PAGE>
7.06 No amendment to this Agreement shall be valid unless it is evidenced
by a written agreement executed by all of the parties hereto.
ARBITRATION
7.07 All disputes arising under this Agreement shall be resolved through
arbitration by a single arbitrator in accordance with the COMMERCIAL
ARBITRATION ACT of British Columbia, except that nothing in this section
shall prevent a party from commencing proceedings before another court or
tribunal to protect any Intellectual Property Right.
GOOD FAITH
7.08 All parties to this Agreement shall exercise their respective rights,
and perform their respective obligations, in good faith and in a commercially
reasonable manner.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the day and year first above written.
SIDEWARE SYSTEMS INC.
Per:
"signed"
---------------------------------
Authorised Signatory
BRAINTECH, INC.
Per:
"signed"
---------------------------------
Authorised Signatory
14
<PAGE>
Exhibit 10.8
Lease effective as of July 1, 1999 between the Company, Techwest
Management Ltd., Sideware Systems, Inc. and Pacific Centre Leaseholds Ltd.
<PAGE>
PACIFIC CENTRE
PACIFIC CENTRE TOWER FOUR
OFFICE LEASE
BETWEEN
PACIFIC CENTRE LEASEHOLDS LIMITED
- AND -
TECHWEST MANAGEMENT INC.
(Tenant)
- AND -
SIDEWARE SYSTEMS INC.
AND
BRAINTECH, INC.
(collectively, the Indemnifier)
===============================================================================
Pacific Centre Tower Four - Pacific Centre
777 Dunsmuir Street
Vancouver, British Columbia
===============================================================================
<PAGE>
LEASE
TABLE OF CONTENTS
ARTICLE I - PREMISES - TERM AND USE. . . . . . . . . . . . . . . . . . . . . .1
Section 1.01 Grant and Premises . . . . . . . . . . . . . . . . . . . . .1
Section 1.02 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.03 Construction of Premises . . . . . . . . . . . . . . . . . .1
Section 1.04 Use and Conduct of Business. . . . . . . . . . . . . . . . .1
ARTICLE II - RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2.01 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . . .1
Section 2.02 Net Rent . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.03 Payment of Operating Costs . . . . . . . . . . . . . . . . .2
Section 2.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . .2
Section 2.05 Payment of Estimated Taxes and Operating Costs . . . . . . .3
Section 2.06 Additional Rent. . . . . . . . . . . . . . . . . . . . . . .3
Section 2.07 Rent Past Due. . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.08 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.09 Adjustment of Areas. . . . . . . . . . . . . . . . . . . . .3
Section 2.10 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.11 Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III - CONTROL OF BUILDING. . . . . . . . . . . . . . . . . . . . . . .4
Section 3.01 Landlord's Services. . . . . . . . . . . . . . . . . . . . .4
Section 3.02 Alterations by Landlord. . . . . . . . . . . . . . . . . . .4
ARTICLE IV - ACCESS AND ENTRY. . . . . . . . . . . . . . . . . . . . . . . . .5
Section 4.01 Entry for Inspection and Work. . . . . . . . . . . . . . . .5
Section 4.02 Right to Show Premises . . . . . . . . . . . . . . . . . . .5
Section 4.03 Entry not Forfeiture . . . . . . . . . . . . . . . . . . . .5
ARTICLE V - MAINTENANCE, REPAIRS AND ALTERATIONS . . . . . . . . . . . . . . .5
Section 5.01 Maintenance By Landlord. . . . . . . . . . . . . . . . . . .5
Section 5.02 Maintenance by Tenant; Compliance with Laws. . . . . . . . .6
Section 5.03 Tenant's Alterations . . . . . . . . . . . . . . . . . . . .6
Section 5.04 Repair Where Tenant at Fault . . . . . . . . . . . . . . . .6
Section 5.05 Removal of Improvements and Fixtures . . . . . . . . . . . .6
Section 5.06 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 5.07 Notice by Tenant . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE VI - INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . . . .7
Section 6.01 Tenant's Insurance . . . . . . . . . . . . . . . . . . . . .7
Section 6.02 Increase in Insurance Premiums . . . . . . . . . . . . . . .8
Section 6.03 Cancellation of Insurance. . . . . . . . . . . . . . . . . .8
Section 6.04 Loss or Damage . . . . . . . . . . . . . . . . . . . . . . .9
Section 6.05 Landlord's Insurance . . . . . . . . . . . . . . . . . . . .9
Section 6.06 Indemnification of the Landlord. . . . . . . . . . . . . . .9
ARTICLE VII - DAMAGE AND DESTRUCTION . . . . . . . . . . . . . . . . . . . . .9
Section 7.01 No Abatement or Termination. . . . . . . . . . . . . . . . .9
Section 7.02 Damage to Premises . . . . . . . . . . . . . . . . . . . . .9
Section 7.03 Right of Termination . . . . . . . . . . . . . . . . . . . 10
Section 7.04 Destruction of or Damage to Building . . . . . . . . . . . 10
Section 7.05 Architect's Certificate. . . . . . . . . . . . . . . . . . 11
ARTICLE VIII - ASSIGNMENT, SUBLETTING AND TRANSFERS. . . . . . . . . . . . . 11
Section 8.01 Assignments, Subleases and Transfers . . . . . . . . . . . 11
Section 8.02 Landlord's Rights. . . . . . . . . . . . . . . . . . . . . 11
Section 8.03 Conditions of Transfer . . . . . . . . . . . . . . . . . . 12
Section 8.04 Change of Control. . . . . . . . . . . . . . . . . . . . . 12
Section 8.05 No Advertising . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.06 Assignment By Landlord . . . . . . . . . . . . . . . . . . 13
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<PAGE>
ARTICLE IX - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.01 Default and Remedies . . . . . . . . . . . . . . . . . . . 13
Section 9.02 Distress . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9.03 Damages and Costs. . . . . . . . . . . . . . . . . . . . . 14
Section 9.04 Allocation of Payments . . . . . . . . . . . . . . . . . . 14
Section 9.05 Survival of Obligations. . . . . . . . . . . . . . . . . . 14
ARTICLE X - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION . . . . . . . . . 14
Section 10.01 Status Statement. . . . . . . . . . . . . . . . . . . . . 14
Section 10.02 Subordination . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.03 Attornment. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.04 Execution of Documents. . . . . . . . . . . . . . . . . . 15
ARTICLE XI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.01 Rules and Regulations . . . . . . . . . . . . . . . . . . 15
Section 11.02 Delay . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.03 Overholding . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.04 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.05 Registration. . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.07 Successors. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.08 Joint and Several Liability . . . . . . . . . . . . . . . 16
Section 11.09 Captions and Section Numbers. . . . . . . . . . . . . . . 16
Section 11.10 Extended Meanings . . . . . . . . . . . . . . . . . . . . 16
Section 11.11 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 16
Section 11.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 16
Section 11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.14 Time of the Essence . . . . . . . . . . . . . . . . . . . 16
Section 11.15 Authority . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.16 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 17
Section 11.17 Indemnity Agreement . . . . . . . . . . . . . . . . . . . 17
. . . . . . . . . . . . . . . . . . . . 17
. . . . . . . . . . . . . . . . . . . . 17
Section 11.20 Execution . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.21 PARKING . . . . . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULE "A" - LEGAL DESCRIPTION OF THE LANDS. . . . . . . . . . . . . . . . 19
SCHEDULE "B" - FLOOR PLAN OF THE PREMISES. . . . . . . . . . . . . . . . . . 20
SCHEDULE "C" - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE "D" - RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . 26
SCHEDULE "E" - INDEMNITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . 28
- ii -
<PAGE>
THIS LEASE is dated the 25TH day of JUNE, 1999.
B E T W E E N:
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
- and -
TECHWEST MANAGEMENT INC.
(the "Tenant")
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
ARTICLE I - PREMISES - TERM AND USE
SECTION I.1 GRANT AND PREMISES
In consideration of the performance by the Tenant of its obligations under
this Lease, the Landlord leases the Premises to the Tenant for the Term
DESCRIBED IN SECTION 1.02. The Premises are located on the 16TH floor of the
Building and COMPRISE THE ORIGINAL PREMISES (THE "ORIGINAL PREMISES") WHICH
are shown outlined in red on the floor plan attached as Schedule "B" AND THE
EXTENDED PREMISES (THE "EXTENDED PREMISES") WHICH ARE SHOWN OUTLINED IN RED
ON THE FLOOR PLAN ATTACHED AS SCHEDULE "B1". FOR THE PURPOSES OF THIS LEASE,
REFERENCES TO THE PREMISES WILL MEAN THE ORIGINAL PREMISES ONLY FOR THE
PERIOD COMMENCING JULY 1, 1999 THROUGH AND INCLUDING THE LAST DAY OF
NOVEMBER, 2000 AND WILL MEAN BOTH THE ORIGINAL PREMISES AND THE EXTENDED
PREMISES FOR THE PERIOD COMMENCING DECEMBER 1, 2000 AND ENDING THE LAST DAY
OF JUNE, 2002. The Net Rentable Area of the ORIGINAL Premises is
approximately 3,538 square feet and the Rentable Area of the Original
Premises is approximately 3,909 square feet. THE NET RENTABLE AREA OF THE
EXTENDED PREMISES IS APPROXIMATELY 3,996 SQUARE FEET AND THE RENTABLE AREA OF
THE EXTENDED PREMISES IS APPROXIMATELY 4,416 SQUARE FEET.
SECTION 1.02 TERM
The Term of this Lease WITH RESPECT TO THE ORIGINAL PREMISES is THREE (3)
years from the 1ST day of JULY, 1999, to the LAST day of JUNE, 2002. THE
TERM OF THIS LEASE WITH RESPECT TO THE EXTENDED PREMISES IS ONE (1) YEAR AND
SEVEN (7) MONTHS FROM THE 1ST DAY OF DECEMBER, 2000, TO THE LAST DAY OF JUNE,
2002.
SECTION 1.03 CONSTRUCTION OF PREMISES
The provisions (if any) of the Lease Proposal relating to construction of the
Premises and delay in availability of the Premises for occupancy by the
Tenant shall remain in effect and shall not merge upon the execution of this
Lease. The Tenant shall abide by the provisions of the tenant leasehold
improvement manual supplied by the Landlord for any construction it proposes
to do prior to or upon occupancy of the Premises, and any renovations to the
Premises after it takes occupancy.
SECTION 1.04 USE AND CONDUCT OF BUSINESS
The Premises shall be used only for general office use and for no other
purpose.
The Tenant shall conduct its business in the Premises in a reputable and
first class manner. If the Tenant is a corporation, the Tenant will be
either incorporated or extra-provincially registered in the province of
British Columbia and will remain in good standing during the Term with the
Registrar of Companies for British Columbia with respect to filing annual
reports.
ARTICLE II - RENT
SECTION 2.01 COVENANT TO PAY
(a) Except as may be provided in Section 2.02, the Tenant shall pay Rent from
the Commencement Date without prior demand and without any deduction, abatement,
setoff or compensation. If the
- iii -
<PAGE>
Commencement Date is not on the first day of a calendar month, or the period
of time from the Commencement Date to the end of the first Fiscal Year during
the Term is less than 12 calendar months, or the period of time from the last
Fiscal Year end during the Term to the end of the Term is less than 12
calendar months, then Rent for such month and such periods shall be pro-rated
on a per diem basis, based upon a period of 365 days.
(b) If an Event of Default occurs, at the request of the Landlord, the
Tenant will deliver to the Landlord a series of monthly post-dated cheques
for the next ensuing twelve month period, for the total of the monthly
payments of Net Rent and any Additional Rent estimated by the Landlord in
advance.
SECTION 2.02 NET RENT
(a) WITH RESPECT TO THE ORIGINAL PREMISES, the Tenant shall pay Net Rent
in the sum of SIXTY-FOUR THOUSAND, FOUR HUNDRED AND NINETY-EIGHT DOLLARS AND
FIFTY CENTS ($64,498.50) per annum payable in equal monthly instalments of
FIVE THOUSAND THREE HUNDRED AND SEVENTY-FOUR DOLLARS AND EIGHTY-EIGHT CENTS
($5,374.88) each in advance, on the first day of each calendar month of the
Term. The Net Rent is based on an annual rate of $16.50 per square foot of
the Rentable Area of the ORIGINAL Premises. As soon as reasonably possible
after completion of construction of the ORIGINAL Premises, the Landlord shall
measure the Net Rentable Area of the ORIGINAL Premises and shall calculate
the Rentable Area of the ORIGINAL Premises and Rent shall be adjusted
accordingly.
(b) WITH RESPECT TO THE EXTENDED PREMISES, THE TENANT SHALL PAY NET RENT
IN THE SUM OF SEVENTY-TWO THOUSAND, EIGHT HUNDRED AND SIXTY-FOUR DOLLARS
($72,864) PER ANNUM PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF SIX THOUSAND AND
SEVENTY-TWO DOLLARS ($6,072) EACH IN ADVANCE, ON THE FIRST DAY OF EACH
CALENDAR MONTH COMMENCING DECEMBER 1, 2000 AND CONTINUING UNTIL THE END OF
THE TERM. THE NET RENT IS BASED ON AN ANNUAL RATE OF $16.50 PER SQUARE FOOT
OF THE RENTABLE AREA OF THE EXTENDED PREMISES.
SECTION 2.03 PAYMENT OF OPERATING COSTS
The Tenant shall pay to the Landlord the Tenant's Proportionate Share of
Operating Costs.
SECTION 2.04 PAYMENT OF TAXES
(a) The Tenant shall pay when due all Business Tax. If the Tenant's
Business Tax is payable by the Landlord to the relevant taxing authority, the
Tenant shall pay the amount thereof to the Landlord or as it directs. If no
separate tax bills for Business Tax are issued with respect to the Tenant or
the Premises, the Landlord may allocate Business Tax charged, assessed or
levied against the Building or the Lands to the Tenant on the basis of the
Tenant's Proportionate Share.
(b) The Landlord shall allocate Taxes between the Total Rentable Area of
the Building and other components of the Development on such basis as the
Landlord, acting equitably, determines from time to time.
(c) The Tenant shall pay to the Landlord its Proportionate Share of the
Taxes allocated to the Total Rentable Area of the Building by the Landlord.
(d) If the Landlord obtains a written statement from the assessment or
taxing authorities indicating that as a result of any construction or
installation of improvements in the Premises, or any act or election of the
Tenant, the Taxes payable by the Tenant under subsection 2.05(b) do not
accurately reflect the Tenant's proper share of Taxes, the Landlord may
require the Tenant to pay such greater or lesser amount as is determined by
the Landlord, acting reasonably.
(e) The Landlord may: contest any Taxes and appeal any assessments with
respect thereto; withdraw any such contest or appeal; and agree with the
taxing authorities on any settlement or compromise with respect to Taxes.
The Tenant will co-operate with the Landlord in respect of any such contest
or appeal and will provide the Landlord with all relevant information,
documents and consents required by the Landlord in connection with any such
contest or appeal. The Tenant will not contest any Taxes or appeal any
assessments related thereto without the Landlord's prior written consent.
(f) The Tenant shall promptly deliver to the Landlord on request, copies
of assessment notices, tax bills and other documents received by the Tenant
relating to Taxes and Business Tax and receipts for payment of Taxes and
Business Tax payable by the Tenant.
(g) The Tenant shall on demand, pay to the Landlord or to the appropriate
taxing authority if required by the Landlord, all goods and services taxes,
sales taxes, value added taxes, business transfer taxes, or any other taxes
imposed on the Landlord with respect to Rent or in respect of the rental of
space
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under this Lease, whether characterized as a goods and services tax, sales
tax, value added tax, business transfer tax or otherwise. The Landlord shall
have the same remedies and rights with respect to the payment or recovery of
such taxes as it has for the payment or recovery of Rent under this Lease.
SECTION 2.05 PAYMENT OF ESTIMATED TAXES AND OPERATING COSTS
(a) The amount of Taxes and Operating Costs may be estimated by the
Landlord for such period as the Landlord determines from time to time, and
the Tenant agrees to pay to the Landlord the amounts so estimated in equal
instalments, in advance, on the first day of each month during such period.
Notwithstanding the foregoing, when bills for all or any portion of the
amounts so estimated are received, the Landlord may bill the Tenant for the
Tenant's Proportionate Share thereof (or the amount determined under Section
2.04(d)) after crediting against such amounts any monthly payments of
estimated Taxes and Operating Costs previously made by the Tenant and the
Tenant shall pay the Landlord the amounts so billed.
(b) Within a reasonable time after the end of the period for which such
estimated payments have been made, the Landlord shall submit to the Tenant a
statement showing the calculation of the Tenant's share of Taxes and
Operating Costs together with a report from the Landlord's auditor as to the
total amount of Operating Costs. If: (i) the amount the Tenant has paid is
less than the amounts due, the Tenant shall pay such deficiency to the
Landlord; or (ii) the amount paid by the Tenant is greater than the amounts
due, the Landlord shall pay such excess to the Tenant.
(c) The obligations contained in this Section shall survive the expiration
or earlier termination of the Term. Failure of the Landlord to render any
statement of Taxes or Operating Costs shall not prejudice the Landlord's
right to render such statement thereafter or with respect to any other
period. The rendering of any such statement shall also not affect the
Landlord's right to subsequently render an amended or corrected statement.
SECTION 2.06 ADDITIONAL RENT
Except as otherwise provided in this Lease, all Additional Rent shall be
payable by the Tenant to the Landlord within 5 business days after demand.
SECTION 2.07 RENT PAST DUE
All Rent past due shall bear interest from the date on which the same became
due until the date of payment at 5% per annum in excess of the prime interest
rate for Canadian Dollar demand loans announced from time to time by any
Canadian chartered bank designated by the Landlord.
SECTION 2.08 UTILITIES
(a) The Tenant shall pay to the Landlord, or as the Landlord directs, all
gas, electricity, water, steam and other utility charges applicable to the
Premises on the basis of the Rentable Area of the Premises. Charges for
utilities shall be payable in advance on the first day of each month at a
basic rate determined by the Landlord's engineers. The Landlord shall be
entitled to allocate to the Premises an additional charge, as determined by
the Landlord's engineer, for any supply of utilities to the Premises in
excess of those covered by such basic charge. If any utility rates or
related taxes or charges are increased or decreased during the Term, such
charges shall be equitably adjusted and the decision of the Landlord, acting
reasonably, shall be final and binding with respect to any such adjustment.
(b) The Landlord shall have the exclusive right to replace bulbs, tubes
and ballasts in the lighting system in the Premises, on either an individual
or a group basis. The Tenant shall pay the cost of such replacement on the
first day of each month or at the option of the Landlord upon demand.
(c) The Tenant shall pay the cost of installing and maintaining any meters
installed at the request of the Landlord or the Tenant to measure the usage
of utilities in the Premises.
SECTION 2.09 ADJUSTMENT OF AREAS
The Landlord may from time to time re-measure the Net Rentable Area of the
Premises or re-calculate the Rentable Area of the Premises and may re-adjust
the Net Rent and/or the Tenant's Proportionate Share of Additional Rent
accordingly. The effective date of any such re-adjustment shall: (a) in the
case of an adjustment to the Rentable Area resulting from a change in the
aggregate Net Rentable Area of all office premises on the floor on which the
Premises are situated, be the date on which such change occurred; and (b)
in the case of a correction to any measurement or calculation error, be the
date as of which such error was introduced in the calculation of Rent. Any
necessary adjusting payment will be made by the party responsible for that
payment forthwith upon the amount of the adjusting payment
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being determined.
SECTION 2.10 NET LEASE
This Lease is a completely net lease to the Landlord, except as expressly
herein set out. The Landlord is not responsible for any expenses or outlays
of any nature arising from or relating to the Premises, or the use or
occupancy thereof, or the contents thereof or the business carried on
therein. The Tenant shall pay all charges, impositions and outlays of every
nature and kind relating to the Premises except as expressly herein set out.
SECTION 2.11 DEPOSIT
The Landlord hereby acknowledges receipt of the Tenant's deposit cheque in a
sum EQUAL TO ONE MONTH'S RENT PLUS GST which will be applied without interest
against the FIRST Rent due under this Lease.
ARTICLE III - CONTROL OF BUILDING
SECTION 3.01 LANDLORD'S SERVICES
(a) The Landlord shall provide climate control to the Premises 24 hours
per day from Monday to Friday inclusive and from 9:00 a.m. to 6:00 p.m. on
Saturdays, Sundays and statutory holidays throughout the Term to maintain a
temperature adequate for normal occupancy, except during the making of
repairs, alterations or improvements, provided that the Landlord shall have
no liability for failure to supply climate control service when stopped as
aforesaid or when prevented from doing so by repairs, or causes beyond the
Landlord's reasonable control. Any rebalancing of the climate control system
in the Premises necessitated by the installation of partitions, equipment or
fixtures by the Tenant or by any use of the Premises not in accordance with
the design standards of such system will be performed by the Landlord or, at
the option of the Landlord, by the Tenant, but in either case at the Tenant's
expense.
(b) Subject to the Rules and Regulations, the Landlord shall provide
elevator service 24 hours per day, 7 days per week for use by the Tenant in
common with others, except when prevented by repairs. The Landlord will
operate at least one passenger elevator for use by tenants at all times
except in the case of fire or other emergencies.
(c) The Landlord will provide cleaning services in the Building consistent
with the standards of a first class office building.
(d) Subject to Section 2.08, the Landlord shall make available to the
Premises electricity for normal lighting and miscellaneous power requirements
and, in normal quantities gas, water, and other public utilities generally
made available to other tenants of the Building by the Landlord.
SECTION 3.02 ALTERATIONS BY LANDLORD
The Landlord may: (a) alter, add to, subtract from, construct improvements
to, rearrange, build additional storeys on and construct additional
facilities adjoining or near the Development; (b) relocate the facilities and
improvements comprising the Building or erected on the Lands, or relocate,
alter or rearrange the Premises, provided that the premises as relocated,
altered, or rearranged shall be in all material aspects comparable to the
Premises as herein defined; (c) do such things on, or in the Lands or
Development as are required to comply with any laws, by-laws, regulations,
orders or directives affecting the Lands or any part of the Development; and
(d) do such other things on or in the Lands or Development as the Landlord,
in the use of good business judgment determines to be advisable; provided
that notwithstanding anything contained in this Section, access to the
Premises shall at all times be available from the elevator lobbies of the
Building.
The Landlord shall not be in breach of its covenant for quiet enjoyment or
liable for any loss, costs or damages, whether direct or indirect, incurred
by the Tenant due to any of the foregoing.
ARTICLE IV - ACCESS AND ENTRY
SECTION 4.01 ENTRY FOR INSPECTION AND WORK
The Landlord shall be entitled at all reasonable times (and at any time in
case of emergency) to enter the Premises to examine them; to make such
repairs, alterations or improvements in the Premises or to the
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Building as the Landlord considers necessary or desirable; to have access to
underfloor ducts and access panels to mechanical shafts; to check, calibrate,
adjust and balance controls and other parts of the heating, air conditioning,
ventilating and climate control systems; and for any other purpose necessary
to enable the Landlord to perform its obligations or exercise its rights
under this Lease or in the administration of the Building or other
improvements on the Lands. The Tenant shall not obstruct any pipes, conduits
or mechanical or electrical equipment so as to prevent reasonable access
thereto. The Landlord shall exercise its rights under this Section, to the
extent possible in the circumstances, in such manner so as to minimize
interference with the Tenant's use and enjoyment of the Premises.
SECTION 4.02 RIGHT TO SHOW PREMISES
The Landlord and its agents shall have the right to enter the Premises at all
reasonable times during Normal Business Hours to show them to prospective
purchasers, or Mortgagees or prospective Mortgagees, and, during the last six
months of the Term (or the last six months of any renewal term if this Lease
is renewed), to prospective tenants.
SECTION 4.03 ENTRY NOT FORFEITURE
No entry into the Premises or anything done hereunder by the Landlord
pursuant to a right granted by this Lease shall constitute a breach of any
covenant for quiet enjoyment, or (except where expressed by the Landlord in
writing) shall constitute a re-entry or forfeiture, or an actual or
constructive eviction. The Tenant shall have no claim for injury, damages or
loss suffered as a result of any such entry or thing, except in the case of
wilful misconduct by the Landlord in the course of such entry, but the
Landlord shall in no event be responsible for the acts or negligence of any
Persons providing cleaning services in the Building.
ARTICLE V - MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 5.01 MAINTENANCE BY LANDLORD
(a) The Landlord covenants to keep the following in good repair as a
prudent owner: (i) the structure of the Building including exterior walls
and roofs; (ii) the mechanical, electrical and other base building systems;
and (iii) the entrance, lobbies, plazas, stairways, corridors, parking areas
and other facilities from time to time provided for use in common by the
Tenant and other tenants of the Building. If such maintenance or repairs or
alterations are required by law or in the prudent management of the Building
or any other improvements on the Lands due to the business carried on by the
Tenant, then the full cost of such maintenance and repairs plus a sum equal
to 15% of such cost representing the Landlord's overhead, shall be paid by
the Tenant to the Landlord.
(b) The Landlord shall not be responsible for any damages caused to the
Tenant by reason of failure of any equipment or facilities serving the
Building or delays in the performance of any work for which the Landlord is
responsible under this Lease. The Landlord shall have the right to stop,
interrupt or reduce any services, systems or utilities provided to, or
serving the Building or Premises to perform repairs, alterations or
maintenance or to comply with laws or regulations, or requirements of its
insurers, or for causes beyond the Landlord's reasonable control or as a
result of the Landlord exercising its rights under Section 3.02. The
Landlord shall not be in breach of its covenant for quiet enjoyment or liable
for any loss, costs or damages, whether direct or indirect, incurred by the
Tenant due to any of the foregoing, but the Landlord shall make reasonable
efforts to restore the services, utilities or systems so stopped, interrupted
or reduced.
(c) If the Tenant fails to carry out any maintenance, repairs or work
required to be carried out by it under this Lease to the reasonable
satisfaction of the Landlord, the Landlord may at its option carry out such
maintenance or repairs without any liability for any resulting damage to the
Tenant's property or business. The cost of such work, plus a sum equal to
15% of such cost representing the Landlord's overhead, shall be paid by the
Tenant to the Landlord.
SECTION 5.02 MAINTENANCE BY TENANT; COMPLIANCE WITH LAWS
(a) The Tenant shall at its sole cost repair and maintain the Premises
exclusive of base building mechanical and electrical systems, all to a
standard consistent with a first class office building, with the exception
only of those repairs which are the obligation of the Landlord under this
Lease, subject to Article VII. The Landlord may enter the Premises at all
reasonable times to view their condition and the Tenant shall maintain and
keep the Premises in good and substantial repair according to notice in
writing. At the expiration or earlier termination of the Term, the Tenant
shall surrender the Premises to the Landlord in as good condition and repair
as the Tenant is required to maintain the Premises throughout the Term.
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(b) The Tenant shall, at its own expense, promptly comply with all laws,
by-laws, government orders and with all reasonable requirements or directives
of the Landlord's insurers affecting the Premises or their use, repair or
alteration.
SECTION 5.03 TENANT'S ALTERATIONS
(a) No Alterations shall be made to the Premises without the Landlord's
written approval. The Tenant shall submit to the Landlord details of the
proposed work including drawings and specifications prepared by qualified
architects or engineers conforming to good engineering practice. All such
Alterations shall be performed: (i) at the sole cost of the Tenant; (ii) by
contractors and workmen approved by the Landlord; (iii) in a good and
workmanlike manner; (iv) in accordance with drawings and specifications
approved by the Landlord; (v) in accordance with all applicable legal and
insurance requirements; (vi) subject to the reasonable regulations,
supervision, control and inspection of the Landlord; (vii) subject to such
indemnification against liens and expenses as the Landlord reasonably
requires; and (viii) in accordance with all applicable laws, by-laws and
government orders. The Landlord's reasonable cost incurred with respect to
the Tenant's Alterations including without limitation the cost of approving,
supervising and inspecting all such work shall be paid by the Tenant.
(b) If the Alterations would affect the structure of the Building or any
of the electrical, plumbing, mechanical, heating, ventilating or air
conditioning systems or other base building systems, such work shall at the
option of the Landlord be performed by the Landlord at the Tenant's cost. If
the Landlord performs such work, then on completion of such work, the cost of
the work plus a sum equal to 15% of said cost representing the Landlord's
overhead shall be paid by the Tenant to the Landlord.
(c) If the Tenant installs Leasehold Improvements, or makes Alterations
which depart from the Building standard and which restrict access by the
Landlord to any Building system or to any structural element of the Building
by the Landlord or by any person or corporation authorized by the Landlord,
or which restrict the installation of the leasehold improvements of any other
tenant in the Building, then the Tenant shall at the request of the Landlord
remove any obstruction in a manner acceptable to the Landlord, failing which
the Landlord may remove the same; and the Tenant will pay, or reimburse the
Landlord for, the cost of such removal and for any replacement or restoration
of such Leasehold Improvements or Alterations.
SECTION 5.04 REPAIR WHERE TENANT AT FAULT
Notwithstanding any other provisions of this Lease, if the Building is
damaged or destroyed or requires repair, replacement or alteration as a
result of the act or omission of the Tenant, its employees, agents, invitees,
licensees, contractors or others for whom it is in law responsible, the cost
of the resulting repairs, replacements or alterations plus a sum equal to 15%
of such cost representing the Landlord's overhead, shall be paid by the
Tenant to the Landlord.
SECTION 5.05 REMOVAL OF IMPROVEMENTS AND FIXTURES
All Leasehold Improvements (other than Trade Fixtures) shall immediately upon
their placement, before or during the Term, become the Landlord's property
without compensation to the Tenant. Except as otherwise agreed by the
Landlord in writing, no Leasehold Improvements shall be removed from the
Premises by the Tenant either during or at the expiration or sooner
termination of the Term except that:
(a) the Tenant may, during the Term, in the usual course of its business,
remove its Trade Fixtures, provided that the Tenant is not in default under
this Lease;
(b) the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, remove its Trade Fixtures from the Premises, failing
which, at the option of the Landlord, the Trade Fixtures shall become the
property of the Landlord and may be removed from the Premises and sold or
disposed of by the Landlord in such manner as it deems advisable; and
(c) the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, leave the premises in a neat and tidy condition.
SECTION 5.06 LIENS
The Tenant shall promptly pay for all materials supplied and work done in
respect of the Premises so as to ensure that no lien is registered against
any portion of the Lands or Building or against the Landlord's or Tenant's
interest therein. If a lien is registered or filed, the Tenant shall
discharge it at its expense forthwith, failing which the Landlord may at its
option discharge the lien by paying the amount claimed to be due into court
or directly to the lien claimant and the amount so paid and all expenses of
the
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Landlord including legal fees (on a solicitor and client basis) shall be paid
by the Tenant to the Landlord. The Tenant will not grant any security
interest in the Leasehold Improvements without the prior written consent of
the Landlord and will promptly cause the discharge of any financing statement
or notice which may be filed in respect of such security interest under any
statute, unless such statement or notice is in favour of the Landlord.
SECTION 5.07 NOTICE BY TENANT
The Tenant shall notify the Landlord of any accident, defect, damage or
deficiency in any part of the Premises or the Building which comes to the
attention of the Tenant, its employees or contractors notwithstanding that
the Landlord may have no obligation in respect thereof.
ARTICLE VI - INSURANCE AND INDEMNITY
SECTION 6.01 TENANT'S INSURANCE
(a) The Tenant shall maintain the following insurance throughout the Term at
its sole cost:
(i) "All Risks" (including flood and earthquake) property insurance
with deductibles not exceeding 3% of the amount insured, naming
the Landlord, the owners of the Lands and Development and the
Mortgagee as insured parties, containing a waiver of any
subrogation rights which the Tenant's insurers may have against
the Landlord and against those for whom the Landlord is in law
responsible, and (except with respect to the Tenant's chattels)
incorporating the Mortgagee's standard mortgage clause. Such
insurance shall insure: (1) property of every kind owned by the
Tenant or for which the Tenant is legally liable located on or in
the Development including, without limitation, Leasehold
Improvements, in an amount equal to not less than 90% of the full
replacement cost thereof, subject to a stated amount co-insurance
clause; and (2) extra expense insurance in such amount as will
reimburse the Tenant for loss attributable to all perils referred
to in this paragraph 6.01(a)(i) or resulting from prevention of
access to the Premises;
(ii) Comprehensive general liability insurance which includes the
following coverages: owners protective; personal injury;
occurrence property damage; and employers and blanket contractual
liability. Such policies shall contain inclusive limits of not
less than $5,000,000, provide for cross liability, and name the
Landlord and the owners of the Lands as insured;
(iii) Tenant's "all risks" legal liability insurance for the replacement
cost value of the Premises including loss of use thereof;
(iv) Automobile liability insurance on a non-owned form including
contractual liability, and on an owner's form covering all
licensed vehicles operated by or on behalf of the Tenant, which
insurance shall have inclusive limits of not less than $1,000,000;
and
(v) Any other form of insurance which the Tenant or the Landlord,
acting reasonably, or the Mortgagee requires from time to time in
form, in amounts and for risks against which a prudent tenant
would insure.
(b) All policies referred to in this Section 6.01 shall:
(i) be taken out with insurers reasonably acceptable to the Landlord;
(ii) be in a form reasonably satisfactory to the Landlord;
(iii) be non-contributing with, and shall apply only as primary and not
as excess to any other insurance available to the Landlord;
(iv) not be invalidated as respects the interests of the Landlord or
the Mortgagee by reason of any breach of or violation of any
warranty, representation, declaration or condition; and
(v) contain an undertaking by the insurers to notify the Landlord by
registered mail not less than 30 days prior to any material
change, cancellation or termination.
Certificates of insurance on the Landlord's standard form or, if required by the
Landlord, certified copies of such insurance policies, shall be delivered to the
Landlord forthwith upon request. If the Tenant fails
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to take out or to keep in force any insurance referred to in this Section
6.01 or should any such insurance not be approved by either the Landlord or
the Mortgagee and should the Tenant not commence to diligently rectify (and
thereafter proceed to diligently rectify) the situation within 48 hours after
written notice by the Landlord to the Tenant (stating, if the Landlord or the
Mortgagee, from time to time, does not approve of such insurance, the reasons
therefor) the Landlord has the right without assuming any obligation in
connection therewith, to effect such insurance at the sole cost of the Tenant
and all outlays by the Landlord shall be paid by the Tenant to the Landlord
without prejudice to any other rights or remedies of the Landlord under this
Lease.
SECTION 6.02 INCREASE IN INSURANCE PREMIUMS
The Tenant shall not keep or use in the Premises any article which may be
prohibited by any fire insurance policy in force from time to time covering
the Premises or the Development. If: (a) the conduct of business in, or
use or manner of use of the Premises; (b) or any acts or omissions of the
Tenant in the Development or any part thereof; cause or result in any
increase in premiums for any insurance carried by the Landlord with respect
to the Development, the Tenant shall pay any such increase in premiums. In
determining whether increased premiums are caused by or result from the use
or occupancy of the Premises, a schedule issued by the organization computing
the insurance rate on the Development showing the various components of such
rate, shall be conclusive evidence of the items and charges which make up
such rate.
SECTION 6.03 CANCELLATION OF INSURANCE
If any insurer under any insurance policy covering any part of the
Development or any occupant thereof cancels or threatens to cancel its
insurance policy or reduces or threatens to reduce coverage under such policy
by reason of the use of the Premises by the Tenant or by any Transferee, or
by anyone permitted by the Tenant to be upon the Premises, the Tenant shall
remedy such condition within 48 hours after notice thereof by the Landlord.
SECTION 6.04 LOSS OR DAMAGE
The Landlord shall not be liable for any death or injury arising from or out
of any occurrence in, upon, at, or relating to the Lands or Development or
damage to property of the Tenant or of others located on the Premises or
elsewhere in the Development, nor shall it be responsible for any loss of or
damage to any property of the Tenant or others from any cause, whether or not
any such death, injury, loss or damage results from the negligence of the
Landlord, its agents, employees, contractors, or others for whom it may, in
law, be responsible. Without limiting the generality of the foregoing, the
Landlord shall not be liable for any injury or damage to Persons or property
resulting from fire, explosion, falling plaster, falling ceiling tile,
falling fixtures, steam, gas, electricity, water, rain, flood, snow or leaks
from any part of the Premises or from the pipes, sprinklers, appliances,
plumbing works, roof, windows or subsurface of any floor or ceiling of the
Development or from the street or any other place or by dampness or by any
other cause whatsoever. The Landlord shall not be liable for any such damage
caused by other tenants or Persons on the Lands or in the Development or by
occupants of adjacent property thereto, or the public, or caused by
construction or by any private, public or quasi-public work. All property of
the Tenant kept or stored on the Premises shall be so kept or stored at the
risk of the Tenant only and the Tenant releases and agrees to indemnify the
Landlord and save it harmless from any claims arising out of any damage to
the same including, without limitation, any subrogation claims by the
Tenant's insurers.
SECTION 6.05 LANDLORD'S INSURANCE
The Landlord shall throughout the Term carry: (a) insurance on the
Development (excluding the foundations and excavations) and the machinery,
boilers and equipment in or servicing the Development and owned by the
Landlord or the owners of the Development (excluding any property which the
Tenant and other tenants are obliged to insure under Section 6.01 or similar
sections of their respective leases) against damage by fire and extended
perils coverage; (b) public liability and property damage insurance with
respect to the Landlord's operations in the Development; and (c) such other
form or forms of insurance as the Landlord or the Mortgagee reasonably
considers advisable. Such insurance shall be in such reasonable amounts and
with such reasonable deductibles as would be carried by a prudent owner of a
reasonably similar building, having regard to size, age and location.
Notwithstanding the Landlord's covenant in this Section and notwithstanding
any contribution by the Tenant to the cost of the Landlord's insurance
premiums, the Tenant acknowledges and agrees that: (i) the Tenant is not
relieved of any liability arising from or contributed to by its negligence or
its wilful act or omissions; (ii) no insurable interest is conferred upon the
Tenant under any insurance policies carried by the Landlord; and (iii) the
Tenant has no right to receive any proceeds of any insurance policies carried
by the Landlord.
SECTION 6.06 INDEMNIFICATION OF THE LANDLORD
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Notwithstanding any other provision of this Lease, the Tenant shall indemnify
the Landlord and save it harmless from all loss (including loss of Net Rent
and Additional Rent) claims, actions, damages, liability and expense in
connection with loss of life, personal injury, damage to property or any
other loss or injury whatsoever arising out of this Lease, or any occurrence
in, upon or at the Premises, or the occupancy or use by the Tenant of the
Premises or any part thereof, or occasioned wholly or in part by any act or
omission of the Tenant or by anyone permitted to be on the Premises by the
Tenant. If the Landlord shall, without fault on its part, be made a party to
any litigation commenced by or against the Tenant, then the Tenant shall
protect, indemnify and hold the Landlord harmless in connection with such
litigation. The Landlord may, at its option, participate in or assume
carriage of any litigation or settlement discussions relating to the
foregoing, or any other matter for which the Tenant is required to indemnify
the Landlord under this Lease. Alternatively, the Landlord may require the
Tenant to assume carriage of and responsibility for all or any part of such
litigation or discussions.
ARTICLE VII - DAMAGE AND DESTRUCTION
SECTION 7.01 NO ABATEMENT OR TERMINATION
If the Premises or Building are damaged or destroyed in whole or in part by
fire or any other occurrence, this Lease shall continue in full force and
effect and there shall be no abatement of Rent except as provided in this
Article VII.
If the Premises are at any time destroyed or damaged as a result of fire or
any other casualty required to be insured against by the Landlord under this
Lease or otherwise insured against by the Landlord and not caused or
contributed to by the Tenant, then the following provisions shall apply:
(a) if the Premises are rendered untenantable only in part, the Landlord
shall diligently repair the Premises to the extent only of its obligations
under Section 5.01 and Net Rent shall abate proportionately to the portion of
the Premises rendered untenantable from the date of destruction or damage
until the Landlord's repairs have been completed;
(b) if the Premises are rendered wholly untenantable, the Landlord shall
diligently repair the Premises to the extent only of its obligations pursuant
to Section 5.01 and Net Rent shall abate entirely from the date of
destruction or damage until the Landlord's repairs have been completed;
(c) if the Premises are not rendered untenantable in whole or in part, the
Landlord shall diligently perform such repairs to the Premises to the extent
only of its obligations under Section 5.01, but in such circumstances Net
Rent shall not terminate or abate;
(d) upon being notified by the Landlord that the Landlord's repairs have
been substantially completed, the Tenant shall diligently perform all repairs
to the Premises which are the Tenant's responsibility under Section 5.02, and
all other work required to fully restore the Premises for use in the Tenant's
business, in every case at the Tenant's cost and without any contribution to
such cost by the Landlord, whether or not the Landlord has at any time made
any contribution to the cost of supply, installation or construction of
Leasehold Improvements in the Premises;
(e) othing in this Section shall require the Landlord to rebuild the
Premises in the condition which existed before any such damage or destruction
so long as the Premises as rebuilt will have reasonably similar facilities to
those in the Premises prior to such damage or destruction, having regard,
however, to the age of the Building at such time; and
(f) nothing in this Section shall require the Landlord to undertake any
repairs having a cost in excess of the insurance proceeds actually received
by the Landlord with respect to such damage or destruction.
SECTION 7.03 RIGHT OF TERMINATION
Notwithstanding Section 7.02, if the damage or destruction which has occurred in
the Premises is such that in the reasonable opinion of the Landlord the Premises
cannot be rebuilt or made fit for the purposes of the Tenant within 90 days of
the happening of the damage or destruction, the Landlord may, at its option,
terminate this Lease on notice to the Tenant given within 30 days after such
damage or destruction. If such notice of termination is given, Rent shall be
apportioned and paid to the date of such damage or destruction and the Tenant
shall immediately deliver vacant possession of the Premises in accordance with
the terms of this Lease.
SECTION 7.04 DESTRUCTION OF OR DAMAGE TO BUILDING
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(a) Notwithstanding anything contained in this Lease and specifically
notwithstanding the provisions of Section 7.03, if
(i) thirty-five percent (35%) or more of the Total Rentable Area of
the Building; or
(ii) a portion of the Building or of the Lands or any other
improvements on the Lands which affect access or services
essential to the Premises;
is damaged or destroyed by any cause whatsoever (irrespective of whether the
Premises are damaged or destroyed) and if, in the opinion of the Landlord
reasonably arrived at, the Total Rentable Area of the Building or the
essential portion described above, as the case may be, so damaged or
destroyed cannot be rebuilt or made fit for the purposes of the respective
tenants of such space within one hundred and eighty (180) days of the
happening of the damage or destruction; then, the Landlord may at its option
(to be exercised by written notice to the Tenant within sixty (60) days
following any such occurrence), elect to terminate this Lease. In the case
of such election, the Term and the tenancy hereby created shall expire upon
the thirtieth (30th) day after such notice is given, without indemnity or
penalty payable by, or any other recourse against the Landlord, and the
Tenant shall, within such thirty (30) day period, vacate the Premises and
surrender them to the Landlord with the Landlord having the right to re-enter
and repossess the Premises discharged of this lease and to expel all Persons
and remove all property therefrom. Net Rent and Additional Rent shall be due
and payable without reduction or abatement subsequent to the destruction or
damage and until the date of termination, unless the Premises shall have been
destroyed or damaged as well, in which event Section 7.03 shall apply.
(b) If the Landlord is entitled to, but does not elect to terminate this
Lease under Section 7.4(a), the Landlord shall, following such damage or
destruction, diligently repair if necessary that part of the Building damaged
or destroyed, but only to the extent of the Landlord's obligations under the
terms of the various leases for premises in the Building and exclusive of any
tenant's responsibilities with respect to such repair. If the Landlord
elects to repair the Building, the Landlord may do so in accordance with
plans and specifications other than those used in the original construction
of the Building.
SECTION 7.05 ARCHITECT'S CERTIFICATE
The certificate of the Architect shall bind the parties as to: (a) the
percentage of the Total Rentable Area of the Building damaged or destroyed;
(b) whether or not the Premises are rendered untenantable and the percentage
of the Premises rendered untenantable; (c) the date upon which either the
Landlord's or Tenant's work of reconstruction or repair is completed or
substantially completed and the date when the Premises are rendered
tenantable; and (d) the state of completion of any work of the Landlord or
the Tenant.
ARTICLE VIII - ASSIGNMENT, SUBLETTING AND TRANSFERS
SECTION 8.01 ASSIGNMENTS, SUBLEASES AND TRANSFERS
The Tenant shall not enter into, consent to, or permit any Transfer without
the prior written consent of the Landlord in each instance, which consent
shall not be unreasonably withheld but shall be subject to the Landlord's
rights under Section 8.02. Notwithstanding any statutory provision to the
contrary, it shall not be considered unreasonable for the Landlord to take
into account the following factors in deciding whether to grant or withhold
its consent: (a) whether such Transfer is in violation or in breach of any
covenants or restrictions made or granted by the Landlord to other tenants or
occupants or prospective tenants or occupants of the Building; (b) whether in
the Landlord's opinion, the financial background, business history and
capability of the proposed Transferee is satisfactory; and (c) if the
Transfer is to an existing tenant of the Landlord. Consent by the Landlord
to any Transfer if granted shall not constitute a waiver of the necessity for
such consent to any subsequent Transfer. This prohibition against Transfer
shall include a prohibition against any Transfer by operation of law and no
Transfer shall take place by reason of the failure of the Landlord to give
notice to the Tenant within 30 days as required by Section 8.02.
Notwithstanding anything to the contrary herein contained, the Tenant may not
assign this Lease while any Rent is in arrears hereunder or while any other
Event of Default exists hereunder. Before making any assignment of this Lease
the Tenant will pay all Rent in arrears and will remedy any Event of Default
which then exists or will cause any Event of Default to cease to exist.
SECTION 8.02 LANDLORD'S RIGHTS
If the Tenant intends to effect a Transfer, the Tenant shall give prior
notice to the Landlord of such intent specifying the identity of the
Transferee, the type of Transfer contemplated, the portion of the Premises
affected thereby, and the financial and other terms of the Transfer, and
shall provide such financial, business or other information relating to the
proposed Transferee and its principals as the Landlord or
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any Mortgagee requires, together with copies of any documents which record
the particulars of the proposed Transfer. The Landlord shall, within 30 days
after having received such notice and all requested information, notify the
Tenant either that:
(a) it consents or does not consent to the Transfer in accordance with the
provisions and qualifications of this Article VIII; or
(b) it elects to cancel this Lease as to the whole or part, as the case
may be, of the Premises affected by the proposed Transfer, in preference to
giving such consent; or
(c) it elects to take over the position of the proposed Transferee with
respect to the Transfer such that the Landlord becomes the assignee or
subtenant, as the case may be, of the Tenant on the financial terms set out
in the notice.
If the Landlord elects to terminate this Lease it shall stipulate in its
notice the termination date of this Lease, which date shall be no less than
30 days nor more than 90 days following the giving of such notice of
termination. If the Landlord elects to terminate this Lease, the Tenant
shall notify the Landlord within 10 days thereafter of the Tenant's intention
either to refrain from such Transfer or to accept termination of this Lease
or the portion thereof in respect of which the Landlord has exercised its
rights. If the Tenant fails to deliver such notice within such 10 days or
notifies the Landlord that it accepts the Landlord's termination, this Lease
will as to the whole or affected part of the Premises, as the case may be, be
terminated on the date of termination stipulated by the Landlord in its
notice of termination. If the Tenant notifies the Landlord within 10 days
that it intends to refrain from such Transfer, then the Landlord's election
to terminate this Lease shall become void.
SECTION 8.03 CONDITIONS OF TRANSFER
(a) Subject to Section 8.03(e), if there is a permitted Transfer, the
Landlord may collect Rent from the Transferee and apply the net amount
collected to the Rent payable under this Lease but no acceptance by the
Landlord of any payments by a Transferee shall be deemed a waiver of the
Tenant's covenants or by acceptance of the Transferee as tenant or a release
from the Tenant from the further performance by the Tenant of its obligations
under this Lease. Any consent by the Landlord shall be subject to the Tenant
and Transferee executing an agreement with the Landlord agreeing:
(i) that the Transferee will be bound by all of the terms of this
Lease and, except in the case of a sublease, that the Transferee
will be so bound as if it had originally executed this Lease as
tenant; and
(ii) to amend the Lease to incorporate such terms, covenants and
conditions as are necessary so that the Lease will be in
accordance with the Landlord's standard form of office lease in
use for the Building at the time of the Transfer, and so as to
incorporate any conditions imposed by the Landlord in its consent
or required by this Section 8.03.
(b) Notwithstanding any Transfer permitted or consented to by the
Landlord, including a Transfer to the Landlord pursuant to Section 8.02(c),
the Tenant making such Transfer shall remain liable under this Lease and
shall not be released from performing any of the terms of this Lease.
(c) The Landlord's consent to any Transfer shall be subject to the
condition that: (i) the net and additional rent payable by the Transferee
shall not be less than the Rent payable by the Tenant under this Lease as at
the effective date of the Transfer, (including any increases provided for in
this Lease); and (ii) if the net and additional rent to be paid by the
Transferee under such Transfer exceeds the Rent payable under this Lease, the
amount of such excess shall be paid by the Tenant to the Landlord. If the
Tenant receives from any Transferee, either directly or indirectly, any
consideration other than rent or additional rent for such Transfer, either in
the form of cash, goods or services (other than the proceeds of any financing
as the result of a Transfer involving a mortgage, charge or similar security
interest in this Lease) the Tenant shall forthwith pay to the Landlord an
amount equivalent to such consideration. The Tenant and the Transferee shall
execute any agreement required by the Landlord to give effect to the
foregoing terms.
(d) Notwithstanding the effective date of any permitted Transfer as
between the Tenant and the Transferee, all Rent for the month in which such
effective date occurs shall be paid in advance by the Tenant so that the
Landlord will not be required to accept partial payments of Rent for such
month from either the Tenant or Transferee.
(e) If a Transfer occurs as a result of the Landlord's election pursuant
to Section 8.2(c), the Landlord will apply the Rent payable by the Landlord,
as Transferee, to the Rent payable under this Lease, but otherwise the Tenant
will not be released from its covenant under this Lease or from the further
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performance of its obligations under this Lease. The Tenant will enter into
an agreement with the Landlord setting out the terms of such Transfer, which
agreement will be prepared by the Landlord or its solicitors and all legal
costs associated with such Transfer shall be paid by the Tenant.
(f) Any document evidencing any Transfer permitted by the Landlord or any
amendment of this Lease pursuant to clause 8.03(a)(ii), or setting out any
terms applicable to such Transfer or the rights and obligations of the Tenant
or Transferee thereunder including a Transfer under Section 8.2(c), shall be
prepared by the Landlord or its solicitors and all associated legal costs
shall be paid by the Tenant.
SECTION 8.04 CHANGE OF CONTROL
If the Tenant is at any time a corporation or partnership, any actual or
proposed Change of Control in such corporation or partnership shall be deemed
to be a Transfer and subject to all of the provisions of this Article VIII.
The Tenant shall make available to the Landlord or its representatives all of
its corporate or partnership records, as the case may be, for inspection at
all reasonable times, in order to ascertain whether any Change of Control has
occurred.
SECTION 8.05 NO ADVERTISING
The Tenant shall not advertise that the whole or any part of the Premises are
available for a Transfer and shall not permit any broker or other Person to
do so unless the text and format of such advertisement and the publications
in which such advertisement is to be placed are approved in writing by the
Landlord. No such advertisement shall contain any reference to the rental
rate of the Premises.
SECTION 8.06 ASSIGNMENT BY LANDLORD
The Landlord shall have the unrestricted right to sell, lease, convey or
otherwise dispose of all or any part of the Building or Lands or this Lease
or any interest of the Landlord in this Lease. To the extent that the
purchaser or assignee from the Landlord assumes the obligations of the
Landlord under this Lease, the Landlord shall thereupon and without further
agreement be released from all liability under this Lease.
ARTICLE IX - DEFAULT
SECTION 9.01 DEFAULT AND REMEDIES
If and whenever an Event of Default occurs, then without prejudice to any
other rights which it has pursuant to this Lease or at law, the Landlord
shall have the following rights and remedies, which are cumulative and not
alternative:
(a) to re-enter the Premises or any part thereof in the name of the whole
and the same to have again, repossess, and enjoy as of the Landlord's former
estate, anything herein contained to the contrary notwithstanding;
(b) to terminate this Lease, with or without notice to the Tenant, whether
or not the Landlord has, with respect to the same or another Event of
Default, previously elected or pursued a right or remedy which is
inconsistent with termination of this Lease;
(c) enter the Premises as agent of the Tenant and to relet the Premises
for whatever term, and on such terms as the Landlord in its discretion may
determine and to receive the Rent therefor and as agent of the Tenant to take
possession of any property of the Tenant on the Premises, to store such
property at the expense and risk of the Tenant or to sell or otherwise
dispose of such property in such manner as the Landlord may see fit without
notice to the Tenant; to make alterations to the Premises to facilitate their
reletting; and to apply the proceeds of any such sale or reletting first, to
the payment of any expenses incurred by the Landlord with respect to any such
reletting or sale; second, to the payment of any indebtedness of the Tenant
to the Landlord other than Rent; and third, to the payment of Rent in
arrears; with the residue to be held by the Landlord and applied in payment
of future Rent as it becomes due and payable. The Tenant shall remain liable
for any deficiency to the Landlord. If any reletting extends for a period
beyond the end of the Term, such reletting shall not constitute a termination
of this Lease, but a reletting as agent of the Tenant up to the end of the
Term and a letting thereafter by the Landlord for its own account. The
Tenant acknowledges and agrees that if the Tenant has abandoned property on
the Premises after notice from the Landlord to remove such property, the
Landlord has no obligation whatsoever to store such property for any period
of time;
(d) to remedy or attempt to remedy any default of the Tenant under this
Lease for the account of the Tenant and to enter upon the Premises for such
purposes. No notice of the Landlord's intention to
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perform such covenants need be given the Tenant unless expressly required by
this Lease. The Landlord shall not be liable to the Tenant for any loss,
injury or damage caused by acts of the Landlord in remedying or attempting to
remedy such default and the Tenant shall pay to the Landlord all expenses
incurred by the Landlord in connection with remedying or attempting to remedy
such default;
(e) to recover from the Tenant all damages, and expenses incurred by the
Landlord as a result of any breach by the Tenant including, if the Landlord
terminates this Lease, any deficiency between those amounts which would have
been payable by the Tenant for the portion of the Term following such
termination and the net amounts actually received by the Landlord during such
period of time with respect to the Premises;
(f) to recover from the Tenant the full amount of the current month's Rent
together with 3 months' instalments of Rent, all of which shall immediately
become due and payable as accelerated rent and may be held and applied by the
Landlord without interest against the last Rent due under this Lease; and
(g) if this Lease has been terminated in accordance with Section 9.01(b),
to recover from the Tenant the unamortized portion of any leasehold
improvement allowance or inducement paid or given by the Landlord under the
terms of this Lease or the Lease Proposal, calculated from the date which is
the later of the date of payment by the Landlord or the Commencement Date, on
the basis of an assumed rate of depreciation on a straight line basis to zero
over the initial Term of this Lease.
SECTION 9.02 DISTRESS
Notwithstanding any provision of this Lease or any provision of applicable
legislation, none of the goods and chattels of the Tenant on the Premises at
any time during the Term shall be exempt from levy by distress for Rent in
arrears, and the Tenant waives any such exemption. If the Landlord makes any
claim against the goods and chattels of the Tenant by way of distress, this
provision may be pleaded as an estoppel against the Tenant in any action
brought to test the right of the Landlord to levy such distress. The Tenant
acknowledges and agrees that the Landlord is entitled to levy by distress any
accelerated rent which becomes due and is payable pursuant to Section 9.01(f)
of this Lease.
SECTION 9.03 DAMAGES AND COSTS
The Tenant shall pay to the Landlord all damages and costs (including,
without limitation, all legal fees on a solicitor and his client basis)
incurred by the Landlord in enforcing or interpreting the terms of this
Lease, or with respect to any matter or thing which is the obligation of the
Tenant under this Lease, or in respect of which the Tenant has agreed to
insure, or to indemnify the Landlord.
SECTION 9.04 ALLOCATION OF PAYMENTS
The Landlord may at its option apply sums received from the Tenant against
any amounts due and payable by the Tenant under this Lease in such manner as
the Landlord sees fit.
SECTION 9.05 SURVIVAL OF OBLIGATIONS
If the Tenant has failed to fulfil its obligations under this Lease with
respect to the payment of Rent, the maintenance, repair and alteration of the
Premises and removal of improvements and fixtures from the Premises during or
at the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration,
surrender or sooner termination of the Term.
ARTICLE X - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 10.01 STATUS STATEMENT
Within 10 days after written request by the Landlord, the Tenant shall
deliver in a form supplied by the Landlord a statement or estoppel
certificate to the Landlord as to the status of this Lease, including as to
whether this Lease is unmodified and in full force and effect (or, if there
have been modifications that this Lease is in full force and effect as
modified and identifying the modification agreements); the amount of Net Rent
and Additional Rent then being paid and the dates to which same have been
paid; whether or not there is any existing or alleged default by either party
with respect to which a notice of default has been served and if there is any
such default, specifying the nature and extent thereof; and any other matters
pertaining to this Lease as to which the Landlord shall request such
statement or certificate.
SECTION 10.02 SUBORDINATION
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This Lease and all rights of the Tenant shall be subject and subordinate to any
and all Mortgages and any ground, operating, overriding or underlying leases,
from time to time in existence against the Lands and Building (including without
limitation those referred to in section 11.15 hereof). On request, the Tenant
shall acknowledge in writing the subordination of this Lease and its rights
under this Lease to any and all such Mortgages and leases and to all advances
made under such Mortgages. The form of such subordination shall be as required
by the Landlord or any Mortgagee or the lessee under any such lease.
SECTION 10.03 ATTORNMENT
The Tenant shall promptly, on request, attorn to any Mortgagee, or to the owners
of the Building and Lands, or the lessor under any ground, operating,
overriding, underlying or similar lease of all or substantially all of the
Building made by the Landlord or otherwise affecting the Building and Lands, or
the purchaser on any foreclosure or sale proceedings taken under any Mortgage,
and shall recognize such Mortgagee, owner, lessor or purchaser as the Landlord
under this Lease.
SECTION 10.04 EXECUTION OF DOCUMENTS
The Tenant irrevocably constitutes the Landlord the agent and attorney of the
Tenant for the purpose of executing any agreement, certificate, attornment or
subordination required by this Lease and for registering postponements in favour
of any Mortgagee if the Tenant fails to execute such documents within 10 days
after request by the Landlord.
ARTICLE XI - GENERAL PROVISIONS
SECTION 11.01 RULES AND REGULATIONS
The Tenant shall comply with all Rules and Regulations, and amendments thereto,
adopted by the Landlord from time to time including those set out in Schedule
"D". Such Rules and Regulations may differentiate between different types of
businesses in the Building, and the Landlord shall have no obligation to enforce
any Rule or Regulation or the provisions of any other lease against any other
tenant, and the Landlord shall have no liability to the Tenant with respect
thereto.
SECTION 11.02 DELAY
Except as expressly provided in this Lease, whenever the Landlord or Tenant is
delayed in the fulfilment of any obligation under this Lease (other than the
payment of Rent and surrender of the Premises on termination) by an unavoidable
occurrence which is not the fault of the party delayed in performing such
obligation, then the time for fulfilment of such obligation shall be extended
during the period in which such circumstances operate to delay the fulfilment of
such obligation.
SECTION 11.03 OVERHOLDING
If the Tenant remains in possession of the Premises after the end of the Term
with the consent of the Landlord but without having executed and delivered a new
lease or an agreement extending the Term, there shall be no tacit renewal of
this Lease, and the Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly Net Rent payable in advance on the first
day of each month equal to twice the monthly amount of Net Rent payable during
the last month of the Term, and otherwise upon the same terms as are set forth
in this Lease, so far as these are applicable to a monthly tenancy.
SECTION 11.04 WAIVER
If either the Landlord or Tenant excuses or condones any default by the other of
any obligation under this Lease, no waiver of such obligation shall be implied
in respect of any continuing or subsequent default.
SECTION 11.05 REGISTRATION
Neither the Tenant nor anyone claiming under the Tenant shall register this
Lease or any Transfer without the prior written consent of the Landlord. The
Tenant hereby waives any right which the Tenant may have to require the Landlord
to deliver this Lease in registrable form or to provide a plan of the Premises
acceptable to the land title office or other office of public record for
registration or filing purposes.
SECTION 11.06 NOTICES
Any notice, consent or other instrument which may be or is required to be given
under this Lease shall be
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in writing and shall be delivered in person or sent by registered mail
postage prepaid, addressed: (a) if to the Landlord: Pacific Centre North
Limited, Suite 550, The Toronto Dominion Bank Tower, 700 West Georgia Street,
Vancouver, British Columbia, V7Y 1A1 Attention: Vice-President and General
Manager; and (b) if to the Tenant, at the Premises. Any such notice or
other instrument shall be deemed to have been given and received on the day
upon which personal delivery is made or, if mailed, then 48 hours following
the date of mailing. Either party may give notice to the other of any change
of address and after the giving of such notice, the address therein specified
is deemed to be the address of such party for the giving of notices. If
postal service is interrupted or substantially delayed, all notices or other
instruments shall be delivered in person.
SECTION 11.07 SUCCESSORS
The rights and liabilities created by this Lease extend to and bind the
successors and assigns of the Landlord and the heirs, executors, administrators
and permitted successors and assigns of the Tenant. No rights, however, shall
enure to the benefit of any Transferee unless the provisions of Article VIII are
complied with.
SECTION 11.08 JOINT AND SEVERAL LIABILITY
If there is at any time more than one Tenant or more than one Person
constituting the Tenant, their covenants shall be considered to be joint and
several and shall apply to each and every one of them. If the Tenant is or
becomes a partnership, each Person who is a member, or shall become a member, of
such partnership or its successors shall be and continue to be jointly and
severally liable for the performance of all covenants of the Tenant pursuant to
this Lease, whether or not such Person ceases to be a member of such partnership
or its successor.
SECTION 11.09 CAPTIONS AND SECTION NUMBERS
The captions, section numbers, article numbers and table of contents appearing
in this Lease are inserted only as a matter of convenience and in no way affect
the substance of this Lease.
SECTION 11.10 EXTENDED MEANINGS
The words "hereof", "hereto" and "hereunder" and similar expressions used in
this Lease relate to the whole of this Lease and not only to the provisions in
which such expressions appear. This Lease shall be read with all changes in
number and gender as may be appropriate or required by the context. Any
reference to the Tenant includes, where the context allows, the employees,
agents, invitees and licensees of the Tenant and all others over whom the Tenant
might reasonably be expected to exercise control.
SECTION 11.11 PARTIAL INVALIDITY
All of the provisions of this Lease are to be construed as covenants even though
not expressed as such. If any such provision is held or rendered illegal or
unenforceable it shall be considered separate and severable from this Lease and
the remaining provisions of this Lease shall remain in force and bind the
parties as though the illegal or unenforceable provision had never been included
in this Lease.
SECTION 11.12 ENTIRE AGREEMENT
This Lease and the Schedules and riders, if any, attached hereto and the Lease
Proposal, if any, and the Landlord's leasehold improvement manual, set forth the
entire agreement between the Landlord and Tenant concerning the Premises and
there are no agreements or understandings between them other than as are herein
set forth. Subject to Section 11.01, this Lease and its Schedules and riders
may not be modified except by agreement in writing executed by the Landlord and
Tenant. In the event of any inconsistency between the provisions of this Lease
and the provisions of the Lease Proposal, the provisions of this Lease shall
prevail.
SECTION 11.13 GOVERNING LAW
This Lease shall be construed in accordance with and governed by the laws of the
Province of British Columbia.
SECTION 11.14 TIME OF THE ESSENCE
Time is of the essence of this Lease.
SECTION 11.15 AUTHORITY
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The Tenant acknowledges that the Landlord has authority from Toronto Dominion
Realty Limited, 527698 British Columbia Ltd., 527700 British Columbia Ltd. and
The Cadillac Fairview Corporation Limited to enter into this Lease.
SECTION 11.16 QUIET ENJOYMENT
If the Tenant pays Rent, fully observes and performs all of its obligations
under this Lease, and there has been no Event of Default, the Tenant shall be
entitled to peaceful and quiet enjoyment of the Premises for the Term without
interruption or interference by the Landlord or any Person claiming through the
Landlord.
SECTION 11.17 INDEMNITY AGREEMENT
If any Indemnifier is named in this Lease, the Indemnifier agrees to execute and
deliver to the Landlord an Indemnity Agreement in the form attached as Schedule
"E" hereto (with blanks completed) with respect to this lease and any and all
renewals hereof; and the Tenant agrees that failure of the Indemnifier to do so
shall constitute an Event of Default.
SECTION 11.20 EXECUTION
If the Tenant is a corporation, the Tenant confirms and agrees that this Lease
has been executed by its authorized signatories and that if only one signatory
has signed this Lease, the Tenant is authorized by its articles of incorporation
or other constating documents to execute leases by such sole authorized
signatory and if this Lease is not executed under seal by the Tenant, the Tenant
is authorized by its articles of incorporation or other constating documents to
execute leases without a seal.
SECTION 11.21 PARKING
THE LANDLORD AGREES TO PROVIDE TO THE TENANT UP TO TWO (2) UNRESERVED PARKING
STALLS IN THE UNDERGROUND PARKING FACILITY IN THE BUILDING DURING THE TERM UNTIL
NOVEMBER 30, 2000 AND UP TO SIX (6) UNRESERVED PARKING STALLS FROM DECEMBER 1,
2000 FOR THE BALANCE OF THE TERM AT MONTHLY RATES, PLUS GOODS AND SERVICES TAX,
AS ESTABLISHED BY THE LANDLORD FROM TIME TO TIME FOR RANDOM USERS OF PARKING
SPACES WITHIN THE PARKING FACILITY.
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IN WITNESS WHEREOF the Landlord and Tenant have signed this Lease under seal.
PACIFIC CENTRE LEASEHOLDS LIMITED
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Tenant)
TECHWEST MANAGEMENT INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Indemnifier)
SIDEWARE SYSTEMS INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Indemnifier)
BRAINTECH, INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
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SCHEDULE "A" - LEGAL DESCRIPTION OF THE LANDS
Those lands and premises lying and being in the City of Vancouver
in the Province of British Columbia more particularly known and described as
Parcel Identifier: 007-857-969
Lot C
Block 32
D.L. 541
Plan 21253
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SCHEDULE "B" - FLOOR PLAN OF THE PREMISES
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SCHEDULE "C" - DEFINITIONS
In this Lease and in the Schedules to this Lease:
1. "ADDITIONAL RENT" means all sums of money required to be paid by the
Tenant under this Lease (except Net Rent) whether or not the same are designated
"Additional Rent" or are payable to the Landlord or otherwise.
2. "ALTERATIONS" means all repairs, replacements, improvements or
alterations to the Premises by the Tenant and the placing of a load of more than
50 lbs per square foot in any part of the Premises or the relocation of any such
load.
3. "ARCHITECT" means the architect from time to time named by the Landlord.
4. "BUILDING" means the multi-storey building known municipally as 777
Dunsmuir Street, Vancouver, British Columbia and generally as Pacific Centre
Tower Four from and including the ground floor of such Building to and including
the roof thereof and including all premises rented or intended to be rented
therein, whether for office, retail, cafeteria, banking or other similar
purposes but excluding any Premises below grade which are intended for leasing
for retail or parking purposes; and the areas, buildings systems and facilities
serving the Building or having utility in connection therewith, as determined by
the Landlord, whether or not located directly under the Building, which areas
and facilities may include, without limitation, internal malls, sidewalks and
plazas, exhibit areas, storage and mechanical areas, janitor rooms, mail rooms,
telephone, mechanical and electrical rooms, stairways, escalators, elevators,
truck and receiving areas, driveways, parking facilities, loading docks and
corridors.
5. "BUSINESS TAX" means all taxes (whether imposed on the Landlord or
Tenant) attributable to the personal property, trade fixtures, business, income,
occupancy or sales of the Tenant or any other occupant of the Premises and to
any leasehold improvements installed in the Premises and to the use of the
Building or Lands by the Tenant.
6. "CAPITAL TAX" means the amount , allocated from time to time by the
Landlord to, and relating to the Lands and Building, of any capital tax payable
by the Landlord or the owners of the Lands and Building under the Corporations
Tax Act (British Columbia) as amended or replaced from time to time or any other
legislation, provincial or federal, imposing taxes on account of capital,
calculated as if the Building were the only property of the Landlord or the
owners of the Lands and Building.
7. "CHANGE OF CONTROL" means, in the case of any corporation or partnership,
the transfer or issue by sale, assignment, subscription, transmission on death,
mortgage, charge, security interest, operation of law or otherwise, of any
shares, voting rights or interest which would result in any change in the
effective control of such corporation or partnership unless such change occurs
as a result of trading in the shares of a corporation listed on a recognized
stock exchange in Canada or the United States and then only so long as the
Landlord receives assurances reasonably satisfactory to it that there will be a
continuity of management and of the business practices of such corporation
notwithstanding such Change of Control.
8. "COMMENCEMENT DATE" means the date on which the Term commences under
Section 1.02.
9. "DEVELOPMENT" means the Lands more particularly described in Schedule "A"
attached to this Lease or as such Lands may be altered, expanded or reduced from
time to time, and the improvements, buildings, equipment and facilities erected
thereon or situate from time to time therein. The Development includes those
areas designated or intended by the Landlord to be leased for office, retail,
service and storage purposes, and those areas not so designated or intended, and
all non-leasable areas, parking facilities and the shared common areas and
facilities of the Development. The Development is known generally as "Pacific
Centre".
10. An "EVENT OF DEFAULT" shall occur whenever:
(a) any Rent is in arrears and is not paid within 5 days after written
demand by the Landlord;
(b) the Tenant has breached any of its obligations in this Lease (other than
the payment of Rent) and:
(i) fails to remedy such breach within 15 days (or such shorter period
as may be provided in this Lease); or
(ii) if such breach cannot be reasonably remedied within 15 days or
such shorter period, the Tenant fails to commence to remedy such
breach within such 15 days or shorter period or thereafter fails
to proceed diligently to remedy such breach; in either case after
notice
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in writing from the Landlord;
(c) the Tenant or any Indemnifier becomes bankrupt or insolvent or takes the
benefit of any statute for bankrupt or insolvent debtors or makes any proposal,
assignment or arrangement with its creditors, or any steps are taken or
proceedings commenced by any Person for the dissolution, winding-up or other
termination of the Tenant's existence or the liquidation of its assets;
(d) a trustee, receiver, receiver/manager or like Person is appointed with
respect to the business or assets of the Tenant or any Indemnifier;
(e) the Tenant makes a sale in bulk of all or a substantial portion of its
assets other than in conjunction with a Transfer approved by the Landlord;
(f) this Lease or any of the Tenant's assets are taken under a writ of
execution;
(g) the Tenant purports to make a Transfer other than in compliance with the
provisions of this Lease;
(h) the Tenant abandons or attempts to abandon the Premises or disposes of
its goods so that there would not after such disposal be sufficient goods of the
Tenant on the Premises subject to distress to satisfy Rent for at least 3
months, or the Premises become vacant and unoccupied for a period of 10
consecutive days or more without the consent of the Landlord;
(i) any insurance policies covering any part of the Building or any occupant
thereof are actually or threatened to be cancelled or adversely changed as a
result of any use or occupancy of the Premises;
(j) if an Event of Default as defined in this paragraph occurs with respect
to any lease or agreement under which the Tenant occupies other premises in the
Building; or
(k) if the Tenant or any Indemnifier is a corporation and at any time during
the Term does not remain in good standing with the Office of the Registrar of
Companies for British Columbia.
11. "FISCAL YEAR" means (i) the period of time commencing on the Commencement
Date and ending on the last day of the next ensuing October; and (ii) thereafter
the period of time commencing on the first day of November and ending on the
last day of the next ensuing October, or (iii) the fiscal period designated by
the Landlord from time to time.
12. "INDEMNIFIER" means the Person, if any, who has executed or agreed to
execute an Indemnity Agreement substantially in the form attached to this Lease
as Schedule "E", or any other indemnity agreement in favour of the Landlord.
13. "LANDLORD" means the party named as landlord on the first page of this
Lease.
14. "LANDS" means the lands situated in the City of Vancouver in the Province
of British Columbia on which the Building is constructed, as more particularly
described in Schedule "A", or as such lands may be expanded or reduced from time
to time.
16. "LEASEHOLD IMPROVEMENTS" mean leasehold improvements in the Premises
determined according to common law, and shall include, without limitation, all
fixtures, improvements, installations, alterations and additions from time to
time made, erected or installed in the Premises by or on behalf of the Tenant or
any previous occupant of the Premises, including signs and lettering,
partitions, doors and hardware however affixed and whether or not movable, all
mechanical, electrical and utility installations and all carpeting and drapes
with the exception only of furniture and equipment not in the nature of
fixtures.
17. "MORTGAGE" means any and all mortgages, charges, debentures, security
agreements, trust deeds, hypothecs or like instruments resulting from financing,
refinancing or collateral financing (including renewals or extensions thereof)
made or arranged by the Landlord of its interest in all or any part of the
Building or Lands.
18. "MORTGAGEE" means the holder of, or secured party under, any Mortgage and
includes any trustee for bondholders.
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19. "NET RENT" means the annual rent payable by the Tenant under Section
2.02.
20. "NET RENTABLE AREA" means, in the case of premises consisting of part of
a floor, the floor area bounded by the inside surface of the exterior glass, the
office side of the corridor or other permanent partitions and the centre of
partitions that separate the premises from adjoining leasable areas (if any)
without deductions for columns or projections but after making the same
exclusions as are made in computing Rentable Area.
21. "NORMAL BUSINESS HOURS" means the hours from 8:00 a.m. to 6:00 p.m. on
Mondays through Fridays and the hours from 8:00 a.m. to 1:00 p.m. on Saturdays,
unless any such day is a statutory holiday.
22. "OPERATING COSTS" means (without duplication) any amounts paid or payable
whether by the Landlord or by others on behalf of the Landlord for maintenance,
operation, repair, replacement to and administration of the Lands and Building
or allocated by the Landlord to the Lands and Building and for services provided
generally to tenants, calculated as if the Building were 100% occupied by
tenants during the Term, including without limitation:
(a) the cost of insurance which the Landlord is obligated or permitted
to obtain under this Lease and any deductible amount applicable to
any claim made by the Landlord under such insurance;
(b) the cost of security, janitorial, landscaping, window cleaning,
garbage removal and snow removal services;
(c) the cost of heating, ventilating and air-conditioning;
(d) the cost of fuel, steam, water, electricity, telephone and other
utilities used in the maintenance, operation or administration of
the Building, including charges and imposts related to such
utilities to the extent such costs, charges and imposts are not
recovered from other tenants;
(e) salaries, wages and other amounts paid or payable for all
personnel involved in the repair, maintenance, operation, leasing,
on site management, security, supervision or cleaning of the
Building, including fringe benefits, unemployment and worker's
compensation insurance premiums, pension plan contributions and
other employment costs and the cost of engaging contractors for
the repair, maintenance, security, supervision or cleaning of the
Building;
(f) auditing, accounting, legal and other professional and consulting
fees and disbursements;
(g) the costs: (i) of repairing, operating and maintaining the
Building and the equipment serving the Building and of all
replacements and modifications to the Building or such equipment,
including those made by the Landlord in order to comply with laws
or regulations affecting the Building; (ii) incurred by the
Landlord in providing and installing energy conservation equipment
or systems and life safety systems; (iii) incurred by the
Landlord to make alterations, replacements or additions to the
Building intended to reduce operating costs, improve the operation
of the Building or maintain its operation as a first class office
building; and, (iv) incurred to replace machinery or equipment
which by its nature requires periodic replacement; all to the
extent that such costs are fully chargeable in the Fiscal Year in
which they are incurred in accordance with sound accounting
principles;
(h) the cost of the rental of all equipment, supplies, tools,
materials and signs;
(i) all costs incurred by the Landlord in contesting or appealing
Taxes or related assessments including legal, appraisal and other
professional fees, and administration and overhead costs;
(j) Capital Tax;
(k) depreciation or amortization of the costs referred to in paragraph
22(g) above as determined by the Landlord in accordance with sound
accounting principles, if such costs have not been charged fully
in the Fiscal Year in which they are incurred;
(l) interest calculated at 2 percentage points above the average daily
prime bank commercial lending rate charged during such Fiscal Year
by any Canadian chartered bank designated from time to time by the
Landlord upon the undepreciated or unamortized balance of the
costs referred to in paragraph 22(k); and
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(m) a reasonable fee for the administration and management of the
Building equal to an amount which the Landlord might reasonably
pay to a third party for the administration and management of the
Building as part of the Pacific Centre complex.
Operating Costs shall exclude or have deducted from them as the case may be:
(n) all amounts which otherwise would be included in Operating Costs
which are recovered by the Landlord from tenants (other than under
sections of their leases comparable to section 2.03 of this
Lease);
(o) such of the Operating Costs as are recovered from insurance
proceeds, to the extent such recovery represents reimbursements
for costs previously included in Operating Costs;
(p) interest on debt and capital retirement of debt;
(q) ground rent payable by the Landlord to the owner of the Lands
under any ground lease of the Lands; and
(r) all amounts which otherwise would be included in Operating Costs
which are directly attributable to the operation of the parking
garage forming part of and serving the Building. Costs incurred
in maintaining and operating the Building may be attributed by the
Landlord to the various components of the Building in accordance
with reasonable and current practices and on a basis consistent
with the nature of the particular costs being attributed, and the
costs so attributed may be allocated to the tenants of such
components accordingly.
23. "PERSON" means any person, firm, partnership or corporation, or any group
or combination of persons, firms, partnerships or corporations.
24. "PREMISES" means the premises leased to the Tenant described in Section
1.01 and includes Leasehold Improvements in such premises.
25. "PROPORTIONATE SHARE" means a fraction which has as its numerator the
Rentable Area of the Premises and as its denominator the Total Rentable Area of
the Building.
26. "RENT" means the aggregate of Net Rent and Additional Rent.
27. "RENTABLE AREA" means (a) in the case of premises used or intended to
be used for office purposes and occupying an entire floor, the floor area
bounded by the inside surface of the glass on the exterior walls, including
without limitation, washrooms, telephone, electrical and janitorial closets
and elevator lobbies; (b) in the case of premises used or intended to be used
for office purposes and consisting of part of a floor, the area computed by
multiplying the Net Rentable Area of such premises by a fraction, the
numerator of which is the aggregate floor area of the floor on which the
Premises are located (using the measurement method set out in subparagraph
(a)) and the denominator of which is the aggregate Net Rentable Area of all
office premises on such floor; and (c) in the case of premises used or
intended to be used for retail purposes, the Net Rentable Area thereof. In
calculating Rentable Area, stairs, elevator shafts, flues, stacks, pipe
shafts and vertical ducts with their own enclosing walls, any of which are
used in common, shall be excluded but no deductions or exclusions shall be
made for columns and projections necessary for the Building. The Landlord may
for the purpose of calculating the Net Rent and any Proportionate Share
change the factor referred to in subparagraph (b) from time to time to
reflect the actual ratio of the aggregate floor area of the floor on which
the Premises or part thereof are located (using the measurement method set
out in subparagraph (a)) to the aggregate Net Rentable Area of all office
premises on such floor.
28. "RULES AND REGULATIONS" means the rules and regulations adopted and
promulgated by the Landlord from time to time pursuant to Section 11.01. The
Rules and Regulations existing as at the Commencement Date are those set out in
Schedule "D".
29. "TAXES" means all taxes, levies, charges, local improvement rates and
assessments whatsoever assessed or charged against the Building and the Lands or
any part thereof by any lawful taxing authority and including any amounts
assessed or charged in substitution for or in lieu of any such taxes, but
excluding only such taxes as capital gains taxes, corporate, income, profit or
excess profit taxes to the extent such taxes are not levied in lieu of any of
the foregoing against the Building or Lands or the Landlord in respect thereof.
Taxes shall in every instance be calculated on the basis of the Total Rentable
Area of the Building being assessed as fully leased and operational.
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30. "TENANT" means the party named as tenant on the first page of this Lease.
31. "TERM" means the period set out in Section 1.02.
32. "TOTAL RENTABLE AREA OF THE BUILDING" means the aggregate of the Rentable
Area of each floor in the Building intended for leasing as if each floor is
occupied by one tenant, all as determined by the Architect. The Total Rentable
Area of the Building shall: (a) exclude the main telephone, mechanical,
electrical and other utility rooms and enclosures, public lobbies on the ground
floor, and other public space common to the entire Building; and, (b) be
adjusted by the Architect from time to time to take account of any structural,
functional or other change affecting the same.
33. "TRADE FIXTURES" means trade fixtures as determined at common law, but
for greater certainty, shall not include: (a) heating, ventilating or air
conditioning systems, facilities and equipment in or serving the Premises;
(b) floor coverings affixed to the floor of the Premises; (c) light
fixtures; (d) internal stairways and doors; and, (e) any fixtures,
facilities, equipment or installations installed by or at the expense of the
Landlord pursuant to the Lease Proposal or otherwise.
34. "TRANSFER" means an assignment of this Lease in whole or in part, a
sublease of all or any part of the Premises (whether by the Tenant or by a
subtenant), any transaction whereby the rights of the Tenant under this Lease or
the rights of any subtenant or to the Premises are transferred to another, any
transaction by which any right of use or occupancy of all or any part of the
Premises is conferred upon anyone, any mortgage, charge or encumbrance of this
Lease or the Premises or any part thereof or other arrangement under which
either this Lease or the Premises become security for any indebtedness or other
obligations and includes any transaction or occurrence whatsoever (including,
but not limited to, expropriation, receivership proceedings, seizure by legal
process and transfer by operation of law), which has changed or might change the
identity of the Persons having lawful use or occupancy of any part of the
Premises or which creates a security interest in any part of the Premises,
including without limitation, any of the Leasehold Improvements.
35. "TRANSFEREE" means the Person or Persons to whom a Transfer is or is to
be made.
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SCHEDULE "D" - RULES AND REGULATIONS
1. LIFE SAFETY. (a) The Tenant shall not do or permit anything to be
done in the Premises, or bring or keep anything therein which will in any way
increase the risk of fire or the rate of fire insurance on the Building or on
property kept therein, or obstruct or interfere with the rights of other
tenants or in any way injure or annoy them or the Landlord, or violate or act
at variance with the laws relating to fires or with regulations of the Fire
Department, or with any insurance upon the Lands or Building or in any part
thereof, or violate or act in conflict with any statutes, rules and
ordinances governing health standards or with any other statute or municipal
by-law. (b)No inflammable oils or other inflammable, dangerous or explosive
materials save those approved in writing by the Landlord's insurers shall be
kept or permitted to be kept in the Premises.
2. SECURITY. (a) The Landlord shall permit the Tenant and the Tenant's
employees and all Persons lawfully requiring communication with them to have
the use, during Normal Business Hours in common with others entitled thereto,
of the main entrance and the stairways, corridors, elevators, escalators, or
other mechanical means of access leading to the Building and the Premises.
At times other than during Normal Business Hours the Tenant and the employees
of the Tenant shall have access to the Building and to the Premises only in
accordance with the Rules and Regulations and shall be required to
satisfactorily identify themselves and to register in any book which may at
the Landlord's option be kept by the Landlord for such purpose. If
identification is not satisfactory, the Landlord is entitled to prevent the
Tenant or the Tenant's employees or other Persons lawfully requiring
communication with the Tenant from having access to the Building and to the
Premises. In addition, the Landlord is not required to open the door to the
Premises for the purpose of permitting entry therein to any Person not having
a key to the Premises. (b) The Tenant shall not place or cause to be placed
any additional locks upon any doors of the Premises without the approval of
the Landlord. Two keys shall be supplied to the Tenant for each entrance
door to the Premises and all locks shall be Building standard to permit
access by the Landlord's master key. If additional keys are required, they
must be obtained from the Landlord at the cost of the Tenant. Keys or other
means of access for entrance doors to the Building will not be issued without
the written authority of the Landlord.
3. HOUSEKEEPING. (a) The Tenant shall permit window cleaners to clean the
windows of the Premises during Normal Business Hours. (b) The Tenant shall not
place any debris, garbage, trash or refuse or permit same to be placed or left
in or upon any part of the Lands or Building outside of the Premises, other than
in a location provided by the Landlord specifically for such purposes, and the
Tenant shall not allow any undue accumulation of any debris, garbage, trash or
refuse in or outside of the Premises. If the Tenant uses perishable articles or
generates wet garbage, the Tenant shall provide refrigerated storage facilities
suitable to the Landlord. (c) The Tenant shall not place or maintain any
supplies, or other articles in any vestibule or entry of the Premises, on the
adjacent footwalks or elsewhere on the exterior of the Premises or elsewhere on
the Lands or Building. (d) The sidewalks, entrances, passages, escalators,
elevators and staircases shall not be obstructed or used by the Tenant, its
agents, servants, contractors, invitees or employees for any purpose other than
ingress to and egress from the Premises and the Building. The Landlord reserves
entire control of all parts of the Lands and Building employed for the common
benefit of the tenants and without restricting the generality of the foregoing,
the sidewalks, entrances, corridors and passages not within the Premises,
washrooms, lavatories, air conditioning closets, fan rooms, janitor's closets,
electrical closets and other closets, stairs, escalators, elevator shafts,
flues, stacks, pipe shafts and ducts and shall have the right to place such
signs and appliances therein, as it deems advisable, provided that ingress to
and egress from the Premises is not unduly impaired thereby. (e) The Tenant
shall not cause or permit: any waste or damage to the Premises; any overloading
of the floors or the utility, electrical or mechanical facilities of the
Premises; any nuisance in the Premises; or any use or manner of use causing a
hazard or annoyance to other occupants of the Building or to the Landlord.
4. RECEIVING, SHIPPING, MOVEMENT OF ARTICLES. (a) The Tenant shall not
receive or ship articles of any kind except through facilities and designated
doors and at hours designated by the Landlord and under the supervision of
the Landlord. (b) Hand trucks, carryalls or similar appliances shall only be
used in the Building with the consent of the Landlord and shall be equipped
with rubber tires, slide guards and such other safeguards as the Landlord
requires. (c) The Tenant, its agents, servants, contractors, invitees or
employees, shall not bring in or take out, position, construct, install or
move any safe, business machinery or other heavy machinery or equipment or
anything liable to injure or destroy any part of the Building, including the
Premises, without first obtaining the consent in writing of the Landlord. In
giving such consent, the Landlord shall have the right in its sole
discretion, to prescribe the weight permitted and the position thereof, the
use and design of planks, skids or platforms, and to distribute the weight
thereof. All damage done to the Building, including the Premises, by moving
or using any such heavy equipment or other office equipment or furniture
shall be repaired at the expense of the Tenant. The moving of all heavy
equipment or other office furniture shall occur only by prior arrangement
with the Landlord. The cost of such moving shall be paid by the Tenant.
Safes and other heavy office equipment and machinery shall be moved through
the halls and corridors only in a manner expressly approved by the Landlord.
No freight or bulky matter of any description will be received into any part
of the Building, including the Premises, or carried in the elevators except
during hours approved by the Landlord.
5. PREVENTION OF INJURY TO PREMISES. (a) It shall be the duty of the
Tenant to assist and co-operate
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with the Landlord in preventing injury to the Premises. (b) The Tenant shall
not deface or mark any part of the Building, including the Premises, and
shall not drive nails, spikes, hooks or screws into the walls, floors,
ceilings or woodwork of any part of the Building, including the Premises, or
bore, drill or cut into the walls, floors, ceilings or woodwork of any part
of the Building including the Premises, in any manner or for any reason. (c)
If the Tenant desires telegraphic or telephonic connections, the Landlord,
in its sole discretion, may direct the electricians as to where and how the
wires are to be introduced. No gas pipe or electric wire will be permitted
which has not been ordered or authorized by the Landlord. No outside radio
or television antenna shall be allowed on any part of the Premises without
authorization in writing by the Landlord.
6. WINDOWS. Except for the proper use of approved blinds and drapes, the
Tenant shall not cover, obstruct or affix any object or material to any of the
skylights and windows that reflect or admit light into any part of the Building,
including, without limiting the generality of the foregoing, the application of
solar films.
7. WASHROOMS. (a) The Landlord shall permit the Tenant and the employees of
the Tenant in common with others entitled thereto, to use the washrooms on the
floor of the Building on which the Premises are situated or, in lieu thereof,
those washrooms designated by the Landlord, save and except when the general
water supply may be turned off from the public main or at such other times when
repair and maintenance undertaken by the Landlord shall necessitate the non-use
of the facilities. (b) The water closets and other apparatus shall not be used
for any purposes other than those for which they were intended, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown into them.
Any damage resulting from misuse shall be borne by the Tenant by whom or by
whose agents, servants, invitees, or employees such damage is caused.
8. USE OF PREMISES. (a) No one shall use the Premises for sleeping
apartments or residential purposes, or for the storage of personal effects or
articles other than those required for business purposes. (b) No cooking or
heating of any foods or liquids (other than the heating of water or coffee in
coffee makers or kettles) shall be permitted in the Premises without the written
consent of the Landlord. (c) The Tenant shall not install or permit the
installation or use of any machine dispensing goods for sale in the Premises or
the Building or permit the delivery of any food or beverage to the Premises
without the written approval of the Landlord or in contravention of the Rules
and Regulations. (d) The Tenant shall not permit or allow any odours, vapours,
steam, water, vibrations, noises or other undesirable effects to emanate from
the Premises or any equipment or installation therein which, in the Landlord's
opinion, are objectionable or cause any interference with the safety, comfort or
convenience of the Building to the Landlord or the occupants and tenants thereof
or their agents, servants, invitees or employees.
9. CANVASSING, SOLICITING, PEDDLING. Canvassing, soliciting and peddling in
or about the Lands and Building are prohibited.
10. BICYCLES. No bicycles or other vehicles shall be brought within any part
of the Lands or Building without the consent of the Landlord.
11. ANIMALS AND BIRDS. No animals or birds shall be brought into any part
of the Lands or Building without the consent of the Landlord.
12. SIGNS AND ADVERTISING. The Tenant shall not paint, affix, display or
cause to be painted, affixed or displayed, any sign, picture, advertisement,
notice, lettering or decoration on any part of the outside of the Building or in
the interior of the Premises which is visible from the outside of the Building.
The Landlord will prescribe a uniform pattern and location of identification
signs for tenants, to be placed on the outside of the Premises, and the Tenant
shall not paint, affix, display or cause to be painted, affixed or displayed any
sign, picture, advertisement, notice, lettering or decoration on the outside of
the Premises for exterior view without the written consent of the Landlord. Any
such signs shall remain the property of the Tenant and shall be maintained at
the Tenant's sole cost and expense. At the expiration of the Term or earlier
termination of this Lease, the Tenant shall remove any such sign, picture,
advertisement, notice, lettering or decoration from the Premises at the Tenant's
expense and shall promptly repair all damage caused by any such removal. The
Tenant's obligation to observe and perform this covenant shall survive the
expiration of the Term or earlier termination of the Lease.
13. DIRECTORY BOARD. The Tenant shall be entitled at its expense to have its
name shown upon the directory board of the Building and the Landlord shall
design the style of such identification and shall determine the number of spaces
available on the directory board for each tenant. The directory board shall be
located in an area designated by the Landlord in the main lobby of the Building.
SCHEDULE "E" - INDEMNITY AGREEMENT
THIS INDEMNITY is dated the 25TH day of JUNE, 1999.
B E T W E E N :
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PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE SECOND PART
In order to induce the Landlord to enter into the Lease (the "Lease") dated the
25TH day of JUNE, 1999, and made between the Landlord and TECHWEST MANAGEMENT
INC., as Tenant, and for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the Indemnifier hereby makes the
following indemnity and agreement (the "Indemnity") with and in favour of the
Landlord:
1. (a) The Indemnifier hereby agrees with the Landlord that at all times
during the Term of the Lease and any extensions or renewals thereof or
overholding by the Tenant under the Lease, it will (i) make the due and punctual
payment of all Rent, monies, charges and other amounts of any kind whatsoever
payable under the Lease by the Tenant whether to the Landlord or otherwise; (ii)
effect prompt and complete performance and observance of all and singular the
terms, covenants and conditions contained in the Lease on the part of the Tenant
to be kept, observed and performed; and (iii) indemnify and save harmless the
Landlord from any loss, costs or damages arising out of any failure by the
Tenant and the Indemnifier to pay the aforesaid Rent, monies, charges and other
amounts of any kind whatsoever payable under the Lease or resulting from any
failure by the Tenant and the Indemnifier to observe or perform any of the
terms, covenants and conditions contained in the Lease.
(b) The Indemnifier's covenants and obligations set out in paragraph
(a) above will not be affected by any disaffirmance, disclaimer, repudiation,
rejection, termination or unenforceability of the Lease or by any other event or
occurrence which would have the effect at law of terminating any obligations of
the Tenant prior to the termination of the Lease whether pursuant to court
proceedings or otherwise and no surrender of the Lease to which the Landlord has
not provided its written consent (all of which are referred to collectively and
individually in this Indemnity as an "Unexpected Termination"), and the
occurrence of any such Unexpected Termination shall not reduce the period of
time in which the Indemnifier's covenants and obligations hereunder apply, which
period of time includes, for greater certainty, that part of the Term of the
Lease and any extensions or renewals thereof which would have followed had the
Unexpected Termination not occurred.
2. This Indemnity is absolute, unconditional and irrevocable and the
obligations of the Indemnifier and the rights of the Landlord under this
Indemnity shall not be prejudiced, waived, released, discharged, mitigated,
impaired or affected by (a) any extension of time, indulgences or modifications
which the Landlord extends to or makes with the Tenant in respect of the
performance of any of the obligations of the Tenant (or any other obligated
Person) under the Lease; (b) any waiver by or failure of the Landlord to enforce
any of the terms, covenants and conditions contained in the Lease; (c) any
Transfer under Article VIII of the Lease by the Tenant or by any trustee,
receiver, liquidator or any other Person; (d) any consent which the Landlord
gives to any such Transfer; (e) any amendment to the Lease or any waiver by the
Tenant of any of its rights under the Lease; (f) the expiration of the Term; or
(g) any Unexpected Termination (as that term is defined in Section 1(b) above).
The obligations of the Indemnifier are as primary obligor and not as a guarantor
of the Tenant's obligations.
3. The Indemnifier hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions in the Lease.
Notwithstanding the foregoing but without prejudicing the foregoing, any notice
which the Landlord desires to give to the Indemnifier shall be sufficiently
given if delivered to the Indemnifier, or, if mailed, by prepaid registered mail
addressed to the Indemnifier at the Premises, or, at the Landlord's option, at
the address, if any, set forth above and every such notice is deemed to have
been given upon the day it was delivered, or if mailed, forty-eight (48) hours
after the date it was mailed. Despite what is stated above, the Indemnifier
acknowledges that if its address is stipulated as a post office box or rural
route number, then notice will be considered to have been sufficiently given to
the Indemnifier if delivered or sent by registered mail to the Premises or,
where notice cannot be given in person upon the Premises, by posting the notice
upon the Premises. The Indemnifier may designate by notice in writing a
substitute address for that set forth above and thereafter notice shall be
directed to such substitute address. If two or more Persons are named as
Indemnifier, such notice given hereunder or under the Lease shall be deemed
sufficiently given to all such Persons if delivered or mailed in the foregoing
manner to any one of such Persons.
4. If an Event of Default has occurred under the Lease or a default under
this Indemnity, the
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<PAGE>
Indemnifier waives any right to require the Landlord to (a) proceed against
the Tenant or pursue any rights or remedies against the Tenant with respect
to the Lease; (b) proceed against or exhaust any security of the Tenant held
by the Landlord; or (c) pursue any other remedy whatsoever in the Landlord's
power. The Landlord has the right to enforce this Indemnity regardless of
the acceptance of additional security from the Tenant and regardless of any
release or discharge of the Tenant by the Landlord or by others or by
operation of any law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnifier under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired or affected by reason of the release or discharge
of the Tenant in any receivership, bankruptcy, winding-up or other creditors'
proceedings or any Unexpected Termination (as that term is defined in Section
1(b) above) and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if an Unexpected Termination or
any receivership, bankruptcy, wind-up or other creditors' proceedings had not
occurred, and in furtherance hereof, the Indemnifier agrees, upon any such
Unexpected Termination or any receivership, bankruptcy, wind-up or other
creditors' proceedings, that the Indemnifier shall, at the option of the
Landlord, exercisable at any time after such Unexpected Termination or any
receivership, bankruptcy, wind-up or other creditors' proceedings, become the
Tenant of the Landlord upon the same terms and conditions as are contained in
the Lease, applied mutatis mutandis. The liability of the Indemnifier shall not
be affected by any failure of the Landlord to exercise this option, nor by any
repossession of the Premises by the Landlord provided, however, that the net
payments received by the Landlord after deducting all costs and expenses of
repossessing and reletting the Premises shall be credited from time to time by
the Landlord against the indebtedness of the Indemnifier hereunder and the
Indemnifier shall pay any balance owing to the Landlord from time to time
immediately upon demand.
6. No action or proceedings brought or instituted under this Indemnity and
no recovery in pursuance thereof shall be a bar or defence to any further action
or proceeding which may be brought under this Indemnity by reason of any further
default or default hereunder or in the performance and observance of the terms,
covenants and conditions contained in the Lease.
7. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnifier and two authorized
representatives of the Landlord.
8. The Indemnifier shall, without limiting the generality of the foregoing,
be bound by this Indemnity in the same manner as though the Indemnifier were the
Tenant named in the Lease.
9. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnifier, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner,
if the Indemnifier named in this Indemnity is a partnership or other business
association, the members of which are by virtue of statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
10. All of the terms, covenants and conditions of this Indemnity extend to
and are binding upon the Indemnifier, his, her or its heirs, executors,
administrators, successors and assigns, as the case may be, and enure to the
benefit of and may be enforced by the Landlord, the owner or owners from time to
time (other than the Landlord) of the freehold or leasehold title of the
Building and any Mortgagee.
11. The expressions "Building", "Event of Default", "Landlord", "Tenant",
"Rent", "Term", and "Premises" and other terms or expressions where used in this
Indemnity, respectively, have the same meaning as in the Lease.
12. The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Indemnity to such person or persons or circumstances as the context otherwise
permits.
13. The undersigned, as Indemnifier, hereby represents and warrants to and
covenants and agrees with the Landlord that:
(a) notwithstanding the foregoing or any performance in whole or in
part by the Indemnifier of the covenants of this Indemnity, the
Indemnifier shall not, except at the option of the Landlord, have
any entitlement to occupy the Premises or otherwise enjoy the
benefits of the Tenant under this Lease;
(b) the Indemnifier has full power and authority to enter into this
Indemnity and to perform the Indemnifier's obligations contained
herein;
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<PAGE>
(c) this Indemnity is valid and binding upon the Indemnifier and
enforceable against the Indemnifier in accordance with its terms;
and
(d) in entering into this Indemnity, the Indemnifier, if a
corporation, is not contravening any provisions of the Company
Act (British Columbia) or the Canada Business Corporations Act
(Canada), as the case may be, as these Acts may be amended from
time to time, or any statute that replaces or supersedes those
Acts.
14. If a part of this Indemnity or the application of it to any Person
hereunder or circumstance is to any extent held or rendered invalid,
unenforceable or illegal, that part:
(a) is independent of the remainder of this Indemnity and is severable
from it, and its invalidity, unenforceability or illegality does
not affect, impair or invalidate the remainder of this Indemnity;
and
(b) continues to be applicable to and enforceable to the fullest
extent permitted by law against any Person hereunder and
circumstance, except those as to which it has been held or
rendered invalid, unenforceable or illegal.
15. The Indemnifier agrees to execute such further assurances in connection
with this Indemnity as the Landlord may reasonably require.
16. This Indemnity shall be construed in accordance with the laws of the
Province in which the Building is located.
17. This Indemnity is the sole agreement between the Landlord and the
Indemnifier relating to the indemnity and there are no other written or verbal
agreements or representations relating thereto.
18. If the Indemnifier is a corporation, the Indemnifier confirms and agrees
that this Indemnity has been executed by its authorized signatories and that if
only one signatory has signed this Indemnity, the Indemnifier is authorized by
its articles of incorporation or other constating documents to execute
indemnities by such sole authorized signatory and if this Indemnity is not
executed under seal by the Indemnifier, the Indemnifier is authorized by its
articles of incorporation or other constating documents to execute indemnities
without a seal.
19. Wherever in this Indemnity reference is made to either the Landlord or
the Tenant, the reference is deemed to apply also to the heirs, executors,
administrators, successors and assigns of the Landlord and the heirs, executors,
administrators, permitted successors, and permitted assigns of the Tenant. Any
assignment by the Landlord of any of its interests in the Lease operates
automatically as an assignment to such assignee of the benefit of this
Indemnity.
IN WITNESS WHEREOF the Landlord and the Indemnifier have signed and sealed this
Indemnity.
SIGNED, SEALED AND DELIVERED in ) PACIFIC CENTRE LEASEHOLDS LIMITED
the presence of: )
)
)
) Per:____________________________________
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) (Indemnifier)
)
) SIDEWARE SYSTEMS INC.
)
)
) Per:____________________________________
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) (Indemnifier)
) BRAINTECH, INC.
)
)
) Per:____________________________________
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<PAGE>
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) I/We have authority to bind the
) corporation.
-32-
<PAGE>
EXHIBIT 10.9
Assignment Agreement effective as of July 1, 1999 between the Company,
Techwest Management Ltd., Sideware Systems and SJM Management Ltd.
<PAGE>
ASSIGNMENT OF LEASE
THIS AGREEMENT is dated for reference June 25, 1999.
BETWEEN:
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
AND:
SJM MANAGEMENT LTD.
(the "Tenant")
OF THE SECOND PART
AND:
TECHWEST MANAGEMENT INC.
(the "Assignee")
OF THE THIRD PART
AND:
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE FOURTH PART
WITNESSES THAT WHEREAS:
A. By a lease (the "Original Lease") dated October 10, 1990 made between
Pacific Centre North Limited ("PCNL") and the Tenant, PCNL demised and leased
unto the Tenant certain premises (the "Original Premises") on the 16th Floor of
the Building (as therein defined) comprising 5,496 square feet more or less of
Rentable Area (as therein defined);
B. By an amendment to lease (the "Amendment") dated for reference January
12, 1994, PCNL and the Tenant agreed to adjust the Net Rent payable and to
increase the notice requirement for termination;
C. By a renewal of lease (the "Renewal") dated for reference September
27, 1995, the Tenant and PCNL agreed to renew the Lease for a further term of
five (5) years expiring November 30, 2000 and to reduce the size of the Original
Premises to approximately 4,416 square feet of Rentable Area (the "Premises");
D. The Original Lease, the Amendment and the Renewal are together
referred to herein as the "Lease";
E. By an assignment of lease made as of August 31, 1998, PCNL assigned
all of its estate, right, title and interest in the Lease to the Landlord;
F. Effective July 1, 1999 (the "Effective Date"), the Tenant proposes to
assign its interest under the Lease to the Assignee, and the Landlord has agreed
to give its consent to such assignment on the terms and conditions hereinafter
set forth; and
G. The Indemnifier has agreed to indemnify the obligations of the
Assignee pursuant to this Agreement.
NOW THEREFORE THE LANDLORD, THE TENANT, THE ASSIGNEE AND THE
INDEMNIFIER, in consideration of the Premises, the sum of $1.00 paid by each
party to the others, the mutual covenants and agreements herein contained, and
other good and valuable consideration (the
- 1 -
<PAGE>
receipt and sufficiency of which is hereby acknowledged) and subject to
the terms and conditions herein set out, covenant and agree as follows:
1. INTERPRETATION
All terms defined in the Lease and used herein shall have the
respective meanings ascribed to them in the Lease unless the context otherwise
requires or unless otherwise stated herein. The defined terms in the recitals
to this Agreement shall have such meaning throughout this Agreement, unless
otherwise stated herein.
2. AMENDMENTS TO LEASE
The Lease is hereby amended, with effect as of the Effective Date, by
deleting Section 1.04.
3. ASSIGNMENT OF THE LEASE
The Tenant hereby assigns to the Assignee as of the Effective Date all
of the right, title, benefit and interest of the Tenant in and to the Premises,
together with the unexpired residue of the Term, as extended pursuant to this
Agreement, and the Lease (as hereby amended) and all of the benefit and
advantage to be derived therefrom, to hold the same onto the Assignee henceforth
for and during the residue of the Term, as hereby extended, subject to the
payment of the rent and performance of the covenants of the Tenant under the
Lease.
4. WARRANTIES AND COVENANTS OF THE TENANT IN FAVOUR OF THE ASSIGNEE
The Tenant hereby represents and warrants to, and covenants and agrees
with, the Assignee that:
(a) notwithstanding any act of the Tenant, the Lease is good, valid and
subsisting, the rents thereby reserved have been duly paid, the
covenants and conditions therein have been duly observed and performed
by the Tenant as of the date hereof, and the Tenant now has good
right, full power and absolute authority to assign the Premises and
the Lease in the manner aforesaid according to the true intent and
meaning hereof;
(b) subject to the payment of rent and the performance of the covenants
and conditions contained in the Lease, the Assignee may enter into and
hold and enjoy the Premises for the residue of the Term, for its own
use and benefit without any interruption by the Tenant or any person
claiming under it, free from all charges and encumbrances whatsoever,
and the Tenant shall at all times hereafter, at the request and cost
of the Assignee, execute such further assurances of the Premises as
the Assignee shall reasonably require;
(c) it has not previously assigned, transferred, charged, encumbered,
sublet or parted with possession of the Premises; and,
(d) it has not exercised any renewal options under the Lease.
5. COVENANTS OF THE ASSIGNEE IN FAVOUR OF THE TENANT
The Assignee hereby covenants and agrees with the Tenant that the
Assignee shall during the residue of the Term:
(a) pay the Rent reserved by the Lease;
(b) perform and observe the obligations, covenants and conditions therein
contained on the part of the tenant therein named to be observed and
performed; and,
(c) indemnify and save the Tenant harmless therefrom and from all actions,
suits, costs, losses, charges, damages and expenses for or in respect
thereof, as if the Assignee were the tenant named in the Lease.
6. COVENANTS OF THE ASSIGNEE IN FAVOUR OF THE LANDLORD
The Assignee hereby covenants and agrees with the Landlord:
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<PAGE>
(a) to pay the Rent and Additional Rent and to observe and perform all of
the covenants, agreements and conditions of the Tenant reserved and
contained in the Lease in the same manner as if the Assignee were the
tenant named in the Lease; and
(b) not to assign or sublet or part with possession of the Premises or any
part thereof or the Lease without the prior written consent of the
Landlord pursuant to the Lease.
7. COVENANTS OF THE INDEMNIFIER IN FAVOUR OF THE LANDLORD
Each of the corporations which are identified as the Indemnifier in
this Agreement agree to execute and deliver to the Landlord an indemnity
agreement in the form attached as Schedule "A" hereto (with blanks completed)
and the Tenant agrees that the failure of the Indemnifier to do so shall
constitute a Event of Default pursuant to the Lease.
8. CONSENT OF THE LANDLORD TO THE ASSIGNMENT
The Landlord hereby consents to this Assignment on the following
conditions:
(a) neither the consent of the Landlord, nor the payment of any money, nor
the performance by the Assignee of its obligations under the Lease
shall waive or modify in any respect the rights of the Landlord under
the Lease other than to relieve the Tenant from the observance or
performance of the conditions and covenants in the Lease to be
observed or performed by the Tenant; and
(b) the consent of the Landlord shall not be deemed to be a consent to or
a waiver of the requirement set forth in the Lease for the consent of
the Landlord to any subsequent assignment of the Lease or the Term or
to any subletting or other parting with possession of the Premises or
any part thereof.
9. RELEASE OF TENANT
The Landlord hereby expressly confirms and agrees that the Tenant is
released from any further obligations arising under the Lease as of the
Effective Date, except for any claims or liabilities which exist or arise prior
to the Effective Date.
10. DEMISE
For greater certainty, and in consideration of the rents, covenants
and agreements contained in the Lease as hereby amended on the part of Tenant to
be paid, observed and performed, the Landlord does hereby demise and lease unto
the Assignee, as from the Effective Date, the Premises for and during the Term
of the Lease, and the Assignee hereby covenants and agrees to pay the rents, and
observe and perform the covenants and agreements in the Lease as hereby amended
on its part to be paid, observed and performed.
11. LEASE RATIFIED AND CONFIRMED
Except as hereby expressly amended the Lease is hereby ratified and
confirmed by the Landlord, the Tenant, the Assignee and the Indemnifier to the
effect and with the intent that the Lease and this Agreement shall be read and
construed as one document.
12. EXECUTION
The Tenant, the Assignee and the Indemnifier confirm and agree that
this Agreement has been executed by their authorized signatories and if only one
signatory has signed this Agreement, each of the Tenant, the Assignee and the
Indemnifier is authorized by its articles or incorporation or other constating
documents to execute leases by such sole authorized signatory and if this
Agreement is not executed under seal, the Tenant, the Assignee and the
Indemnifier are authorized by their articles of incorporation or other
constating documents to execute leases without a seal.
13. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the
parties and their respective heirs, personal representatives, successors and
permitted assigns.
14. CAPTIONS
The captions appearing in this Agreement have been inserted as a
matter of convenience
- 3 -
<PAGE>
and for reference only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any provision hereof.
IN WITNESS WHEREOF the Landlord, the Tenant, the Assignee and the
Indemnifier have executed this Agreement as of date first above written.
THE CORPORATE SEAL OF PACIFIC CENTRE )
LEASEHOLDS LIMITED was hereunto affixed )
in the presence of: )
)
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
THE COMMON SEAL OF SJM MANAGEMENT LTD. )
was hereunto affixed in the presence of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
THE COMMON SEAL OF TECHWEST MANAGEMENT )
INC. was hereunto affixed in the presence )
of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
THE COMMON SEAL OF SIDEWARE SYSTEMS INC. )
was hereunto affixed in the presence of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
)
- 4 -
<PAGE>
THE COMMON SEAL OF BRAINTECH, INC. was )
hereunto affixed in the presence of: )
)
"signed )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
)
SCHEDULE A
INDEMNITY AGREEMENT
THIS INDEMNITY is dated the 25TH day of JUNE, 1999.
B E T W E E N :
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE SECOND PART
In order to induce the Landlord to consent to an assignment of the Lease (the
"Lease") dated the 10TH day of OCTOBER, 1996, and made between the Landlord and
SJM Management Ltd. which was assigned to Techwest Management Inc. (the
"Tenant") effective July 1, 1999 (the "Effective Date") and for other good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Indemnifier hereby makes the following indemnity and agreement
(the "Indemnity") with and in favour of the Landlord:
A. 1. The Indemnifier hereby agrees with the Landlord that at all times
during the Term of the Lease and any extensions or renewals thereof or
overholding by the Tenant under the Lease, it will (i) make the due and punctual
payment of all Rent, monies, charges and other amounts of any kind whatsoever
payable under the Lease by the Tenant whether to the Landlord or otherwise; (ii)
effect prompt and complete performance and observance of all and singular the
terms, covenants and conditions contained in the Lease on the part of the Tenant
to be kept, observed and performed; and (iii) indemnify and save harmless the
Landlord from any loss, costs or damages arising out of any failure by the
Tenant and the Indemnifier to pay the aforesaid Rent, monies, charges and other
amounts of any kind whatsoever payable under the Lease or resulting from any
failure by the Tenant and the Indemnifier to observe or perform any of the
terms, covenants and conditions contained in the Lease.
2. The Indemnifier's covenants and obligations set out in paragraph (a)
above will not be affected by any disaffirmance, disclaimer, repudiation,
rejection, termination or unenforceability of the Lease or by any other event or
occurrence which would have the effect at law of terminating any obligations of
the Tenant prior to the termination of the Lease whether pursuant to court
proceedings or otherwise and no surrender of the Lease to which the Landlord has
not provided its written consent (all of which are referred to collectively and
individually in this Indemnity as an "Unexpected Termination"), and the
occurrence of any such Unexpected Termination shall not reduce the period of
time in which the Indemnifier's covenants and obligations hereunder apply, which
period of time includes, for greater certainty, that part of the Term of the
Lease and any extensions or renewals thereof which would have followed had the
Unexpected Termination not occurred.
B. This Indemnity is absolute, unconditional and irrevocable and the
obligations of the Indemnifier and the rights of the Landlord under this
Indemnity shall not be prejudiced, waived, released, discharged, mitigated,
impaired or affected by 1. any extension of time, indulgences or modifications
which the Landlord extends to or makes with the Tenant in respect of the
performance of any of the obligations of the Tenant (or any other obligated
Person) under the Lease; 2. any waiver by or failure of the Landlord to enforce
any of the terms, covenants and conditions contained in the Lease; 3. any
Transfer under Article VIII of the Lease by the Tenant or by any trustee,
receiver, liquidator or any other Person; 4. any consent which the Landlord
gives to any such Transfer; 5. any amendment to the Lease or any waiver by the
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<PAGE>
Tenant of any of its rights under the Lease; 6. the expiration of the Term; or
(g) any Unexpected Termination (as that term is defined in Section 1(b) above).
The obligations of the Indemnifier are as primary obligor and not as a guarantor
of the Tenant's obligations.
C. The Indemnifier hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions in the Lease.
Notwithstanding the foregoing but without prejudicing the foregoing, any notice
which the Landlord desires to give to the Indemnifier shall be sufficiently
given if delivered to the Indemnifier, or, if mailed, by prepaid registered mail
addressed to the Indemnifier at the Premises, or, at the Landlord's option, at
the address, if any, set forth above and every such notice is deemed to have
been given upon the day it was delivered, or if mailed, forty-eight (48) hours
after the date it was mailed. Despite what is stated above, the Indemnifier
acknowledges that if its address is stipulated as a post office box or rural
route number, then notice will be considered to have been sufficiently given to
the Indemnifier if delivered or sent by registered mail to the Premises or,
where notice cannot be given in person upon the Premises, by posting the notice
upon the Premises. The Indemnifier may designate by notice in writing a
substitute address for that set forth above and thereafter notice shall be
directed to such substitute address. If two or more Persons are named as
Indemnifier, such notice given hereunder or under the Lease shall be deemed
sufficiently given to all such Persons if delivered or mailed in the foregoing
manner to any one of such Persons.
D. If an Event of Default has occurred under the Lease or a default under this
Indemnity, the Indemnifier waives any right to require the Landlord to (a)
proceed against the Tenant or pursue any rights or remedies against the Tenant
with respect to the Lease; (b) proceed against or exhaust any security of the
Tenant held by the Landlord; or (c) pursue any other remedy whatsoever in the
Landlord's power. The Landlord has the right to enforce this Indemnity
regardless of the acceptance of additional security from the Tenant and
regardless of any release or discharge of the Tenant by the Landlord or by
others or by operation of any law.
E. Without limiting the generality of the foregoing, the liability of the
Indemnifier under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired or affected by reason of the release or discharge
of the Tenant in any receivership, bankruptcy, winding-up or other creditors'
proceedings or any Unexpected Termination (as that term is defined in Section
1(b) above) and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if an Unexpected Termination or
any receivership, bankruptcy, wind-up or other creditors' proceedings had not
occurred, and in furtherance hereof, the Indemnifier agrees, upon any such
Unexpected Termination or any receivership, bankruptcy, wind-up or other
creditors' proceedings, that the Indemnifier shall, at the option of the
Landlord, exercisable at any time after such Unexpected Termination or any
receivership, bankruptcy, wind-up or other creditors' proceedings, become the
Tenant of the Landlord upon the same terms and conditions as are contained in
the Lease, applied mutatis mutandis. The liability of the Indemnifier shall not
be affected by any failure of the Landlord to exercise this option, nor by any
repossession of the Premises by the Landlord provided, however, that the net
payments received by the Landlord after deducting all costs and expenses of
repossessing and reletting the Premises shall be credited from time to time by
the Landlord against the indebtedness of the Indemnifier hereunder and the
Indemnifier shall pay any balance owing to the Landlord from time to time
immediately upon demand.
F. No action or proceedings brought or instituted under this Indemnity and no
recovery in pursuance thereof shall be a bar or defence to any further action or
proceeding which may be brought under this Indemnity by reason of any further
default or default hereunder or in the performance and observance of the terms,
covenants and conditions contained in the Lease.
G. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnifier and two authorized
representatives of the Landlord.
H. The Indemnifier shall, without limiting the generality of the foregoing, be
bound by this Indemnity in the same manner as though the Indemnifier were the
Tenant named in the Lease.
I. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnifier, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner,
if the Indemnifier named in this Indemnity is a partnership or other business
association, the members of which are by virtue of statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
J. All of the terms, covenants and conditions of this Indemnity extend to and
are binding upon the Indemnifier, his, her or its heirs, executors,
administrators, successors and assigns, as the case may be, and enure to the
benefit of and may be enforced by the Landlord, the owner or owners from time to
time
- 6 -
<PAGE>
(other than the Landlord) of the freehold or leasehold title of the
Building and any Mortgagee.
K. The expressions "Building", "Event of Default", "Landlord", "Tenant",
"Rent", "Term", and "Premises" and other terms or expressions where used in this
Indemnity, respectively, have the same meaning as in the Lease.
L. The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Indemnity to such person or persons or circumstances as the context otherwise
permits.
M. The undersigned, as Indemnifier, hereby represents and warrants to and
covenants and agrees with the Landlord that:
7 notwithstanding the foregoing or any performance in whole or in part
by the Indemnifier of the covenants of this Indemnity, the Indemnifier
shall not, except at the option of the Landlord, have any entitlement
to occupy the Premises or otherwise enjoy the benefits of the Tenant
under this Lease;
8 the Indemnifier has full power and authority to enter into this
Indemnity and to perform the Indemnifier's obligations contained
herein;
9 this Indemnity is valid and binding upon the Indemnifier and
enforceable against the Indemnifier in accordance with its terms; and
10 in entering into this Indemnity, the Indemnifier, if a corporation, is
not contravening any provisions of the Company Act (British Columbia)
or the Canada Business Corporations Act (Canada), as the case may be,
as these Acts may be amended from time to time, or any statute that
replaces or supersedes those Acts.
N. If a part of this Indemnity or the application of it to any Person
hereunder or circumstance is to any extent held or rendered invalid,
unenforceable or illegal, that part:
11 is independent of the remainder of this Indemnity and is severable
from it, and its invalidity, unenforceability or illegality does not
affect, impair or invalidate the remainder of this Indemnity; and
12 continues to be applicable to and enforceable to the fullest extent
permitted by law against any Person hereunder and circumstance, except
those as to which it has been held or rendered invalid, unenforceable
or illegal.
O. The Indemnifier agrees to execute such further assurances in connection
with this Indemnity as the Landlord may reasonably require.
P. This Indemnity shall be construed in accordance with the laws of the
Province in which the Building is located.
Q. This Indemnity is the sole agreement between the Landlord and the
Indemnifier relating to the indemnity and there are no other written or verbal
agreements or representations relating thereto.
R. If the Indemnifier is a corporation, the Indemnifier confirms and agrees
that this Indemnity has been executed by its authorized signatories and that if
only one signatory has signed this Indemnity, the Indemnifier is authorized by
its articles of incorporation or other constating documents to execute
indemnities by such sole authorized signatory and if this Indemnity is not
executed under seal by the Indemnifier, the Indemnifier is authorized by its
articles of incorporation or other constating documents to execute indemnities
without a seal.
S. Wherever in this Indemnity reference is made to either the Landlord or the
Tenant, the reference is deemed to apply also to the heirs, executors,
administrators, successors and assigns of the Landlord and the heirs, executors,
administrators, permitted successors, and permitted assigns of the Tenant. Any
assignment by the Landlord of any of its interests in the Lease operates
automatically as an assignment to such assignee of the benefit of this
Indemnity.
IN WITNESS WHEREOF the Landlord and the Indemnifier have signed and sealed this
Indemnity.
- 7 -
<PAGE>
SIGNED, SEALED AND DELIVERED in
the presence of: ) PACIFIC CENTRE LEASEHOLDS LIMITED
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) Per: ---------------------------
) Authorized Signatory
)
) (Indemnifier)
) SIDEWARE SYSTEMS INC.
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) (Indemnifier)
) BRAINTECH, INC.
Per: ---------------------------
Authorized Signatory
Per: ---------------------------
Authorized Signatory
) I/We have authority to bind the
) corporation.
- 8 -
<PAGE>
THIS AGREEMENT made as of the 20th day of September 1999
BETWEEN:
BRAINTECH, INC.
Having a place of business at:
930 West 1st Street, Unit 102
North Vancouver, BC, V7P 3N4
Hereinafter referred to as BrainTech
and
MERCATOR ROBOTEC INC.
Having a place of business at:
105 Lexington Rd., Unit 17
Waterloo, Ontario, N2J 4R7
Hereinafter referred to as Mercator
and
SATISFIED BRAKE PRODUCTS INC.
Having a place of business at:
805 Education Rd.
Cornwall, Ontario, K6H 6C7
Hereinafter referred to as Customer
WHEREAS the Customer carries on the business of re-manufacturing brake shoes;
AND WHEREAS the Customer requires BrainTech and Mercator (the Contractors) to
upgrade the machine vision system on a brake shoe sorting machine (the Product)
located at the Customer's place of business;
AND WHEREAS the parties wish to confirm their understanding with respect to
provision and purchase of the product;
NOW THEREFORE WITNESSETH that in consideration of the mutual covenants and
agreements contained in this Agreement, the Contractor and the Customer agree as
follows:
<PAGE>
ARTICLE 1
MANUFACTURE AND CONSTRUCTION OF THE PRODUCT
1.1 The agreement between the Contractors and the Customer consists of
the following documents:
a. Agreement, September 20, 1999
b. Quotation, September 17, 1999
c. Specific Terms and Conditions, September 20, 1999
d. Terms and Conditions, September 17, 1999
e. List of Deliverables, September 17, 1999
in order of precedence.
1.2 The Contractors agree to develop, construct and install an improved
machine vision system (the Product) for the Customer as more fully
described in the documents referenced in clause 1.1.
ARTICLE 2
PURCHASE PRICE OF THE PRODUCT
2.1 The purchase price for the Product shall be Ninety Nine Thousand Five
Hundred Forty-Six Dollars and Twenty-Six Cents. This amount being
exclusive of applicable taxes.
2.2 Upon execution of this Agreement the Customer agrees to pay BrainTech
Thirty-one Thousand Nine Hundred Fifty-four Dollars and Thirty-five
cents for the Deposit including Seven percent GST.
2.3 BrainTech shall thereafter invoice the Customer for the amounts
outlined in the Payment Schedule, payments being due upon receipt of
the invoice.
2.4 All amounts stated in the Agreement are to be paid in Canadian
currency.
ARTICLE 3
LIMITATION OF LIABILITY
3.1 Any liability, claims, demands or expenses including solicitor and
client fees, for damages to the property of or injuries (including
death) to, the Customer, its employees or any other person arising from
or in connection with the Product is limited to the insurance carried
by the Contractors.
ARTICLE 4
TERM AND TERMINATION
4.1 Subject to Clauses 4.2 and 4.3, the parties intend for this Agreement
to remain binding upon them from the date of the agreement for a period
of one year (the "Term").
<PAGE>
4.2 Either party may immediately terminate this Agreement without liability
to the other party on the happening of any of the following events or
any other comparable event:
(a) insolvency of a party;
(b) filing of a voluntary petition in bankruptcy by a party;
(c) filing of any involuntary petition in bankruptcy against
a party;
(d) appointment of an assignment for the benefit of the creditors
by a party provided that such petition, appointment or
assignment is not vacated or nullified within thirty days of
the event.
4.3 Either party may terminate this Agreement if the other party is in
default of any of the terms and conditions of this Agreement, and such
default continued for a period of thirty days from the date that the
defaulting party receives a notice from the non-defaulting party to
remedy such default, and such default remains unremedied by the end of
such thirty day period.
4.4 The termination of this Agreement (howsoever occasioned) shall be
without prejudice to any rights or obligations which shall have accrued
prior to such termination and shall not destroy or diminish the binding
force or effect of any of the provisions of this Agreement which are
expressly or by implications to remain in force after such termination.
ARTICLE 5
GENERAL PROVISIONS
5.1 The Contractor and the Customer are independent contracting parties and
nothing in this Agreement shall make either party the agent or legal
representative of the other for any purpose whatsoever, nor shall it
grant either party any authority to assume or to create any obligation
on behalf of or in the name of the other.
5.2 The Contractor may not assign or delegate its obligations under this
Agreement without the Customer's prior written consent, which shall not
be unreasonable withheld.
5.3 This Agreement shall endure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
5.4 This Agreement is to be construed in accordance with and governed by
the laws of the Province of Ontario. The parties hereby agree to attorn
to the exclusive jurisdiction of the courts of competent jurisdiction
of the Province of Ontario.
5.5 Time shall be of the essence.
5.6 Failure of either party at any time to require performance by the other
party of any provision of this Agreement shall in no way affect the
right to require performance at any time thereafter, nor shall the
waiver of either party of a breach of any provision of this
<PAGE>
Agreement constitute a waiver of any succeeding breach of the same or
any other provision.
5.7 Any notice or other writing required or permitted to be give under this
Agreement or for the purposes of it to any party shall be sufficiently
given if delivered personally, or if sent by fax to the following:
(a) in the case of notice to the Customer at:
Satisfied Brake Products Inc.
805 Education Rd.
Cornwall, Ontario
K6H 6C7
Fax: (613) 933-3365
Attention: Stewart Kahan;
--------------------------
(b) in the case of notice to the Contractor at:
Mercator Robotec Inc.
105 Lexington Road
Unit #17
Waterloo, ON
N2J 4R7
Fax: (519) 886-0948
Attention: Scott Gibbs;
------------------------
Or at any other address as the party to whom the notice is to be given
shall have last notified the other party.
5.8 Notice shall have been deemed to have been effected between
the parties:
(a) immediately if delivered personally;
(b) within twenty-four hours if sent by fax; and
(c) within five days if sent by pre-paid registered mail.
5.9 This Agreement, together with the items listed in Clause 1.1,
constitutes the entire agreement between the Customer and the
Contractors with respect to the matters contained herein and supersedes
all prior oral or written representations and agreements.
5.10 If any term of this Agreement is invalid or unenforceable under any
statute, regulation, ordinance, order or other rule of law, that term
shall be deemed to be modified or deleted,
<PAGE>
but only to the extent necessary to comply with the statute,
regulations, ordinance, order or rule, and the remaining provisions of
this Agreement shall remain in full force and effect.
5.11 This Agreement may only be modified by written agreement duly
executed by the Customer and the Contractor.
5.12 Should any dispute arise between the parties hereto as to the
interpretation of or otherwise in relation to this Agreement the
dispute shall be settled through an arbitration carried out in
accordance with the ARBITRATION ACT of the Province of Ontario.
IN WITNESS WHEREOF the parties have executed the Agreement this ___ day of
September, 1999.
BRAINTECH, INC.
PER
--------------------------------
MERCATOR ROBOTEC INC.
PER "SIGNED"
--------------------------------
SATISFIED BRAKE PRODUCTS INC.
PER "SIGNED"
--------------------------------
<PAGE>
Exhibit 10.13
Cost Sharing and Allocation Agreement dated October 29, 1999
between the Company and BrainTech, Inc.
<PAGE>
COST SHARING AND ALLOCATION AGREEMENT
BETWEEN:
BRAINTECH, INC., a company duly incorporated under the laws
of the State of Nevada, having an office at 1600 - 777
Dunsmuir Street, Vancouver, B.C. V7Y 1K2
("BNTI")
AND:
SIDEWARE SYSTEMS INC., a company duly incorporated under the
laws of the Province of British Columbia, having an office
at 1910 - 777 Hornby Street, Vancouver, B.C. V7Z 1S4
("SYD")
WHEREAS:
A. BNTI and SYD share certain office premises located at 930 West 1st
Street, North Vancouver, British Columbia (the "Shared Premises").
B. BNTI and SYD also share the services of certain personnel (the "Shared
Personnel") presently including, inter alia, the Receptionist, Marketing
Coordinator, Controller, Assistant Accountant, Trade Show Coordinator,
President, and Chairman of BNTI and SYD.
C. BNTI and SYD also share certain equipment (the "Shared Equipment") which
are incidental to the operation of the Shared Premises and the employment of
the Shared Personnel, presently including, inter alia, a telephone system for
voice and internet communication.
D. Pursuant to a Memorandum of Agreement dated October 18, 1996, BNTI and
SYD agreed to share certain costs relating to the Shared Premises, the Shared
Personnel, and the Shared Equipment on a 50 - 50 basis.
E. Subsequent to the Memorandum of Agreement, the business of SYD has
expanded more rapidly than the business of BNTI.
F. As a result of the expansion of the SYD business, SYD now makes greater
use of the Shared Premises, the Shared Personnel, and the Shared Equipment
than BNTI.
G. Following an analysis of their respective accounting records, BNTI and
SYD have concluded that from and after January 1, 1999, the relative use of
the Shared Premises, the Shared Personnel, and the Shared Equipment has been
approximately 80% by SYD and 20% by BNTI.
H. In the circumstances set out herein, SYD and BNTI have agreed that it
would be fair and equitable to re-allocate the costs relating to the Shared
Premises, the Shared Personnel, and the Shared Equipment on an 80 - 20 basis
as between SYD and BNTI, effective January 1, 1999.
NOW THEREFORE the parties hereto, intending to be legally bound, agree as
follows.
1. Effective January 1, 1999, responsibility for costs relating to the
Shared Premises, the Shared Personnel, and the Shared Equipment, shall be
allocated 80% to SYD and 20% to BNTI.
2. As soon as practicable following execution of this Agreement, the
parties shall use their best efforts to make any adjustments required to
their inter-corporate accounts to give effect to this Agreement.
<PAGE>
3. The parties acknowledge and agree that changes in circumstances may
render the cost allocations set out in this Agreement inequitable. In such
event, the parties will negotiate in good faith to adjust the cost
allocations set out in this Agreement on a fair and equitable basis.
4. The parties acknowledge and agree that it is not practical to ensure
that all payments in respect of the costs covered by this Agreement will be
made in specified proportions in the first instance. BNTI and SYD agree that
they shall, from time to time, account to each other for their respective
shares of the costs covered by this Agreement to ensure that the intent of
this Agreement is carried out.
5. BNTI and SYD will deal with each other in good faith with respect to all
matters covered by this Agreement.
Dated: October 29, 1999.
SIDEWARE SYSTEMS INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
BRAINTECH, INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
2
<PAGE>
Exhibit 11.1
Computation of Net Loss per Share
<PAGE>
Exhibit 11.1
CALCULATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares - opening balance 30,371,333
- -------------------------------------------------------------------------------
Share issuances Mar 5/99 4,400,000 190/273 3,062,271
Sep 28/99 2,600,000 3/273 28,571
Sep 30/99 2,350,000 1/273 8,608
- -------------------------------------------------------------------------------
Weighted Average 33,470,783
- -------------------------------------------------------------------------------
Loss (935,962)
- -------------------------------------------------------------------------------
Loss per share ($0.03)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 134,375
<SECURITIES> 0
<RECEIVABLES> 15,225
<ALLOWANCES> 0
<INVENTORY> 3,575
<CURRENT-ASSETS> 169,771
<PP&E> 147,413
<DEPRECIATION> 54,431
<TOTAL-ASSETS> 272,883
<CURRENT-LIABILITIES> 196,563
<BONDS> 0
0
0
<COMMON> 39,721
<OTHER-SE> (589,671)
<TOTAL-LIABILITY-AND-EQUITY> 272,883
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 935,962
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (935,962)
<INCOME-TAX> 0
<INCOME-CONTINUING> (935,962)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (935,962)
<EPS-BASIC> (0.03)
<EPS-DILUTED> 0
</TABLE>
