<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended January 31, 2000.
[ ] Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from _______ to ________
Commission file number 0-29248
SmarTire Systems Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
British Columbia, Canada Not Applicable
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
150-13151 Vanier Place, Richmond, British Columbia, V6V 2J1
(Address of Principal Executive Offices)
(604) 276-9884
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
As of February 29, 2000, the Company had 12,582,447 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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SMARTIRE SYSTEMS INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) -
JANUARY 31, 2000 AND JULY 31, 1999
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (UNAUDITED) -
THREE MONTHS AND SIX MONTHS ENDED JANUARY 31, 2000 AND
JANUARY 31, 1999.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - SIX
MONTHS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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ITEM 1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of SmarTire Systems Inc. and its
wholly owned subsidiaries, SmarTire USA Inc., SmarTire (Europe) Limited and
SmarTire Technologies Inc. (the "Company" or "SmarTire") as of January 31, 2000
for the three month and six month periods ended January 31, 2000 and January 31,
1999 are attached hereto.
SMARTIRE SYSTEMS INC.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
January 31, July 31,
2000 1999
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,285,382 $ 422,982
Short-term investments -- 2,062,013
Receivables 225,152 1,104,456
Inventory 61,097 225,514
Prepaid expenses 445,033 128,988
Investment 293,825 --
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2,310,489 3,943,953
Capital assets 795,327 523,481
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$ 3,105,816 $ 4,467,434
=====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,164,659 $ 1,892,503
Shareholders' equity
Share capital 42,822,680 38,640,478
Equity component of warrants 2,420,677 2,420,677
Deficit (43,302,200) (38,486,224)
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1,941,157 2,574,931
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$ 3,105,816 $ 4,467,434
=====================================================================================
</TABLE>
On behalf of the Board
"ROBERT V. RUDMAN" "KEVIN A. CARLSON"
/s/ Robert V. Rudman, Director /s/ Kevin A. Carlson, Director
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SMARTIRE SYSTEMS INC.
Consolidated Statements of Loss and Deficit
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
January 31, January 31, January 31, January 31,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenue $ 294,227 $ 530,595 $ 589,153 $ 1,223,981
Cost of goods sold 146,664 417,457 313,461 1,006,694
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147,563 113,138 275,692 217,287
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Expenses and other
Marketing 805,476 871,927 1,500,532 1,573,063
General and administrative 1,233,654 1,099,404 2,225,816 2,039,437
Engineering, research and
development 810,021 397,715 1,209,561 672,103
Depreciation and amortization 80,414 202,638 122,964 406,719
Foreign exchange loss (gain) 64,713 284,208 80,939 184,485
Interest income (25,266) (85,502) (48,144) (191,421)
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2,969,012 2,770,390 5,091,668 4,684,386
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Net loss 2,821,449 2,657,252 4,815,976 4,467,099
Deficit, beginning of period 40,480,751 23,109,823 38,486,224 21,299,976
- ------------------------------------------------------------------------------------------------------------
Deficit, end of period $ 43,302,200 $ 25,767,075 $ 43,302,200 $ 25,767,075
============================================================================================================
Loss per share $ 0.22 $ 0.28 $ 0.42 $ 0.47
============================================================================================================
</TABLE>
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SMARTIRE SYSTEMS INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
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Six Months Ended
January 31, January 31,
2000 1999
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<S> <C> <C>
Cash provided by (used in)
Operating activities
Net loss $(4,815,976) $(4,467,099)
Items not affecting cash
Depreciation and amortization 122,964 406,719
Remuneration in shares 22,680 --
Changes in non-cash working capital
Receivables 879,304 (27,080)
Inventory 164,417 (1,128,589)
Prepaid expenses (316,045) 407,415
Accounts payable and accrued liabilities (727,844) 167,764
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Net cash used in operating activities (4,670,500) (4,640,870)
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Investing activities
Purchase of capital assets (394,810) (233,845)
Purchase of investment (238,380) --
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Net cash used in investing activities (633,190) (233,845)
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Financing activities
Redemption of short-term investments 2,062,013 --
Issuance of common shares 4,104,077 601,475
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Net cash used in financing activities 6,166,090 601,475
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Net increase (decrease) in cash 862,400 (4,273,240)
Cash and cash equivalents, beginning of period 422,982 8,718,258
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Cash and cash equivalents, end of period $ 1,285,382 $ 4,445,018
===================================================================================
Supplementary information
Non-cash investing activities
Purchase of investment 55,445 --
Non-cash financing activities
Conversion of warrants into common shares -- 1,594,323
Remuneration in shares 22,680 --
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
Statements contained in this Report that are not based on historical facts are
forward-looking statements subject to uncertainties and risks including, but not
limited to, product demand and acceptance, economic conditions, the impact of
competition and pricing, results of financing efforts, and other risks.
OVERVIEW
The following discussion of the financial condition, results of operations and
cash flows of the Company for the three months and six months ended January 31,
2000 and 1999 should be read in conjunction with the consolidated financial
statements of the Company.
The Company's consolidated financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP.
Herein all references to the "$" and "CDN$" refer to Canadian Dollars; and all
references to "US$" refer to United States Dollars.
In this Report, unless otherwise specified, all dollar amounts are expressed in
Canadian Dollars. The Government of Canada permits a floating exchange rate to
determine the value of the Canadian Dollar against the U.S. Dollar.
Set forth below is the rate of exchange for the Canadian Dollar at the end of
the most recent fiscal year ended July 31, 1999 and the six months ended January
31, 2000 and 1999, average rates for the periods, and the range of high and low
rates for the periods. For purposes of this table, the rate of exchange means
the noon buying rate in New York City for the cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York. The table below
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sets forth the number of Canadian Dollars required under that formula to buy one
U.S. dollar. The average rate means the average of the exchange rates on the
last day of each month during the period.
U.S. Dollar/Canadian Dollar
<TABLE>
<CAPTION>
Average Close High Low
------- ----- ---- ---
<S> <C> <C> <C> <C>
Six Months Ended 01/31/00 1.47 1.45 1.48 1.43
Six Months Ended 01/31/99 1.53 1.51 1.58 1.50
Fiscal Year Ended 07/31/99 1.43 1.51 1.58 1.37
</TABLE>
SmarTire is engaged in developing and marketing technically advanced Tire
Monitoring Systems (TMS) designed for improved vehicle safety, performance,
reliability and fuel efficiency. During the six months ended January 31, 2000,
the Company earned revenues from the sale of TMS for passenger cars and
motorsport applications.
The Company is focused on developing and marketing technically advanced tire
monitoring products in response to an increasing demand from the transportation
industry for improved vehicle safety, performance, reliability and fuel
efficiency. After developing its proprietary TMS technology for application in
the industrial and commercial vehicle markets plus a specialized tire monitoring
product for motorsports, the Company turned to developing its technology for use
by the automotive industry to address the escalating demand for passenger car
TMS. In support of the tire industry's introduction of the innovative run-flat
or extended mobility tire, the Company developed the SmarTire(TM) system and
established North American and European sales, marketing, and distribution
networks. The Company plans to complete the development and launch of its next
generation of TMS products, including a new commercial TMS product.
The Company is promoting the SmarTire(TM) system to both run-flat and
conventional tire aftermarkets worldwide. Additional target markets included in
the Company's plans are commercial, industrial and recreational vehicles as well
as expanded product lines for the motorsport industry. The Company's alliance
partner, TRW Inc., is marketing TMS to the original equipment vehicle
manufacturers of passenger vehicles.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999
Gross revenue for the three months ended January 31, 2000 was $294,227 compared
to $530,595 for the three months ended January 31, 1999. The decrease
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in revenue for the three months ended January 31, 2000 from the three months
ended January 31, 1999 was a result of the following:
Sales of aftermarket passenger car systems decreased to $134,900 for the three
months ended January 31, 2000 compared to $212,016 for the three months ended
January 31, 1999. Sales of OEM passenger car systems decreased to $39,562 for
the three months ended January 31, 2000 compared to $172,449 for the three
months ended January 31, 1999. Sales of motorsport TMS decreased to $119,765 for
the three months ended January 31, 2000 from $134,324 in the three months ended
January 31, 1999. Sales of industrial TMS systems decreased to $nil during the
three months ended January 31, 2000 from $11,806 in the comparable period of the
previous year.
Gross margin on product sales increased to 50% for the three months ended
January 31, 2000 from 21% for the three months ended January 31, 1999. The
Company's profit margin on passenger car systems increased in 2000 due to the
reduction in carrying value of inventory in the third quarter of the 1999 fiscal
year.
Expenses and other increased to $2,969,012 for the three months ended January
31, 2000 from $2,770,390 for the three months ended January 31, 1999 as
increases in general and administration and engineering, research and
development expenses were partially offset by reduced marketing expenses,
depreciation and amortization and a smaller foreign exchange loss.
Marketing expenses decreased to $805,476 for the three months ended January 31,
2000 from $871,927 for the three months ended January 31, 1999. Increases in
wages and public relations costs were more than offset by decreases in
advertising, travel and market development costs.
General and administrative expenses increased to $1,233,654 for the three months
ended January 31, 2000 as compared to $1,099,404 for the three month period
ended January 31, 1999. The increase was attributed to increases in wages,
investor relations activities and professional fees for legal and other
consulting services.
Engineering, research and development expenses were $810,021 for the three
months ended January 31, 2000 as compared to $397,715 for the three month period
ended January 31, 1999. The increase was attributed to increased expenditures on
prototype development including supplies and materials and
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higher engineering wages, reflecting increased staff for product development
activities.
Depreciation and amortization expense decreased to $80,414 for the three months
ended January 31, 2000 from $202,638 for the same period in the prior year. The
reduction reflects the write-down of certain assets in the third quarter of the
1999 fiscal year.
The company earned interest income of $25,266 for the three months ended January
31, 2000 as compared to $85,502 for the three months ended January 31, 1999.
This decrease was due to lower average cash balances during the current fiscal
year.
SIX MONTHS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999
Gross revenue for the six months ended January 31, 2000 was $589,153 compared to
$1,223,981 for the six months ended January 31, 1999. Sales of aftermarket
passenger car systems were $334,681 for the six months ended January 31, 2000
compared to $764,981 for the six months ended January 31, 1999. Sales of the OEM
passenger car system decreased to $89,209 for the six months ended January 31,
2000 compared to $287,529 for the comparable period of the previous year. Sales
of motorsport TMS increased to $165,263 for the six months ended January 31,
2000 from $150,355 in the six months ended January 31, 1999. Sales of industrial
TMS decreased to $nil during the six months ended January 31, 2000 from $21,116
in the comparable period of the previous year.
Gross margin increased from 18% for the six months ended January 31, 1999 to 47%
for the six months ended January 31, 2000. The Company's profit margin on
passenger car systems increased in 2000 due to the reduction in carrying value
of inventory in the third quarter of the 1999 fiscal year.
Expenses and other increased to $5,091,668 for the six months ended January 31,
2000 from $4,684,386 for the comparable period of the previous fiscal year, due
to higher engineering, research and development and general and administrative
expenses.
Marketing expenses decreased from $1,573,063 for the six month period ended
January 31, 1999 to $1,500,532 for the comparable period of 2000. Increases in
wages and public relations costs were more than offset by decreases in
advertising, travel and market development costs.
General and administrative expenses were $2,225,816 for the six months ended
January 31, 2000 as compared to $2,039,437 for the six month period ended
January 31, 1999. Increases in investor relations activities and professional
fees for
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legal and other consulting services were partially offset by decreases in filing
fees and travel costs.
Engineering, research and development expenses increased to $1,209,561 for the
six months ended January 31, 2000 from $672,103 for the six months ended January
31, 1999 due to increases in costs for prototype development and engineering
wages.
Depreciation and amortization expense decreased to $122,964 for the six months
ended January 31, 2000 from $406,719 for the same period in the prior year. The
reduction reflects the write-down of certain assets in the third quarter of the
1999 fiscal year.
The Company earned interest income of $48,144 for the six months ended January
31, 2000 as compared to $191,421 for the six months ended January 31, 1999. This
decrease was due to lower average cash balances during the current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities primarily through the issuance and sale
of securities. The Company has incurred net losses in each year since inception
and, as of January 31, 2000, had an accumulated deficit of $43,302,200.
Shareholders' equity was $1,941,157 and the Company's working capital was
$1,145,830 at January 31, 2000.
The Company's cash position at January 31, 2000 was $1,285,382 as compared to
$422,982 at July 31, 1999. This increase was due to the net of the Company's
operating, financing and investing activities described below.
For the six months ended January 31, 2000, the Company raised $6,166,090 from
financing activities. The Company received net proceeds of $4,104,077 from the
issuance of 1,505,000 shares of common stock through a private placement and
$2,062,013 from the redemption of short-term investments. The Company used
$633,190 for investing activities during the six months ended January 31, 2000
for the purchase of capital assets and an investment in Transense Technologies
plc ("Transense"). The Company used $4,670,500 for operating activities during
the six months ended January 31, 2000. The net loss of $4,815,976 was reduced by
non-cash charges of $145,644 and a $168 decrease in non-cash working capital.
Subsequent to January 31, 2000 the Company disposed of the common share portion
of its investment in Transense for net cash proceeds of $ 1,443,596. The Company
will record a gain of $1,149,771 on this disposition. The Company still retains
an investment in Transense in the form of 250,000 share purchase warrants.
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<PAGE> 11
The Company has not experienced any difficulties as a result of the Year 2000
issue.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In December 1999, the Company issued 25,000 shares of common stock at a value of
US$1.50 per share to Transense Technologies plc ("Transense") pursuant to a
license agreement. Under the agreement, SmarTire purchased 250,000 units of
Transense, each comprised of one share and one two-year purchase warrant, for a
total purchase price of L150,000 (Pounds Sterling). The purchase price was
paid two-thirds in cash and one-third in SmarTire shares. The offer and sale of
these Securities was made in reliance on the exemption from registration under
Section 4(2) of the Securities Act of 1933.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
The following exhibits are filed hereunder:
<TABLE>
<S> <C>
10.1 Management Agreement between SmarTire USA Inc. and Mark Desmarais
and SmarTire Systems Inc. dated as of June 1, 1999 (Revised)
10.2 Management Agreement between SmarTire Systems Inc. and Shawn
Lammers dated as of August 1, 1999
10.3 Management Agreement between SmarTire Systems Inc. and Robert
Rudman dated as of August 1, 1999
10.4 Service Agreement between SmarTire Europe Limited and Ian Bateman
dated as of December 9, 1999
10.5 ASIS Development/Purchase Agreement dated as of December 13, 1999
between Sensonor ASA and SmarTire Systems Inc.
10.6 License Agreement dated September 30, 1999 between Transense
Technologies plc and SmarTire Systems Inc.
11 Statement re: computation of per share earnings
</TABLE>
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<TABLE>
<S> <C>
27 Financial Data Schedule (electronic filing only)
</TABLE>
(b) Reports on Form 8-K - Three months ended January 31, 2000:
Form 8-K, filed on November 29, 1999, pursuant to Item 5 attaching press release
regarding private placement
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SIGNATURES
In accordance with the requirements for the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SMARTIRE SYSTEMS INC.
-----------------------------------
(Registrant)
Date March 16, 2000 /s/ ROBERT V. RUDMAN
------------------------ -----------------------------------
Robert V. Rudman
President and
Chief Executive Officer
Date March 16, 2000 /s/ KEVIN A. CARLSON
------------------------ -----------------------------------
Kevin A. Carlson
Chief Financial Officer (Principal
Financial Officer)
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<PAGE> 1
EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS AGREEMENT effective as of the 1st day of June, 1999 (the "Effective Date").
BETWEEN:
SMARTIRE USA INC., a company duly incorporated pursuant to the
laws of Delaware, U.S.A. having an office at 6 Otis Park Drive,
Bourne, MA, USA 02532
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
MARK DESMARAIS, businessman, of 5 Volunteer Rd., East Sandwich,
MA, USA, 02537
(hereinafter referred to as the "Manager")
OF THE SECOND PART
AND:
SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to
the laws of the Province of British Columbia, having an office at
150 - 13151 Vanier Place, Richmond, British Columbia, V6V 2J1
(hereinafter referred to as "SmarTire")
OF THE THIRD PART
RECITALS
WHEREAS SmarTire has requested the assistance of the Manager in providing
certain management services to the Company and SmarTire, as hereinafter
described;
WHEREAS the Manager has agreed to provide such assistance and services to the
Company and SmarTire in accordance with the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties hereto agree as follows:
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1. DUTIES AND DEVOTION OF TIME
1.1 Duties. During the term of this Agreement the Manager shall be responsible
for the duties contained in Schedule "A" attached hereto and incorporated herein
by this reference (the "Duties").
1.2 Devotion of Time. The parties hereto acknowledge and agree that the work of
the Manager is and shall be of such a nature that regular hours may not be
sufficient and occasions may arise whereby the Manager shall be required to work
more than eight (8) hours per day and/or five (5) days per week. The Manager
agrees that the consideration set forth herein shall be in full and complete
satisfaction for such work and services, regardless of when and where such work
and services are performed. The Manager further releases SmarTire and the
Company from any claims for overtime pay or other such compensation which may
accrue to the Manager. Notwithstanding the foregoing, SmarTire and the Company
agree that so long as the Manager properly discharges his duties hereunder, the
Manager may devote the remainder of his time and attention to other
non-competing business and personal pursuits.
1.3 Business Opportunities the Property of the Company. The Manager agrees to
communicate immediately to SmarTire all business opportunities, inventions and
improvements in the nature of the business of SmarTire or the Company which,
during the term of this Agreement, the Manager may conceive, make or discover,
become aware of, directly or indirectly, or have presented to him in any manner
which relates in any way to SmarTire or the Company, either as they are now or
as they may develop, and such business opportunities, inventions or improvements
shall become the exclusive property of SmarTire without any obligation on the
part of the Company or SmarTire to make any payments therefor in addition to the
salary and benefits herein described to the Manager.
1.4 No Personal Use. The Manager shall not use any of the work the Manager shall
perform for the Company or SmarTire for any personal purposes without first
obtaining the prior written consent of SmarTire.
2 SALARY, BONUSES AND BENEFITS
2.1 Salary. In consideration of the Manager providing the services referred to
herein, SmarTire agrees to pay the Manager an annual base salary (the "Annual
Base Salary") of one hundred sixty nine thousand six hundred U.S. dollars
($169,600) less applicable deductions, payable bi-weekly, plus incentive
compensation as set out below, subject to increase as from time to time approved
by the Board of Directors of SmarTire.
2.2 Benefits. SmarTire shall provide, maintain and pay for:
(a) medical and dental insurance for the Manager and his immediate
family as is provided by SmarTire's medical services plan or an
equivalent plan;
(b) such extended health and other benefits for the Manager and his
immediate family as are provided to senior management employees
of SmarTire, subject to the eligibility of the Manager; and
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2.3 Incentive Compensation and Stock Options. Within one hundred eighty (180)
days of the Effective Date, the SmarTire Board of Directors will approve and
implement an incentive compensation plan for the senior management of SmarTire
and its subsidiaries, including therein a policy regarding the granting of stock
options. The Manager will participate as a member of the Compensation Committee
of the Board of Directors in recommending that plan to the Board of Directors
and will participate in that plan when approved and implemented by the SmarTire
Board of Directors.
2.4 Payment in Cash or Shares. All payments payable by the Company or SmarTire
to the Manager, including the Annual Base Salary and reimbursement of expenses
under Section 4.1 hereof, shall be payable in cash or, at the election of the
Manager, and subject to the approval of the regulatory authorities, such will be
paid in whole or in part in common shares in the capital stock of SmarTire
("Remuneration Shares"), issued at the 10 day average closing price (for the 10
days prior to the Manager's election) of SmarTire's common shares on any stock
exchange or quotation system upon which SmarTire's common shares are listed for
trading.
2.5 Registration of Performance Bonus Shares. To ensure that any shares issued
to the Manager under paragraph 2.4 of this Agreement are freely tradable,
SmarTire shall register with the SEC any such shares issued. Upon or as soon as
is practical after the issuance of such shares, SmarTire shall file a form S-8
or other appropriate form with the United States Securities and Exchange
Commission (the "SEC") to effect registration.
2.6 Incentive Stock Options. The Manager acknowledges that prior to execution of
this Agreement SmarTire executed an incentive stock option agreement for the
right for the Manager to purchase up to seventy-five thousand (75,000) common
shares in the capital of SmarTire, with options to acquire up to fifteen
thousand (15,000) common shares vesting on execution of the Stock Option
Agreement which grants the options and on each of the first, second, third and
fourth anniversaries of such Agreement, all subject to regulatory approval.
2.7 Signing Bonus. In consideration of the Manager entering into this Agreement,
SmarTire agrees to pay the Manager a signing bonus of ten thousand (10,000)
common shares (the "Signing Bonus Shares") in the capital of SmarTire. The
Signing Bonus Shares shall be paid within ten (10) days of the execution of this
Agreement by all parties hereto. The Manager acknowledges that the Signing Bonus
Shares will be subject to a one year hold period; however, SmarTire will add
registration of the Signing Bonus Shares to any other share registration that
SmarTire may file with the SEC during the year. The Manager further acknowledges
that prior to the execution of this Agreement SmarTire paid to the Manager a
signing cash bonus of twenty five thousand U.S. dollars ($25,000 U.S.).
3 VACATION
3.1 Entitlement to Vacation. The Company and SmarTire acknowledge that the
Manager shall be entitled to an annual vacation of four (4) weeks. The Manager
shall use his best efforts to ensure that such vacation is arranged with
SmarTire in advance such that his vacation does not unduly affect the operations
of SmarTire or the Company.
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3.2 Increase in Vacation. The period set out in Section 3.1 above may be
increased from time to time as mutually agreed to by the Manager and the
SmarTire Board of Directors.
4 REIMBURSEMENT OF EXPENSES
4.1 Reimbursement of Expenses. The Manager shall be reimbursed for all
reasonable out-of-pocket expenses incurred by the Manager in or about the
execution of the Duties contained herein, including without limiting the
generality of the foregoing, all reasonable travel and promotional expenses
payable or incurred by the Manager in connection with the Duties under this
Agreement. All payments and reimbursements shall be made within two (2) weeks of
submission by the Manager of vouchers, bills or receipts for such expenses.
5 CONFIDENTIAL INFORMATION
5.1 Confidential Information. The Manager shall not, either during the term of
this Agreement or under the provisions of section 5.3, without specific consent
in writing, disclose or reveal in any manner whatsoever to any other person,
firm or corporation, nor will he use, directly or indirectly, for any purpose
other than the purposes of the Company and SmarTire, the private affairs of the
Company or SmarTire or any confidential information which he may acquire during
the term of this Agreement with relation to the business and affairs of the
directors and shareholders of the Company or SmarTire, unless the Manager is
ordered to do so by a court of competent jurisdiction or unless required by any
statutory authority.
5.2 Non-Disclosure Provisions. The foregoing provision shall be subject to the
further non-disclosure provisions contained in Schedule "B" attached hereto and
incorporated hereinafter by this reference.
5.3 Provisions Survive Termination. The provisions of this section shall survive
the termination of this Agreement for a period of three years.
6 TERM
6.1 Term. This Agreement shall remain in effect until terminated in accordance
with any of the provisions contained in this Agreement.
7 TERMINATION
7.1 Termination by Manager. Notwithstanding any other provision contained
herein, the parties hereto agree that the Manager may terminate this Agreement,
with or without cause, by giving ninety (90) days' written notice of such
intention to terminate.
7.2 Resignation or Cessation of Duties. In the event that the Manager ceases to
perform all of the Duties contained herein, other than by reason of the
Manager's death or disability, or if the Manager resigns unilaterally and on his
own initiative from all of his positions this Agreement shall be deemed to be
terminated by the Manager as of the date of such cessation of Duties or such
resignation, and the Company and SmarTire shall have no further obligations
under Section 2 hereof.
<PAGE> 5
- 5 -
7.3 Termination by Company. The Company may terminate this agreement at any time
for just cause without further obligation. In the event of termination for any
reason other than for just cause, the Company, at its option, will either (a)
continue to pay the salary under Clause 2.1 and provide the benefits under
Clauses 2.2 until one year from the date of termination or (b) pay one year's
salary under Clause 2.1 in lieu of notice. Any stock options that have been
granted but that have not yet vested shall immediately vest at the date of the
final payment, and may be exercised for a period of 30 days only after the final
payment.
7.4 Death. In the event of the death of the Manager during the term of this
Agreement, this Agreement shall be terminated as of the date of such death, and
the Manager's spouse, if living, or surviving children shall be entitled to the
termination allowance stated in Section 7.3 hereof.
7.5 Disability. In the event that the Manager will during the term of this
Agreement by reason of illness or mental or physical disability or incapacity be
prevented from or incapable of performing the Duties hereunder, then the Manager
shall be entitled to receive the remuneration provided for herein at the rate
specified hereinbefore for the period during which such illness, disability or
incapacity will continue, but not exceeding six (6) successive months. If such
illness, disability or incapacity continues or will continue for a period longer
than six (6) successive months, then this Agreement may, at the option of the
Directors of SmarTire, forthwith be terminated, and the Manager shall be
entitled to the termination allowance stated in Section 7.3 hereof.
<PAGE> 6
- 6 -
7.6 Termination Payments. Any payments made by the Company to the Manager upon
the termination of this Agreement shall be made in cash, or, if the Company does
not have available funds, in equal monthly cash instalments over one year, or in
Remuneration Shares, or in a combination of cash and Remuneration Shares,
subject to regulatory approval. All payments required to be made by the Company
to the Manager pursuant to Section 7 hereof shall be made in full.
8 RIGHTS AND OBLIGATIONS UPON TERMINATION
8.1 Rights and Obligations. Upon termination of this Agreement, the Manager
shall deliver up to SmarTire all documents, papers, plans, materials and other
property of or relating to the affairs of the Company and SmarTire, other than
the Manager's personal papers in regard to his role in the Company or SmarTire,
which may then be in the Manager's possession or under his control.
9 CLOSING
9.1 Closing Date. This Agreement shall be effective as of June 1, 1999.
9.2 Conditions of Closing. The parties hereto agree that it shall be a condition
of the execution of this Agreement that prior to or contemporaneously with the
execution of this Agreement:
(a) this Agreement shall be approved by the Board of Directors of
SmarTire.
10 NOTICES AND REQUESTS
10.1 Notices and Requests. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or mailed by registered or certified mail with
postage prepaid and return receipt requested and addressed as follows:
(a) if to the Company:
SmarTire USA Inc. 6 Otis Park Drive
Bourne, MA 02532, USA
with a copy to: SmarTire (address below)
(b) If to the Manager:
Mark Desmarais
5 Volunteer Road
East Sandwich, MA 02537
USA
<PAGE> 7
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(c) If to SmarTire:
SmarTire Systems Inc.
150 - 13151 Vanier Place
Richmond, British Columbia
V6V 2J1
with a copy to:
CLARK, WILSON
Suite 800-885 West Georgia Street
Vancouver, British Columbia
V6C 3H1
Attention: Bernard Pinsky
or to such other address as the party to receive notice or request so designates
by written notice to the others.
11 INDEPENDENT PARTIES
11.1 Independent Parties. This Agreement is intended solely as a management
services agreement and no partnership, agency, joint venture, distributorship or
other form of agreement is intended.
12 AGREEMENT VOLUNTARY AND EQUITABLE
12.1 Agreement Voluntary. The parties acknowledge and declare that in executing
this Agreement they are each relying wholly on their own judgement and knowledge
and have not been influenced to any extent whatsoever by any representations or
statements made by or on behalf of any other party regarding any matters dealt
with herein or incidental thereto.
12.2 Agreement Equitable. The parties further acknowledge and declare that they
each have carefully considered and understand the provisions contained herein,
including, but without limiting the generality of the foregoing, the Manager's
rights upon termination and the restrictions on the Manager after termination
and agree that the said provisions are mutually fair and equitable, and that
they executed this Agreement voluntarily and of their own free will.
13 CONTRACT NON-ASSIGNABLE; INUREMENT
13.1 Contract Non-Assignable. This Agreement and all other rights, benefits and
privileges contained herein may not be assigned by the Manager.
13.2 Inurement. The rights, benefits and privileges contained herein, including
without limitation the benefits of Sections 2 and 7 hereof, shall inure to the
benefit of and be binding upon the respective parties hereto, their heirs,
executors, administrators and successors.
<PAGE> 8
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14 ENTIRE AGREEMENT
14.1 Entire Agreement. This Agreement represents the entire Agreement between
the parties and supersedes any and all prior agreements and understandings,
whether written or oral, among the parties. The Manager acknowledges that he was
not induced to enter into this Agreement by any representation, warranty,
promise or other statement, except as contained herein.
14.2 Previous Agreements Cancelled. Save and except for the express provisions
of this Agreement and the Manager's continuation as a director of SmarTire and
the Company, any and all previous agreements, written or oral, between the
parties hereto or on their behalf relating to the services of the Manager for
the Company or for SmarTire are hereby terminated and cancelled and each of the
parties hereby releases and further discharges the others of and from all manner
of actions, causes of action, claims and demands whatsoever under or in respect
of any such agreements.
15 WAIVER
15.1 Waiver. No consent or waiver, express or implied, by any party to or of any
breach or default by another party in the performance by the other of its or his
obligations herein shall be deemed or construed to be a consent or waiver to or
of any breach or default of the same or any other obligation of such party.
Failure on the part of any party to complain of any act or failure to act, or to
declare another party in default irrespective of how long such failure
continues, shall not constitute a waiver by such party of its or his rights
herein or of the right to then or subsequently declare a default.
16 SEVERABILITY
16.1 Severability. If any provision contained herein is determined to be void or
unenforceable in whole or in part, it is to that extent deemed omitted. The
remaining provisions shall not be affected in any way.
17 AMENDMENT
17.1 Amendment. This Agreement shall not be amended or otherwise modified except
by a written notice of even date herewith or subsequent hereto signed by both
parties.
18 HEADINGS
18.1 Headings. The headings of the sections and subsections herein are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement.
19 GOVERNING LAW
19.1 Governing Law. This Agreement shall be construed under and governed by the
laws of the Province of British Columbia and the laws of Canada applicable
therein.
<PAGE> 9
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20 EXECUTION
20.1 Execution in Several Counterparts. This Agreement may be executed by
facsimile and in several counterparts, each of which shall be deemed to be an
original and all of which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
2nd day of December, 1999.
SMARTIRE USA INC.
Per: /s/ ROBERT RUDMAN
------------------------------
Authorized Signatory
SIGNED by MARK DESMARAIS in the )
presence of: H. FAHEY )
)
)
HELEN FAHEY )
- -----------------------------------)
Name )
)
c/o SmarTire Systems Inc. ) /s/ MARK DESMARAIS
- -----------------------------------) -----------------------------------
Address ) MARK DESMARAIS
)
Richmond, B.C. )
- -----------------------------------)
)
EXEC. ASSISTANT )
- -----------------------------------)
Occupation
SMARTIRE SYSTEMS INC.
Per: /s/ KEVIN CARLSON
------------------------------
Authorized Signatory
This is page 9 of Agreement dated above for reference the 1st day of June, 1999.
<PAGE> 10
SCHEDULE "A"
MANAGER'S DUTIES
1. To create value for SmarTire's shareholders by leading the development and
sales of tire pressure monitoring systems for SmarTire and the Company.
2. The Manager shall be appointed as the President, Chief Executive Officer and
as a director on the Board of Directors of the Company, and the Manager shall
faithfully, honestly and diligently serve the Company and each of the Company's
subsidiaries (if any) in these capacities. The Manager shall also be appointed
as the President and Chief Operating Officer of SmarTire and the Manager shall
faithfully, honestly and diligently serve SmarTire and each of SmarTire's
subsidiaries.
3. The Manager shall be responsible for the management of all operations of
SmarTire and its subsidiaries and each of the Company's subsidiaries, if any,
and for the supervision and delegation of such duties and responsibilities as
the Company deems appropriate to other officers and employees of the Company and
its subsidiaries, if any. The Manager shall report to the Chief Executive
Officer of SmarTire and shall share with him the responsibility for leading in
the strategic management and direction of SmarTire and each of SmarTire's
subsidiaries and for the supervision and delegation of such duties and
responsibilities as SmarTire deems appropriate to other officers and employees
of SmarTire and its subsidiaries.
<PAGE> 11
SCHEDULE "B"
NON-DISCLOSURE PROVISIONS
1. CONFIDENTIAL INFORMATION AND MATERIALS
(a) "Confidential Information" shall mean, for the purposes of this
Agreement, non-public information which the Company or SmarTire
designates as being confidential or which, under the
circumstances surrounding disclosure ought reasonably to be
treated as confidential. Confidential Information includes,
without limitation, information, whether written, oral or
communicated by any other means, relating to released or
unreleased SmarTire or Company software or hardware products, the
marketing or promotion of any product of SmarTire or the Company,
SmarTire's or the Company's business policies or practices, and
information received from others which SmarTire or the Company is
obliged to treat as confidential. Confidential Information
disclosed to the Manager by any subsidiary and/or agents of
SmarTire is covered by this Agreement.
(b) Confidential Information shall not include that information
defined as Confidential Information hereinabove which the Manager
can exclusively establish:
(i) is or subsequently becomes publicly available without
breach of any obligation of confidentiality owed to
SmarTire or the Company;
(ii) became known to the Manager prior to disclosure by
SmarTire or the Company to the Manager;
(iii) became known to the Manager from a source other than
SmarTire or the Company other than by the breach of any
obligations of confidentiality owed to SmarTire or the
Company; or
(iv) is independently developed by the Manager.
(c) Confidential Materials shall include all tangible materials
containing Confidential Information, including, without
limitation, written or printed documents and computer disks or
tapes, whether machine or user readable.
2. RESTRICTIONS
(a) The Manager shall not disclose any Confidential Information to
third parties for a period of three (3) years following the
termination of this Agreement, except as provided herein.
However, the Manager may disclose Confidential Information during
bona fide execution of the Duties or in accordance with judicial
or other governmental order, provided that the Manager shall give
reasonable notice to SmarTire and the Company prior to such
disclosure and shall comply with any applicable protective order
or equivalent.
<PAGE> 12
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(b) The Manager shall take reasonable security precautions, at least
as great as the precautions he takes to protect his own
confidential information, to keep confidential the Confidential
Information, as defined hereinabove.
(c) Confidential Information and Materials may be disclosed,
reproduced, summarized or distributed only in pursuance of the
business relationship of the Manager with SmarTire and the
Company, and only as provided hereunder.
3. RIGHTS AND REMEDIES
(a) The Manager shall notify SmarTire immediately upon discovery of
any unauthorized use or disclosure of Confidential Information or
Materials, or any other breach of this Agreement by the Manager,
and shall co-operate with SmarTire in every reasonable manner to
aid SmarTire or the Company to regain possession of said
Confidential Information or Materials and prevent all such
further unauthorized use.
(b) The Manager shall return all originals, copies, reproductions and
summaries of or relating to the Confidential Information at the
request of SmarTire or, at the option of SmarTire, certify
destruction of the same.
(c) The parties hereto recognize that a breach by the Manager of any
of the provisions contained herein would result in damages to
SmarTire and that SmarTire could not be compensated adequately
for such damages by monetary award. Accordingly, the Manager
agrees that in the event of any such breach, in addition to all
other remedies available to SmarTire or the Company at law or in
equity, SmarTire and the Company shall be entitled as a matter of
right to apply to a court of competent jurisdiction for such
relief by way of restraining order, injunction, decree or
otherwise, as may be appropriate to ensure compliance with the
provisions of this Agreement.
4. MISCELLANEOUS
(a) All Confidential Information and Materials are and shall remain
the property of the Company and SmarTire. By disclosing
information to the Manager, the Company and SmarTire do not grant
any express or implied right to the Manager to or under any and
all patents, copyrights, trademarks, or trade secret information
belonging to SmarTire or the Company.
(b) All obligations created herein shall survive change or
termination of any and all business relationships between the
parties for a period of three years after such termination.
(c) The Company may from time to time request suggestions, feedback
or other information from the Manager on Confidential Information
or on released or unreleased software belonging to SmarTire or
the Company. Any suggestions, feedback or other disclosures made
by the Manager are and shall be entirely voluntary on the part of
the Manager and shall not create any obligations on the
<PAGE> 13
- 3 -
part of SmarTire or the Company or a confidential agreement between the Manager
and SmarTire or the Company. Instead, SmarTire and the Company shall be free to
disclose and use any suggestions, feedback or other information from the Manager
as SmarTire or the Company sees fit, entirely without obligation of any kind
whatsoever to the Manager.
<PAGE> 1
EXHIBIT 10.2
MANAGEMENT AGREEMENT
THIS AGREEMENT effective as of the 1st day of August, 1999 (the "Effective
Date").
BETWEEN:
SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to
the laws of the Province of British Columbia, having an office
at 150 - 13151 Vanier Place, Richmond, British Columbia, V6V 2J1
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
SHAWN LAMMERS, businessman, of 84 - 7955 122nd Street, Surrey,
British Columbia V3W 4T4
(hereinafter referred to as the "Manager")
OF THE SECOND PART
RECITALS
WHEREAS the Company has requested the assistance of the Manager in providing
certain management services to the Company, as hereinafter described;
WHEREAS the Manager has agreed to provide such assistance and services to the
Company in accordance with the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties hereto agree as follows:
1 DUTIES AND DEVOTION OF TIME
1.1 Duties. During the term of this Agreement the Manager shall be responsible
for the duties contained in Schedule "A" attached hereto and incorporated herein
by this reference (the "Duties").
1.2 Devotion of Time. The parties hereto acknowledge and agree that the work of
the Manager is and shall be of such a nature that regular hours may not be
sufficient and
<PAGE> 2
- 2 -
occasions may arise whereby the Manager shall be required to work more than
eight (8) hours per day and/or five (5) days per week. The Manager agrees that
the consideration set forth herein shall be in full and complete satisfaction
for such work and services, regardless of when and where such work and services
are performed. The Manager further releases the Company from any claims for
overtime pay or other such compensation which may accrue to the Manager.
Notwithstanding the foregoing, the Company agrees that so long as the Manager
properly discharges his duties hereunder, the Manager may devote the remainder
of his time and attention to other non-competing business and personal pursuits.
1.3 Business Opportunities the Property of the Company. The Manager agrees to
communicate immediately to the Company all business opportunities, inventions
and improvements in the nature of the business of the Company which, during the
term of this Agreement, the Manager may conceive, make or discover, become aware
of, directly or indirectly, or have presented to him in any manner which relates
in any way to the Company, either as it is now or as it may develop, and such
business opportunities, inventions or improvements shall become the exclusive
property of the Company without any obligation on the part of the Company to
make any payments therefor in addition to the salary and benefits herein
described to the Manager.
1.4 No Personal Use. The Manager shall not use any of the work the Manager shall
perform for the Company for any personal purposes without first obtaining the
prior written consent of the Company.
2 SALARY, BONUSES AND BENEFITS
2.1 Salary. In consideration of the Manager providing the services referred to
herein, the Company agrees to pay the Manager an annual base salary (the "Annual
Base Salary") of one hundred twenty thousand dollars ($120,000) less applicable
deductions, payable bi-weekly, plus incentive compensation as set out below,
subject to increase as from time to time approved by the Board of Directors of
the Company.
2.2 Benefits. The Company shall provide, maintain and pay for:
(a) medical, dental for the Manager and his immediate family as is provided
by the Company's medical services plan or an equivalent plan; and
(b) such extended health and other benefits for the Manager and his
immediate family as are provided to senior management employees of the
Company, subject to the eligibility of the Manager.
2.3 Incentive Compensation and Stock Options. Within one hundred twenty (120)
days of the Effective Date, the Company's Board of Directors will approve and
implement an incentive compensation plan for the senior management of the
Company and its subsidiaries, including therein a policy regarding the granting
of stock options. The Manger will participate in that plan when approved and
implemented by the Company's Board of Directors.
<PAGE> 3
- 3 -
2.4 Payment in Cash or Shares. All payments payable by the Company to the
Manager, including the Annual Base Salary and reimbursement of expenses under
Section 4.1 hereof, shall be payable in cash or, at the election of the Manager,
and subject to the approval of the regulatory authorities, such will be paid in
whole or in part in common shares in the capital stock of the Company
("Remuneration Shares"), issued at the 10 day average closing price (for the 10
days prior to the Manager's election) of the Company's common shares on any
stock exchange or quotation system upon which the Company's common shares are
listed for trading.
2.5 Registration of Performance Bonus Shares. To ensure that any shares issued
to the Manager under paragraph 2.4 of this Agreement are freely tradable, the
Company shall register with the SEC any such shares issued. Upon or as soon as
is practical after the issuance of such shares, the Company shall file a form
S-8 or other appropriate form with the United States Securities and Exchange
Commission (the "SEC") to effect registration.
3 VACATION
3.1 Entitlement to Vacation. The Company acknowledges that the Manager shall be
entitled to an annual vacation of four (4) weeks. The Manager shall use his best
efforts to ensure that such vacation is arranged with the Company in advance
such that his vacation does not unduly affect the operations of the Company.
3.2 Increase in Vacation. The period set out in Section 3.1 above may be
increased from time to time as mutually agreed to by the Manager and the
Company's Board of Directors.
4 REIMBURSEMENT OF EXPENSES
4.1 Reimbursement of Expenses. The Manager shall be reimbursed for all
reasonable out-of-pocket expenses incurred by the Manager in or about the
execution of the Duties contained herein, including without limiting the
generality of the foregoing, all reasonable travel and promotional expenses
payable or incurred by the Manager in connection with the Duties under this
Agreement. All payments and reimbursements shall be made within two (2) weeks of
submission by the Manager of vouchers, bills or receipts for such expenses.
5 CONFIDENTIAL INFORMATION
5.1 Confidential Information. The Manager shall not, either during the term of
this Agreement or under the provisions of Section 5.3, without specific consent
in writing, disclose or reveal in any manner whatsoever to any other person,
firm or corporation, nor will he use, directly or indirectly, for any purpose
other than the purposes of the Company, the private affairs of the Company or
any confidential information which he may acquire during the term of this
Agreement with relation to the business and affairs of the directors and
shareholders of the Company, unless the Manager is ordered to do so by a court
of competent jurisdiction or unless required by any statutory authority.
<PAGE> 4
- 4 -
5.2 Non-Disclosure Provisions. The foregoing provision shall be subject to the
further non-disclosure provisions contained in Schedule "B" attached hereto and
incorporated hereinafter by this reference.
5.3 Provisions Survive Termination. The provisions of this section shall survive
the termination of this Agreement for a period of three years.
6 TERM
6.1 Term. This Agreement shall remain in effect until terminated in accordance
with any of the provisions contained in this Agreement.
7 TERMINATION
7.1 Termination by Manager. Notwithstanding any other provision contained
herein, the parties hereto agree that the Manager may terminate this Agreement,
with or without cause, by giving ninety (90) days' written notice of such
intention to terminate.
7.2 Resignation or Cessation of Duties. In the event that the Manager ceases to
perform all of the Duties contained herein, other than by reason of the
Manager's death or disability, or if the Manager resigns unilaterally and on his
own initiative from all of his positions this Agreement shall be deemed to be
terminated by the Manager as of the date of such cessation of Duties or such
resignation, and the Company shall have no further obligations under Section 2
hereof.
7.3 Termination by Company. The Company may terminate this agreement at any time
for just cause without further obligation. In the event of termination for any
reason other than for just cause, the Company, at its option, will either (a)
continue to pay the salary under Clause 2.1 and provide the benefits under
Clauses 2.2 until one year from the date of termination or (b) pay one year's
salary under Clause 2.1 in lieu of notice. Any stock options that have been
granted but that have not yet vested shall immediately vest at the date of the
final payment, and may be exercised for a period of 30 days only after the final
payment.
7.4 Death. In the event of the death of the Manager during the term of this
Agreement, this Agreement shall be terminated as of the date of such death, and
the Manager's spouse, if living, or surviving children shall be entitled to the
termination allowance stated in Section 7.3 hereof.
7.5 Disability. In the event that the Manager will during the term of this
Agreement by reason of illness or mental or physical disability or incapacity be
prevented from or incapable of performing the Duties hereunder, then the Manager
shall be entitled to receive the remuneration provided for herein at the rate
specified hereinbefore for the period during which such illness, disability or
incapacity will continue, but not exceeding six (6) successive months. If such
illness, disability or incapacity continues or will continue for a period longer
<PAGE> 5
- 5 -
than six (6) successive months, then this Agreement may, at the option of the
Directors of the Company, forthwith be terminated, and the Manager shall be
entitled to the termination allowance stated in Section 7.3 hereof.
7.6 Termination Payments. Any payments made by the Company to the Manager upon
the termination of this Agreement shall be made in cash, or, if the Company does
not have available funds, in equal monthly cash instalments over one year, or in
Remuneration Shares, or in a combination of cash and Remuneration Shares,
subject to regulatory approval. All payments required to be made by the Company
to the Manager pursuant to Section 7 hereof shall be made in full.
8 RIGHTS AND OBLIGATIONS UPON TERMINATION
8.1 Rights and Obligations. Upon termination of this Agreement, the Manager
shall deliver up to the Company all documents, papers, plans, materials and
other property of or relating to the affairs of the Company, other than the
Manager's personal papers in regard to his role in the Company, which may then
be in the Manager's possession or under his control.
9 CLOSING
9.1 Closing Date. This Agreement shall be effective as of August 1, 1999.
9.2 Conditions of Closing. The parties hereto agree that it shall be a condition
of the execution of this Agreement that prior to or contemporaneously with the
execution of this Agreement:
(a) this Agreement shall be approved by the Board of Directors of the
Company.
10 NOTICES AND REQUESTS
10.1 Notices and Requests. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or mailed by registered or certified mail with
postage prepaid and return receipt requested and addressed as follows:
(a) if to the Company:
SmarTire Systems Inc.
150 - 13151 Vanier Place
Richmond, British Columbia
V6V 2J1
with a copy to:
<PAGE> 6
- 6 -
CLARK, WILSON
Suite 800-885 West Georgia Street
Vancouver, British Columbia
V6C 3H1
Attention: Bernard Pinsky
(b) If to the Manager:
Shawn Lammers
84 - 7955 122nd Street
Surrey, British Columbia
V3W 4T4
or to such other address as the party to receive notice or request so designates
by written notice to the others.
11 INDEPENDENT PARTIES
11.1 Independent Parties. This Agreement is intended solely as a management
services agreement and no partnership, agency, joint venture, distributorship or
other form of agreement is intended.
12 AGREEMENT VOLUNTARY AND EQUITABLE
12.1 Agreement Voluntary. The parties acknowledge and declare that in executing
this Agreement they are each relying wholly on their own judgement and knowledge
and have not been influenced to any extent whatsoever by any representations or
statements made by or on behalf of any other party regarding any matters dealt
with herein or incidental thereto.
12.2 Agreement Equitable. The parties further acknowledge and declare that they
each have carefully considered and understand the provisions contained herein,
including, but without limiting the generality of the foregoing, the Manager's
rights upon termination and the restrictions on the Manager after termination
and agree that the said provisions are mutually fair and equitable, and that
they executed this Agreement voluntarily and of their own free will.
13 CONTRACT NON-ASSIGNABLE; INUREMENT
13.1 Contract Non-Assignable. This Agreement and all other rights, benefits and
privileges contained herein may not be assigned by the Manager.
13.2 Inurement. The rights, benefits and privileges contained herein, including
without limitation the benefits of Sections 2 and 7 hereof, shall inure to the
benefit of and be binding upon the respective parties hereto, their heirs,
executors, administrators and successors.
<PAGE> 7
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14 ENTIRE AGREEMENT
14.1 Entire Agreement. This Agreement represents the entire Agreement between
the parties and supersedes any and all prior agreements and understandings,
whether written or oral, among the parties. The Manager acknowledges that he was
not induced to enter into this Agreement by any representation, warranty,
promise or other statement, except as contained herein.
14.2 Previous Agreements Cancelled. Save and except for the express provisions
of this Agreement, any and all previous agreements, written or oral, between the
parties hereto or on their behalf relating to the services of the Manager for
the Company are hereby terminated and cancelled and each of the parties hereby
releases and further discharges the other of and from all manner of actions,
causes of action, claims and demands whatsoever under or in respect of any such
agreements.
15 WAIVER
15.1 Waiver. No consent or waiver, express or implied, by either party to or of
any breach or default by the other party in the performance by the other of its
or his obligations herein shall be deemed or construed to be a consent or waiver
to or of any breach or default of the same or any other obligation of such
party. Failure on the part of either party to complain of any act or failure to
act, or to declare the other party in default irrespective of how long such
failure continues, shall not constitute a waiver by such party of its or his
rights herein or of the right to then or subsequently declare a default.
16 SEVERABILITY
16.1 Severability. If any provision contained herein is determined to be void or
unenforceable in whole or in part, it is to that extent deemed omitted. The
remaining provisions shall not be affected in any way.
17 AMENDMENT
17.1 Amendment. This Agreement shall not be amended or otherwise modified except
by a written notice of even date herewith or subsequent hereto signed by both
parties.
18 HEADINGS
18.1 Headings. The headings of the sections and subsections herein are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement.
<PAGE> 8
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19 GOVERNING LAW
19.1 Governing Law. This Agreement shall be construed under and governed by the
laws of the Province of British Columbia and the laws of Canada applicable
therein.
20 EXECUTION
20.1 Execution in Several Counterparts. This Agreement may be executed by
facsimile and in several counterparts, each of which shall be deemed to be an
original and all of which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 30
day of November, 1999.
SMARTIRE SYSTEM INC.
Per: /s/ ROBERT RUDMAN
-----------------------------------
Authorized Signatory
SIGNED by SHAWN LAMMERS in the )
presence of: )
/s/ KEVIN CARLSON )
)
KEVIN CARLSON )
- ------------------------------ )
Name )
c/o/ SMARTIRE SYSTEMS INC. ) /s/ SHAWN LAMMERS
- ------------------------------ ) -----------------------------------
Address ) SHAWN LAMMERS
RICHMOND, B.C. )
- ------------------------------ )
BUSINESSMAN )
- ------------------------------ )
Occupation )
This is page 8 of Agreement dated above for reference the 1st day of August,
1999.
<PAGE> 9
SCHEDULE "A"
MANAGER'S DUTIES
1. To create value for the Company's shareholders by leading the development of
new tire monitoring products and technologies for the Company.
2. The Manager shall be appointed as the Vice President of Engineering of the
Company, and the Manager shall faithfully, honestly and diligently serve the
Company and each of the Company's subsidiaries.
3. The Manager shall be responsible for the management of the advanced
engineering group performing development and market qualification of new
products and development of new technologies for tire monitoring, brake
monitoring and light monitoring applications as the senior management of the
Company deems appropriate. The Manager shall be responsible for developing the
company's intellectual property in the fields of tire monitoring, brake
monitoring and light monitoring through proper documentation of new and
developed technology including patent descriptions and filings. The Manager
shall report to the President and Chief Operating Officer of the Company.
<PAGE> 10
SCHEDULE "B"
NON-DISCLOSURE PROVISIONS
1. CONFIDENTIAL INFORMATION AND MATERIALS
(a) "Confidential Information" shall mean, for the purposes of this
Agreement, non-public information which the Company designates
as being confidential or which, under the circumstances
surrounding disclosure ought reasonably to be treated as
confidential. Confidential Information includes, without
limitation, information, whether written, oral or communicated
by any other means, relating to released or unreleased Company
software or hardware products, the marketing or promotion of any
product of the Company, the Company's business policies or
practices, and information received from others which the
Company is obliged to treat as confidential. Confidential
Information disclosed to the Manager by any subsidiary and/or
agents of the Company is covered by this Agreement.
(b) Confidential Information shall not include that information
defined as Confidential Information hereinabove which the
Manager can exclusively establish:
(i) is or subsequently becomes publicly available without
breach of any obligation of confidentiality owed to the
Company;
(ii) became known to the Manager prior to disclosure by the
Company to the Manager;
(iii) became known to the Manager from a source other than the
Company other than by the breach of any obligations of
confidentiality owed to the Company; or
(iv) is independently developed by the Manager.
(c) Confidential Materials shall include all tangible materials
containing Confidential Information, including, without
limitation, written or printed documents and computer disks or
tapes, whether machine or user readable.
2. RESTRICTIONS
(a) The Manager shall not disclose any Confidential Information to
third parties for a period of three (3) years following the
termination of this Agreement, except as provided herein.
However, the Manager may disclose Confidential Information
during bona fide execution of the Duties or in accordance with
judicial or other governmental order, provided that the Manager
shall give
<PAGE> 11
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reasonable notice to the Company prior to such disclosure and
shall comply with any applicable protective order or equivalent.
(b) The Manager shall take reasonable security precautions, at least
as great as the precautions he takes to protect his own
confidential information, to keep confidential the Confidential
Information, as defined hereinabove.
(c) Confidential Information and Materials may be disclosed,
reproduced, summarized or distributed only in pursuance of the
business relationship of the Manager with the Company, and only
as provided hereunder.
3. RIGHTS AND REMEDIES
(a) The Manager shall notify the Company immediately upon discovery
of any unauthorized use or disclosure of Confidential
Information or Materials, or any other breach of this Agreement
by the Manager, and shall co-operate with the Company in every
reasonable manner to aid the Company to regain possession of
said Confidential Information or Materials and prevent all such
further unauthorized use.
(b) The Manager shall return all originals, copies, reproductions
and summaries of or relating to the Confidential Information at
the request of the Company or, at the option of the Company,
certify destruction of the same.
(c) The parties hereto recognize that a breach by the Manager of any
of the provisions contained herein would result in damages to
the Company and that the Company could not be compensated
adequately for such damages by monetary award. Accordingly, the
Manager agrees that in the event of any such breach, in addition
to all other remedies available to the Company at law or in
equity, the Company shall be entitled as a matter of right to
apply to a court of competent jurisdiction for such relief by
way of restraining order, injunction, decree or otherwise, as
may be appropriate to ensure compliance with the provisions of
this Agreement.
4. MISCELLANEOUS
(a) All Confidential Information and Materials are and shall remain
the property of the Company. By disclosing information to the
Manager, the Company does not grant any express or implied right
to the Manager to or under any and all patents, copyrights,
trademarks, or trade secret information belonging to the
Company.
(b) All obligations created herein shall survive change or
termination of any and all business relationships between the
parties for a period of three years after such termination.
<PAGE> 12
- 3 -
(c) The Company may from time to time request suggestions, feedback
or other information from the Manager on Confidential
Information or on released or unreleased software belonging to
the Company. Any suggestions, feedback or other disclosures made
by the Manager are and shall be entirely voluntary on the part
of the Manager and shall not create any obligations on the part
of the Company or a confidential agreement between the Manager
and the Company. Instead, the Company shall be free to disclose
and use any suggestions, feedback or other information from the
Manager as the Company sees fit, entirely without obligation of
any kind whatsoever to the Manager.
<PAGE> 1
EXHIBIT 10.3
MANAGEMENT AGREEMENT
THIS AGREEMENT effective as of the 1st day of August, 1999 (the "Effective
Date").
BETWEEN:
SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to the laws
of the Province of British Columbia, having an office at 150 - 13151
Vanier Place, Richmond, British Columbia, V6V 2J1
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
ROBERT RUDMAN, businessman, of 40 - 5740 Garrison Road,
Richmond, British Columbia V7C 5E7
(hereinafter referred to as the "Manager")
OF THE SECOND PART
RECITALS
WHEREAS the Company has requested the assistance of the Manager in providing
certain management services to the Company, as hereinafter described;
WHEREAS the Manager has agreed to provide such assistance and services to the
Company in accordance with the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties hereto agree as follows:
1 DUTIES AND DEVOTION OF TIME
1.1 Duties. During the term of this Agreement the Manager shall be
responsible for the duties contained in Schedule "A" attached hereto and
incorporated herein by this reference (the "Duties").
1.2 Devotion of Time. The parties hereto acknowledge and agree that
the work of the Manager is and shall be of such a nature that regular hours may
not be sufficient and
<PAGE> 2
- 2 -
occasions may arise whereby the Manager shall be required to work more than
eight (8) hours per day and/or five (5) days per week. The Manager agrees that
the consideration set forth herein shall be in full and complete satisfaction
for such work and services, regardless of when and where such work and services
are performed. The Manager further releases the Company from any claims for
overtime pay or other such compensation which may accrue to the Manager.
Notwithstanding the foregoing, the Company agrees that so long as the Manager
properly discharges his duties hereunder, the Manager may devote the remainder
of his time and attention to other non-competing business and personal pursuits.
1.3 Business Opportunities the Property of the Company. The Manager
agrees to communicate immediately to the Company all business opportunities,
inventions and improvements in the nature of the business of the Company which,
during the term of this Agreement, the Manager may conceive, make or discover,
become aware of, directly or indirectly, or have presented to him in any manner
which relates in any way to the Company, either as it is now or as it may
develop, and such business opportunities, inventions or improvements shall
become the exclusive property of the Company without any obligation on the part
of the Company to make any payments therefor in addition to the salary and
benefits herein described to the Manager.
1.4 No Personal Use. The Manager shall not use any of the work the
Manager shall perform for the Company for any personal purposes without first
obtaining the prior written consent of the Company.
2 SALARY, BONUSES AND BENEFITS
2.1 Salary. In consideration of the Manager providing the services
referred to herein, the Company agrees to pay the Manager an annual base salary
(the "Annual Base Salary") of two hundred seventy three thousand dollars
($273,000) less applicable deductions, thirty seven thousand five hundred
dollars ($37,500) of which shall be payable on the date of signing this
Agreement, with the balance payable bi-weekly, plus incentive compensation as
set out below, subject to increase as from time to time approved by the Board of
Directors of the Company.
2.2 Benefits. The Company shall provide, maintain and pay for:
(a) medical and dental insurance for the Manager and his immediate
family as is provided by the Company's medical services plan or
an equivalent plan; and
(b) such extended health and other benefits for the Manager and his
immediate family as are provided to senior management employees
of the Company, subject to the eligibility of the Manager.
2.3 Incentive Compensation and Stock Options. Within one hundred
twenty (120) days of the Effective Date, the Company's Board of Directors will
approve and implement
<PAGE> 3
- 3 -
an incentive compensation plan for the senior management of the Company and its
subsidiaries, including therein a policy regarding the granting of stock
options. The Manager will participate as a member of the Board of Directors in
approving that plan and will participate in that plan when approved and
implemented by the Company's Board of Directors.
2.4 Payment in Cash or Shares. All payments payable by the Company
to the Manager, including the Annual Base Salary and reimbursement of expenses
under Section 4.1 hereof, shall be payable in cash or, at the election of the
Manager, and subject to the approval of the regulatory authorities, such will be
paid in whole or in part in common shares in the capital stock of the Company
("Remuneration Shares"), issued at the 10 day average closing price (for the 10
days prior to the Manager's election) of the Company's common shares on any
stock exchange or quotation system upon which the Company's common shares are
listed for trading.
2.5 Registration of Performance Bonus Shares. To ensure that any
shares issued to the Manager under Section 2.4 of this Agreement are freely
tradable, the Company shall register with the SEC any such shares issued. Upon
or as soon as is practical after the issuance of such shares, the Company shall
file a form S-8 or other appropriate form with the United States Securities and
Exchange Commission (the "SEC") to effect registration.
3 VACATION
3.1 Entitlement to Vacation. The Company acknowledges that the
Manager shall be entitled to an annual vacation of four (4) weeks. The Manager
shall use his best efforts to ensure that such vacation is arranged with the
Company in advance such that his vacation does not unduly affect the operations
of the Company. The Company further agrees to pay to the Manager on the date of
signing this Agreement sixty five thousand eight hundred fifty one dollars and
forty cents ($65,851.40) less applicable deductions, that amount being in lieu
of all accrued vacation days owing to the Manager as of July 31, 1999.
3.2 Increase in Vacation. The period set out in Section 3.1 above
may be increased from time to time as mutually agreed to by the Manager and the
Company's Board of Directors.
4 REIMBURSEMENT OF EXPENSES
4.1 Reimbursement of Expenses. The Manager shall be reimbursed for
all reasonable out-of-pocket expenses incurred by the Manager in or about the
execution of the Duties contained herein, including without limiting the
generality of the foregoing, all reasonable travel and promotional expenses
payable or incurred by the Manager in connection with the Duties under this
Agreement. All payments and reimbursements shall be made within two (2) weeks of
submission by the Manager of vouchers, bills or receipts for such expenses.
<PAGE> 4
- 4 -
5 CONFIDENTIAL INFORMATION
5.1 Confidential Information. The Manager shall not, either during
the term of this Agreement or under the provisions of Section 5.3, without
specific consent in writing, disclose or reveal in any manner whatsoever to any
other person, firm or corporation, nor will he use, directly or indirectly, for
any purpose other than the purposes of the Company, the private affairs of the
Company or any confidential information which he may acquire during the term of
this Agreement with relation to the business and affairs of the directors and
shareholders of the Company, unless the Manager is ordered to do so by a court
of competent jurisdiction or unless required by any statutory authority.
5.2 Non-Disclosure Provisions. The foregoing provision shall be
subject to the further non-disclosure provisions contained in Schedule "B"
attached hereto and incorporated hereinafter by this reference.
5.3 Provisions Survive Termination. The provisions of this section
shall survive the termination of this Agreement for a period of three years.
6 TERM
6.1 Term. This Agreement shall remain in effect until terminated in
accordance with any of the provisions contained in this Agreement.
7 TERMINATION
7.1 Termination by Manager. Notwithstanding any other provision
contained herein, the parties hereto agree that the Manager may terminate this
Agreement, with or without cause, by giving ninety (90) days' written notice of
such intention to terminate.
7.2 Resignation or Cessation of Duties. In the event that the
Manager ceases to perform all of the Duties contained herein, other than by
reason of the Manager's death or disability, or if the Manager resigns
unilaterally and on his own initiative from all of his positions this Agreement
shall be deemed to be terminated by the Manager as of the date of such cessation
of Duties or such resignation, and the Company shall have no further obligations
under Section 2 hereof.
7.3 Termination by Company. The Company may terminate this agreement
at any time for just cause without further obligation. In the event of
termination for any reason other than for just cause, the Company, at its
option, will either (a) continue to pay the salary under Clause 2.1 and provide
the benefits under Clauses 2.2 until one year from the date of termination or
(b) pay one year's salary under Clause 2.1 in lieu of notice. Any stock options
that have been granted but that have not yet vested shall immediately vest at
the date of the final payment, and may be exercised for a period of 30 days only
after the final payment.
<PAGE> 5
- 5 -
7.4 Death. In the event of the death of the Manager during the term
of this Agreement, this Agreement shall be terminated as of the date of such
death, and the Manager's spouse, if living, shall be entitled to the termination
allowance stated in Section 7.3 hereof.
7.5 Disability. In the event that the Manager will during the term
of this Agreement by reason of illness or mental or physical disability or
incapacity be prevented from or incapable of performing the Duties hereunder,
then the Manager shall be entitled to receive the remuneration provided for
herein at the rate specified hereinbefore for the period during which such
illness, disability or incapacity will continue, but not exceeding six (6)
successive months. If such illness, disability or incapacity continues or will
continue for a period longer than six (6) successive months, then this Agreement
may, at the option of the Directors of the Company, forthwith be terminated, and
the Manager shall be entitled to the termination allowance stated in Section 7.3
hereof.
7.6 Termination Payments. Any payments made by the Company to the
Manager upon the termination of this Agreement shall be made in cash, or, if the
Company does not have available funds, in equal monthly cash instalments over
one year, or in Remuneration Shares, or in a combination of cash and
Remuneration Shares, subject to regulatory approval. All payments required to be
made by the Company to the Manager pursuant to Section 7 hereof shall be made in
full.
8 RIGHTS AND OBLIGATIONS UPON TERMINATION
8.1 Rights and Obligations. Upon termination of this Agreement, the
Manager shall deliver up to the Company all documents, papers, plans, materials
and other property of or relating to the affairs of the Company, other than the
Manager's personal papers in regard to his role in the Company, which may then
be in the Manager's possession or under his control.
9 CLOSING
9.1 Closing Date. This Agreement shall be effective as of August 1,
1999.
9.2 Conditions of Closing. The parties hereto agree that it shall be
a condition of the execution of this Agreement that prior to or
contemporaneously with the execution of this Agreement:
(a) this Agreement shall be approved by the Board of Directors of
the Company.
10 NOTICES AND REQUESTS
10.1 Notices and Requests. All notices and requests in connection
with this Agreement shall be deemed given as of the day they are received either
by messenger, delivery service, or mailed by registered or certified mail with
postage prepaid and return receipt requested and addressed as follows:
<PAGE> 6
- 6 -
(a) if to the Company:
SmarTire Systems Inc.
150 - 13151 Vanier Place
Richmond, British Columbia
V6V 2JI
with a copy to:
CLARK, WILSON
Suite 800-885 West Georgia Street
Vancouver, British Columbia
V6C 3H1
Attention: Bernard Pinsky
(b) If to the Manager:
Robert Rudman
40 - 5740 Garrison Road
Richmond, British Columbia
V7C 5E7
or to such other address as the party to receive notice or request so designates
by written notice to the others.
11 INDEPENDENT PARTIES
11.1 Independent Parties. This Agreement is intended solely as a
management services agreement and no partnership, agency, joint venture,
distributorship or other form of agreement is intended.
12 AGREEMENT VOLUNTARY AND EQUITABLE
12.1 Agreement Voluntary. The parties acknowledge and declare that in
executing this Agreement they are each relying wholly on their own judgement and
knowledge and have not been influenced to any extent whatsoever by any
representations or statements made by or on behalf of any other party regarding
any matters dealt with herein or incidental thereto.
12.2 Agreement Equitable. The parties further acknowledge and declare
that they each have carefully considered and understand the provisions contained
herein, including, but without limiting the generality of the foregoing, the
Manager's rights upon termination and the restrictions on the Manager after
termination and agree that the said provisions are mutually fair and equitable,
and that they executed this Agreement voluntarily and of their own free will.
<PAGE> 7
- 7 -
13 CONTRACT NON-ASSIGNABLE; INUREMENT
13.1 Contract Non-Assignable. This Agreement and all other rights,
benefits and privileges contained herein may not be assigned by the Manager.
13.2 Inurement. The rights, benefits and privileges contained herein,
including without limitation the benefits of Sections 2 and 7 hereof, shall
inure to the benefit of and be binding upon the respective parties hereto, their
heirs, executors, administrators and successors.
14 ENTIRE AGREEMENT
14.1 Entire Agreement. This Agreement represents the entire Agreement
between the parties and supersedes any and all prior agreements and
understandings, whether written or oral, among the parties. The Manager
acknowledges that he was not induced to enter into this Agreement by any
representation, warranty, promise or other statement, except as contained
herein.
14.2 Previous Agreements Cancelled. Save and except for the express
provisions of this Agreement and the Manager's continuation as a director of the
Company, any and all previous agreements, written or oral, between the parties
hereto or on their behalf relating to the services of the Manager for the
Company are hereby terminated and cancelled and each of the parties hereby
releases and further discharges the other of and from all manner of actions,
causes of action, claims and demands whatsoever under or in respect of any such
agreements.
15 WAIVER
15.1 Waiver. No consent or waiver, express or implied, by either
party to or of any breach or default by the other party in the performance by
the other of its or his obligations herein shall be deemed or construed to be a
consent or waiver to or of any breach or default of the same or any other
obligation of such party. Failure on the part of either party to complain of any
act or failure to act, or to declare the other party in default irrespective of
how long such failure continues, shall not constitute a waiver by such party of
its or his rights herein or of the right to then or subsequently declare a
default.
16 SEVERABILITY
16.1 Severability. If any provision contained herein is determined to
be void or unenforceable in whole or in part, it is to that extent deemed
omitted. The remaining provisions shall not be affected in any way.
17 AMENDMENT
17.1 Amendment. This Agreement shall not be amended or otherwise
modified except by a written notice of even date herewith or subsequent hereto
signed by both parties.
<PAGE> 8
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18 HEADINGS
18.1 Headings. The headings of the sections and subsections herein
are for convenience only and shall not control or affect the meaning or
construction of any provisions of this Agreement.
19 GOVERNING LAW
19.1 Governing Law. This Agreement shall be construed under and
governed by the laws of the Province of British Columbia and the laws of Canada
applicable therein.
20 EXECUTION
20.1 Execution in Several Counterparts. This Agreement may be
executed by facsimile and in several counterparts, each of which shall be deemed
to be an original and all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
26th day of November, 1999.
SMARTIRE SYSTEMS INC.
Per: /s/ KEVIN CARLSON
-------------------------------
Authorized Signatory
SIGNED by ROBERT RUDMAN in the presence of:
/s/ W.A. PAGE
- ------------------------------- )
Name )
)
W.A. PAGE ) /s/ ROBERT RUDMAN
- ------------------------------- ) -----------------------------
Address ) ROBERT RUDMAN
)
31 EATON PLACE, CONDON )
- ------------------------------- )
)
Businessman )
- ------------------------------- )
Occupation )
This is page 8 of Agreement dated above for reference the 1st day of August,
1999.
<PAGE> 9
SCHEDULE"A"
MANAGER'S DUTIES
1. The Manager shall continue as the Chief Executive Officer of the
Company, and the Manager shall faithfully, honestly and diligently serve the
Company and each of the Company's subsidiaries.
2. The Manager shall be responsible for the overall activities and
organizational policies of the Company. The Manager will, in that capacity,
develop, recommend and implement, directly and through subordinates, approved
annual and long-term organizational policies and goals. The Manager shall report
to the Board of Directors of the Company.
<PAGE> 10
SCHEDULE "B"
NON-DISCLOSURE PROVISIONS
1. CONFIDENTIAL INFORMATION AND MATERIALS
(a) "Confidential Information" shall mean, for the purposes of this
Agreement, non-public information which the Company designates
as being confidential or which, under the circumstances
surrounding disclosure ought reasonably to be treated as
confidential. Confidential Information includes, without
limitation, information, whether written, oral or communicated
by any other means, relating to released or unreleased Company
software or hardware products, the marketing or promotion of any
product of the Company, the Company's business policies or
practices, and information received from others which the
Company is obliged to treat as confidential. Confidential
Information disclosed to the Manager by any subsidiary and/or
agents of the Company is covered by this Agreement.
(b) Confidential Information shall not include that information
defined as Confidential Information hereinabove which the
Manager can exclusively establish:
(i) is or subsequently becomes publicly available without
breach of any obligation of confidentiality owed to the
Company;
(ii) became known to the Manager prior to disclosure by the
Company to the Manager;
(iii) became known to the Manager from a source other than the
Company other than by the breach of any obligations of
confidentiality owed to the Company; or
(iv) is independently developed by the Manager.
(c) Confidential Materials shall include all tangible materials
containing Confidential Information, including, without
limitation, written or printed documents and computer disks or
tapes, whether machine or user readable.
2. RESTRICTIONS
(a) The Manager shall not disclose any Confidential Information to
third parties for a period of three (3) years following the
termination of this Agreement, except as provided herein.
However, the Manager may disclose Confidential Information
during bona fide execution of the Duties or in accordance with
judicial or other governmental order, provided that the Manager
shall give
<PAGE> 11
- 2 -
reasonable notice to the Company prior to such disclosure and
shall comply with any applicable protective order or equivalent.
(b) The Manager shall take reasonable security precautions, at least
as great as the precautions he takes to protect his own
confidential information, to keep confidential the Confidential
Information, as defined hereinabove.
(c) Confidential Information and Materials may be disclosed,
reproduced, summarized or distributed only in pursuance of the
business relationship of the Manager with the Company, and only
as provided hereunder.
3. RIGHTS AND REMEDIES
(a) The Manager shall notify the Company immediately upon discovery
of any unauthorized use or disclosure of Confidential
Information or Materials, or any other breach of this Agreement
by the Manager, and shall co-operate with the Company in every
reasonable manner to aid the Company to regain possession of
said Confidential Information or Materials and prevent all such
further unauthorized use.
(b) The Manager shall return all originals, copies, reproductions
and summaries of or relating to the Confidential Information at
the request of the Company or, at the option of the Company,
certify destruction of the same.
(c) The parties hereto recognize that a breach by the Manager of any
of the provisions contained herein would result in damages to
the Company and that the Company could not be compensated
adequately for such damages by monetary award. Accordingly, the
Manager agrees that in the event of any such breach, in addition
to all other remedies available to the Company at law or in
equity, the Company shall be entitled as a matter of right to
apply to a court of competent jurisdiction for such relief by
way of restraining order, injunction, decree or otherwise, as
may be appropriate to ensure compliance with the provisions of
this Agreement.
4. MISCELLANEOUS
(a) All Confidential Information and Materials are and shall remain
the property of the Company. By disclosing information to the
Manager, the Company does not grant any express or implied right
to the Manager to or under any and all patents, copyrights,
trademarks, or trade secret information belonging to the
Company.
(b) All obligations created herein shall survive change or
termination of any and all business relationships between the
parties for a period of three years after such termination.
<PAGE> 12
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(c) The Company may from time to time request suggestions, feedback
or other information from the Manager on Confidential
Information or on released or unreleased software belonging to
the Company. Any suggestions, feedback or other disclosures made
by the Manager are and shall be entirely voluntary on the part
of the Manager and shall not create any obligations on the part
of the Company or a confidential agreement between the Manager
and the Company. Instead, the Company shall be free to disclose
and use any suggestions, feedback or other information from the
Manager as the Company sees fit, entirely without obligation of
any kind whatsoever to the Manager.
<PAGE> 1
EXHIBIT 10.4
DATED 9TH DECEMBER, 1999
SMARTIRE EUROPE LIMITED
AND
IAN ROBERT BATEMAN
--------------------------
SERVICE AGREEMENT
--------------------------
HAMMOND SUDDARDS
7 Devonshire Square
Cutlers Gardens
London
EC2M 4YH
Tel: 0207 655 1000
Fax: 0207 655 1001
<PAGE> 2
1 THIS DEED is made on 9 th December 1999
BETWEEN:
(1) SMARTIRE EUROPE LIMITED (Company No. 351661) whose registered office is
situated at 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH (the
"COMPANY"); and
(2) IAN ROBERT BATEMAN of O'Deer O'Prey, The Green, Brightwalton,
Berkshire, RG20 7BH (the "EXECUTIVE")
IT IS AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement:
(a) "ASSOCIATED COMPANY" means:
(i) a subsidiary of the Company or of the Company's
holding company; and
(ii) the holding company (as defined in section 736
Companies Act 1985) of the Company.
(b) "BOARD" means the board of directors of the Company;
(c) "GROUP" means the Company and its associated companies for the
time being and "GROUP COMPANY" means any one of them;
(d) "RECOGNISED INVESTMENT EXCHANGE" has the same meaning as in
section 207 of the Financial Services Act 1986;
(e) "SENIOR EMPLOYEE" means any person who works for the Company
and earns in excess of L25,000 per annum;
(f) "SMARTIRE" means SmarTire Systems Inc. of British Columbia,
Canada.
(g) "STAFF HANDBOOK" means the Company's generally applicable
Staff Handbook as in force from time to time. On signing this
Agreement, the Executive acknowledges that he has been
provided with a current copy of the Staff Handbook and
confirms that he accepts the terms and agrees to comply with
the policies therein. For the avoidance of doubt, where there
is a discrepancy between the terms of this Agreement and the
general contractual terms and conditions in the Staff
Handbook, the terms and conditions set out in this Agreement
will prevail.
(h) "SUBSIDIARY" means a subsidiary within the meaning of section
736 of the Companies Act 1985; and
<PAGE> 3
(i) "WORKING DAY" means a day other than a Saturday, Sunday or
bank or other public holiday in England.
1.2 References in this Agreement to a person include a body corporate and
an unincorporated association of persons and references to a company
include any body corporate.
1.3 Any reference in this Agreement to a statutory provision includes any
statutory modification or re-enactment of it for the time being in
force.
1.4 Clauses 1.1 to 1.3 above apply unless the contrary intention appears.
1.5 The headings in this Agreement do not affect its interpretation.
1.6 Where appropriate, references to the Executive include his personal
representatives.
2. APPOINTMENT
The Company shall employ the Executive and the Executive shall serve
the Company from 1 August 1999 as Managing Director, or in such other
capacity as SmarTire and the Executive may from time to time agree on
the terms set out in this Agreement (the "Appointment"). The
Executive's period of continuous service started on 16 February 1998.
3. DUTIES OF EXECUTIVE
3.1 The Executive shall use his best endeavours to promote and protect the
interests of the Group and shall not do anything which is harmful to
those interests.
3.2 The Executive shall diligently and faithfully perform such duties and
exercise such powers as may from time to time be assigned or delegated
to or vested in him by SmarTire and/or the Board. An outline of the
primary responsibilities of the Executive at the date of this Agreement
is attached at Schedule 1. SmarTire and/or the Board may also suspend
all or any of the Executive's duties and powers for such periods and on
such terms as it considers expedient (including a term that the
Executive shall not attend at the premises of any Group Company and/or
not perform any work on the Group's behalf) provided that those terms
are appropriate to the Executive's status as a Director.
3.3 During the Appointment the Executive shall promptly give to the Board
and/or SmarTire such information in connection with the affairs of the
Group and with such matters relating to the Appointment as it shall
require and shall comply with all proper instructions of the Board.
3.4 The Executive shall (unless prevented by ill-health or accident or
otherwise directed by the Board and/or SmarTire) devote the whole of
his time skill, ability and attention during normal business hours to
the duties of the Appointment and such additional time as is necessary
for the proper fulfilment of those duties. The Executive shall, without
additional remuneration, work such hours (including at weekends) as are
reasonably necessary in order for him to properly carry out his duties
under this Agreement.
<PAGE> 4
3.5 The Executive shall not accept any appointment to any office in
relation to any body, whether corporate or not, (other than a Group
Company) or directly or indirectly be interested in any manner in any
other business except:
(a) as holder or beneficial owner (for investment purposes only)
of any class of securities in a company if those securities
are listed or dealt in on a Recognised Investment Exchange and
if the Executive (together with his spouse, children, parents
and parents' issue) neither holds nor is beneficially
interested in more than five per cent. of the securities of
that class; or
(b) with the consent in writing of SmarTire and/or the Board (such
consent being in their absolute and sole discretion) which may
be given subject to any terms or conditions which the Company
requires.
3.6 The duties of the Appointment shall relate primarily to the United
Kingdom at such places as the Company may from time to time reasonably
require but shall extend to travel abroad (subject to the payment of
proper expenses) when reasonably required by the Company for the proper
performance of his duties.
3.7 Subject always to Clause 3.6 above, the Executive will normally be
based at the Company's premises at 6 Berkshire Business Centre,
Berkshire Drive, Thatcham, Berkshire, RG19 4EW.
4. REMUNERATION
4.1 The Company shall pay to the Executive a salary at the rate of L67,000
per annum.
4.2 The Executive's salary shall be reviewed by the SmarTire Board of
Directors at the end of each Company financial year unless otherwise
agreed, the first review to be on or about 1 August 2000, but without
any obligation to increase the same.
4.3 The Executive's bonus provision shall be as set out in Schedule 2.
5. EXPENSES
The Company shall reimburse the Executive (on production by him of such
evidence as it may reasonably require) the amount of all travelling,
hotel and other expenses properly and reasonably incurred by him in the
discharge of his duties under this Agreement.
6. CAR
6.1 The Company shall provide the Executive with a car of a type from time
to time mutually agreed upon between the Company and the Executive in
accordance with Company policy as in force from time to time but of a
quality reasonably appropriate to his status (in the reasonable opinion
of the Board) for his use in the performance of his duties and, subject
to any restrictions or conditions from time to time imposed by the
Company, the Executive may use the car for his private purposes.
<PAGE> 5
6.2 The Company shall pay all normal servicing, road tax, insurance and
running expenses in relation to the car and all fuel expenses whether
related to business or, subject to 6.1 above, such private use as the
Board considers reasonable.
6.3 The Executive shall at the expense of the Company maintain the car in
good running order, and shall observe the terms and conditions of the
insurance policy relating to it and shall keep such records in relation
to business use as may be necessary to satisfy any queries in relation
thereto which may be raised by the Inland Revenue and the Executive
shall be responsible for the payment of any taxes assessed on him for
the use of the car.
6.4 As at the date of this Agreement the car provided to the Executive is a
Saab 9.5, as delivered on 23 April 1998. The Company reserves the right
in its absolute discretion to revise the policy in part or in whole at
the date of termination of the existing lease in April 2000 in favour
of a comparable car allowance.
6.5 The Executive shall inform the Company immediately if he is
disqualified from holding a driving licence and this clause shall not
apply during any period of disqualification or any period during which
he is in receipt of benefits under the PHI scheme at Clause 7.1(c)
below.
6.6 The Executive shall return the car, its keys and all associated
documentation to the Company's registered office or such other location
as the Company shall request immediately upon the termination of the
Appointment (whether terminated lawfully or not) or at any other
reasonable time, if so requested, for the purpose of inspection and/or
maintenance. The Company shall be entitled to withhold any sums owing
to the Executive on the termination of his Appointment in any way
(whether lawfully or not) until this obligation is complied with.
7. BENEFIT SCHEMES
7.1 The Executive is entitled to membership of the following schemes (each
referred to below as an "insurance scheme"):
(a) a private medical expenses insurance scheme providing such
cover for the Executive his wife and dependent children under
the age of 18 as the Company may from time to time notify to
him;
(b) a life insurance scheme under which a lump sum benefit shall
be payable on the Executive's death while the Appointment
continues; the benefit shall be paid to such dependants of the
Executive or other beneficiary as the trustees of the scheme
select at their discretion, after considering any
beneficiaries identified by the Executive in any expression of
his wishes delivered to the trustees before his death. The
benefit is equal to two times the Executive's basic annual
salary at his death;
(c) a long-term disability insurance scheme ("PHI") providing
salary continuance for the Executive for such period and on
such terms as the Company shall from time to time notify him.
<PAGE> 6
7.2 Benefits under any insurance scheme shall be subject to the rules of
the scheme and the terms of any applicable insurance policy and are
conditional on the Executive complying with and satisfying any
applicable requirements of the insurers. Copies of these rules and
policies and particulars of the requirements as amended from time to
time shall be provided to the Executive on request. The Company shall
not have any liability to pay any benefit to the Executive under any
insurance scheme unless it receives payment of the benefit from the
insurer under the scheme.
7.3 Any insurance scheme which is provided for the Executive is also
subject to the Company's right to alter the cover provided or any term
of the scheme or to cease to provide (without replacement) the scheme
at any time if in the opinion of the Board (after the Executive has
been examined by a medical practitioner nominated by the insurers or by
the Company) the state of health of the Executive is or becomes such
that the Company is unable to insure the benefits under the scheme at
the normal premiums applicable to a person of the Executive's age. In
addition, the Executive shall be responsible for and shall indemnify
the Company in respect of any taxation or statutory levy assessed upon
him in respect of any benefits he receives under any insurance scheme
cover provided for him by the Company.
8. MEDICAL AND SICKNESS
8.1 The Executive shall be paid in full during any period of absence from
work due to sickness or injury not exceeding 60 Working Days (in
aggregate) in any period of 12 consecutive months subject to the
provisions of Clause 13 and to the production of satisfactory evidence
from a registered medical practitioner in respect of any period of
absence if required by the Company. The Executive's salary during any
period of absence due to sickness or injury shall be inclusive of any
statutory sick pay to which he is entitled and the Company may deduct
from his salary the amount of any social security benefits he may be
entitled to receive.
8.2 In the case of prolonged or frequent absences the Company may require
the Executive to be examined by a medical adviser nominated by the
Company and the Executive consents to the medical adviser disclosing
the results of the examination to the Company and shall provide the
Company with such formal consents as may be necessary for this purpose
in accordance with the Access to Medical Reports 1988 with a view to
the Company establishing his likely future fitness for work.
8.3 If in the reasonable opinion of the Company, the Executive is incapable
by reason of physical or mental health to carry out his duties under
this Agreement the Executive may be suspended from carrying out those
duties for so long as the Company in its discretion considers such ill
health to continue subject to the remuneration provisions of Clause 8.1
above.
8.4 If the Executive is incapable of performing his duties by reason of
injury sustained wholly or partly as a result of negligence, nuisance
or breach of any statutory duty on the part of a third party and the
Executive recovers any amount by way of compensation for loss of
earnings from that third party, he shall pay to the Company a sum equal
to the amount recovered or, if less, the amount paid to him by the
Company under Clause 8.1 above in respect of the relevant period of
absence as a result of that injury.
<PAGE> 7
9. HOLIDAYS
9.1 The Executive shall be entitled to holidays in accordance with the
provisions set out in the Staff Handbook for full-time employees.
9.2 The Executive may take his holiday at such time or times as may be
agreed in advance with the Company (to ensure that the Executive's
holiday does not unduly affect the operations of the Company).
9.3 The entitlement to holiday set out in Clause 9.1 above may be increased
from time to time subject to the approval of the SmarTire Board of
Directors.
10. CONFIDENTIAL INFORMATION
10.1 The Executive shall not (except with the prior written consent of the
Board) make use of, publish or divulge to any person, and shall use all
reasonable endeavours to prevent the use, publication or disclosure of,
any information of a confidential or secret nature:
(a) concerning the business of the Company or any Group Company
and which comes to his knowledge during the course of or in
connection with his employment or his holding any office
within the Group from any source within the Company or any
Group Company: or
(b) concerning the business of any person having dealings with the
Company or any Group Company and which is obtained directly or
indirectly in circumstances in which the Company or any Group
Company is subject to a duty of confidentiality in relation to
that information.
10.2 In relation to Clause 10.1 above, the Company specifically, but
without limitation, draws to the Executive's attention the confidential
nature of information relating to:-
(a) the business methods, corporate plans, management systems,
finances, new business opportunities or development projects
of any Group Company; or
(b) the marketing or sales of any past or present or future
products, goods or services of any Group Company including but
not limited to customer names and lists and other details of
customers, sales targets, sales statistics, market share
statistics, prices, market research reports and surveys and
other professional materials; or
(c) future projects, business development or planning, commercial
relationships and negotiations; or
(d) any trade secrets or other information relating to the
provision of any product or service of any Group Company; or
(e) methods of manufacturing, storing, distributing and labeling
any products manufactured by any Group Company; or
<PAGE> 8
(f) any other information specifically identified by the Company
as confidential from time to time or known to the Executive as
being held by the Company or any Group Company under a duty of
confidentiality to a third party, in either case coming to his
attention in the course of or for the purposes of his duties
under this Agreement.
10.3 This clause shall not apply to information which is:
(a) used or disclosed in the proper performance of the Executive's
duties or with the prior written consent of the Company;
(b) ordered to be disclosed by a court of competent jurisdiction
or otherwise required to be disclosed by law; or
(c) in the public domain, other than directly or indirectly by
reason of the act or default of the Executive.
10.4 In relation to information of a confidential nature the Executive:
(a) shall notify the Company immediately upon discovery of any
unauthorised use or disclosure of such information and shall
actively assist the Company in every reasonable manner to aid
the Company to regain possession of such information and
prevent all such further use;
(b) the Executive shall return all originals, copies,
reproductions and summaries of or relating to such information
at the request of the Company or, on the Company's
instructions, ensure destruction of the same.
10.5 The Executive shall not other than with the approval of the Board make
or issue any press, radio or television statement or publish or submit
for publication any letter or article relating directly or indirectly
to the business or affairs of the Company, nor will the Executive
encourage, assist or procure any other person, firm or Company to do
anything, if done by him, which would be in breach of this sub-clause.
10.6 This Clause shall continue to apply after the termination of the
Appointment (whether terminated lawfully or not) without limit of time.
11. INTELLECTUAL PROPERTY
11.1 In this Clause 11 "Intellectual Property Rights" means a formula,
process, invention, improvement, utility model, trade mark, service
mark, business name, copyright, design right, patent, know-how, trade
secret and any other intellectual property right of any nature
whatsoever throughout the world (whether registered or unregistered and
including all applications and rights to apply for the same) which:
(a) relates to or is useful in connection with the business or any
product or service of a Group Company; and
(b) is invented, developed, created or acquired by the Executive
(whether alone or jointly with any other person) during the
period of the Appointment.
<PAGE> 9
11.2 Subject to the provisions of the Patents Act 1977, the entire interest
of the Executive in any Intellectual Property Right shall, as between
the Executive and the Company, become the property of the Company as
absolute beneficial owner without any payment to the Executive for it.
11.3 The Executive shall promptly communicate in confidence to the Company
full particulars of any Intellectual Property Right (whether or not it
is vested in the Company pursuant to Clause 11.2 above or otherwise)
and the Executive shall not use, disclose to any person or exploit any
Intellectual Property Right belonging to the Company without the prior
written consent of the Company.
11.4 With respect to any Intellectual Property Right which is not vested in
the Company pursuant to Clause 11.2 above or otherwise, the Executive
shall negotiate in good faith with the Company with a view to the
Company acquiring all the Executive's right, title and interest in that
Intellectual Property Right and, unless the Company has declined in
writing to negotiate or acquire such Intellectual Property Right, the
Executive shall not jeopardise the grant of any registration in respect
of that Intellectual Property Right by any public or non-confidential
disclosure for a period of three months from the date on which full
particulars of it are communicated to the Company.
11.5 The Executive shall, at the request and expense of the Company, prepare
and execute such instruments and do such other acts and things as may
be necessary or desirable to enable the Company or its nominee to
obtain protection of any Intellectual Property Right vested in the
Company in such parts of the world as may be specified by the Company
or its nominee and to enable the Company to exploit any Intellectual
Property Right vested in the Company to best advantage.
11.6 The Executive hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to sign, execute or do any
instrument or thing and generally to use his name for the purpose of
giving to the Company or its nominee the full benefit of the provisions
of this clause and in favour of any third party a certificate in
writing signed by any Director or the Secretary of the Company that any
instrument or act falls within the authority conferred by this clause
shall be conclusive evidence that such is the case.
11.7 The Executive hereby waives all of his moral rights (as defined in the
Copyright Designs and Patents Act 1988) in respect of any act of the
Company and any act of a third party done with the Company's authority
in relation to any Intellectual Property Right which is or becomes the
property of the Company.
11.8 The obligations of the Executive under Clauses 11.2 to 11.7 above shall
continue to apply after the termination of the Appointment (whether
terminated lawfully or not). Each of those obligations is enforceable
independently of each of the others and its validity shall not be
affected if any of the others are unenforceable to any extent.
12. CODES OF CONDUCT AND DISCIPLINARY AND GRIEVANCE PROCEDURES
<PAGE> 10
12.1 The Executive shall not directly or indirectly accept any commission,
rebate, discount or gratuity, in cash or in kind, from any person who
has or is likely to have a business relationship with any Group
Company.
12.2 The Executive shall comply with all codes of conduct from time to time
adopted by the Board and with all proper standards of corporate
governance.
12.3 The Company's usual disciplinary procedure does not apply to the
Executive. Any disciplinary hearing will usually be heard by a SmarTire
Director. If the Executive seeks to appeal against any disciplinary
action taken against him, he should do so to the SmarTire Board
submitting written grounds for his appeal within seven days of the
action appealed against.
12.4 If the Executive has a grievance in relation to his employment he may
apply in writing to the SmarTire Board who will afford the Executive
the opportunity of a hearing before the SmarTire Board or a committee
of the SmarTire Board whose decision shall be final.
13. TERMINATION OF APPOINTMENT
13.1 Notwithstanding any other provision contained herein, the parties
hereto agree that the Manager may terminate this Agreement, with or
without cause, by giving ninety (90) days' written notice of such
intention to terminate. The Company may terminate this agreement at any
time for just cause without further obligation. In the event of
termination for any reason other than for just cause, the Company, at
its option, will either (a) continue to pay the salary under Clause 4.1
and provide the benefits under Clauses 6 and 7 until one year from the
date of termination or (b) pay one year's salary under Clause 4.1 in
lieu of notice. Any stock options that have been granted but that have
not yet vested shall immediately vest at the date of the final payment,
and may be exercised for a period of 30 days only after vesting.
13.2 Any payments made by the Company to the Executive upon the termination
of this Agreement shall be made in cash, or, if the Company does not
have available funds, in equal monthly cash installments over one year,
or in Remuneration Shares, or in a combination of cash and Remuneration
Shares, subject to regulatory approval. All payments required to be
made by the Company to the Manager pursuant to Section 13 hereof shall
be made in full, irrespective of the amount of the term remaining under
this Agreement.
13.2 If the Executive:
(a) becomes of unsound mind or is, or may be, suffering from
mental disorder and either:
(i) he is admitted to hospital for treatment under the
Mental Health Act 1983; or
(ii) an order is made by any competent court for his
detention or for the appointment of a receiver,
curator bonis or other person to exercise powers with
respect to his property or affairs; or
<PAGE> 11
(b) is unable to perform his duties by reason of ill-health,
accident or otherwise for a period or periods aggregating to
at least 60 Working Days in any period of 12 months;
(c) fails or neglects efficiently and diligently to discharge his
duties or is guilty of any material breach of his obligations
under this Agreement (including any consent granted under it);
or
(d) refuses to accept any changes in his Executive
responsibilities, duties or status from time to time as
reasonably determined by the Company provided that any such
changes will not affect his remuneration (including bonus) or
seniority; or
(e) is guilty of any serious breach or non-observance of any of
the provisions of this Agreement or directions of the Board or
SmarTire Board or continues after written warning to be guilty
of any continued or successive breaches or nonobservance of
any such provisions or directions or any other conduct which
affects or is likely to affect prejudicially the interests of
the Company, SmarTire or the Group or is convicted of an
arrestable offence (other than a road traffic offence for
which a non-custodial penalty is imposed); or
(f) makes a statement, promise or forecast which he knows to be
misleading, false or deceptive or dishonestly conceals any
material facts, or recklessly makes (dishonestly or otherwise)
a statement, promise or forecast which is misleading, false or
deceptive in relation to the affairs of the Company or any
Group Company; or
(g) becomes bankrupt or makes any arrangement or composition with
his creditors; or
(h) is disqualified from being a director of any company by reason
of an order made by any competent court; or
(i) carries out or neglects to carry out any action which in the
reasonable opinion of the Company may seriously damage the
interests of the Company or SmarTire or is willfully or
negligently guilty of any breach or non-observance of any code
of conduct, rule or regulation referred to in Clause 12.2 and
such breach has actually or potentially a material adverse
effect on the Company or the Group, and/or the business of the
Company or the Group and/or on the ability of the Executive to
properly carry out the terms of this Appointment; or
(j) commits any act of deliberate discrimination or harassment on
grounds of race, sex or disability; or
(k) is, in the reasonable opinion of the Company, unable at any
time properly to discharge his duties under this Agreement due
to the effects of drugs or alcohol; or
(1) commits any other act warranting summary termination at common
law including (but not limited to) any act justifying
dismissal with immediate effect
<PAGE> 12
in the terms of the Company's generally-applicable
Disciplinary Rules as laid out in the staff handbook (receipt
of which the Executive hereby acknowledges).
the Company may (whether or not any notice of termination has been
given under Clause 13.1 above) by written notice to the Executive
terminate the Appointment with immediate effect.
13.3 Any delay or forbearance by the Company in exercising its right of
termination shall not constitute a waiver of it.
13.4 During any period of notice of termination of the Appointment (whether
or not such notice has been given by the Company or the Executive) the
Company may require the Executive to take any holiday to which the
Executive is entitled under Clause 9 above at such time or times as the
Company may decide.
13.5 Clause 13.1 above does not limit the rights of the Company to suspend
any of the Executive's duties and powers under Clause 3.2 above during
any period after notice of termination of the Appointment has been
given by either party and in particular (without limitation) the
Company may exercise this right where the Executive leaves the
Company's employment in circumstances where it is reasonable for the
Board to believe that he shall be interested or concerned in a
business, company or firm carrying on, or about to commence, a business
which is, or is likely to be, competitive with any part of the business
of any Group Company with which the Executive was engaged or concerned
in the previous 12 months before the suspension started. In addition or
alternatively, the Company may during the whole or any part of such
period of notice require the Executive to perform duties (including any
modified duties arising from an exercise by the Company of its rights
under Clause 3.2 above) at such locations as the Company may require
consistent with Clause 3.6 above. Throughout any such period of
suspension the Executive's salary, and other benefits to which he is
entitled under this Agreement shall continue to be paid or provided by
the Company and during such time, the Executive acknowledges that his
duties of confidentiality and good faith continue to apply and that he
is not permitted to work for any other person, firm, client,
corporation or on his own behalf without the Company's prior written
permission (which is not to be unreasonably withheld). At any time
during such period the Executive shall, at the request of the Company,
immediately resign without claim for compensation from his office as a
Director of the Company and any Group Company and from any other office
held by him in the Company or any Group Company.
13.6 On the termination of the Appointment in any way (whether lawfully or
otherwise) the Executive shall immediately deliver to the Company or
its authorized representative all property in his possession, custody
or under his control belonging to any Group Company including (but not
limited to) business cards, credit and charge cards, security and
computer passes, original and copy documents or other media on which
information is held in his possession relating to the business or
affairs of any Group Company, without keeping any copies, notes or
extracts thereof. The Company may withhold any sums owing to the
Executive on the termination of his employment until the obligations in
Clause 13.6 have been complied with.
<PAGE> 13
13.7 The Executive hereby agrees that he will not at any time after the
termination of the Appointment in any way (whether lawfully or
otherwise) either personally or by his agent, directly or indirectly
represent himself as being in any way still connected with or
interested in the business of the Company or any Group Company.
14. PROTECTIVE COVENANTS
14.1 For the purposes of this clause:
(a) "Termination Date" means the date of termination of the
Appointment.
(b) references to a Group Company include its successors in
business where the succession occurs after the Termination
Date.
14.2 The Executive covenants with the Company (for itself and as trustee for
each Group Company but only whilst it remains a Group Company) that he
shall not for a period of 6 months after the Termination Date be
concerned in any business within the United Kingdom which is
competitive with any business carried on by the Company or a Group
Company and with which the Executive was actively involved during the
course of the 12 months immediately preceding the Termination Date and
in particular any tyre monitoring business provided by the Company or
any of its Group Companies (all of which is hereinafter referred to as
the "Restricted Business"). For this purpose the Executive is concerned
in a business if (without limitation):-
(a) he carries it on as principal or agent; or
(b) he is a partner, director, employee, secondee, consultant or
agent in, of or to any person who carries on the business;
disregarding any financial interest of a person in securities which are
listed or dealt in on any Recognised Investment Exchange if that
person, the Executive and any person connected with him (within the
meaning of Section 839 of the Income and Corporation Taxes Act 1988)
are interested in securities which amount to less than five per cent
of the issued securities of that class and which, in all circumstances,
carry less than five per cent of the voting rights (if any) attaching
to the issued securities of that class.
14.3 The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he shall not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period
of 6 months after the Termination Date within the United Kingdom
canvass or solicit business or custom from any customer or client of
the Company or a Group Company with whom the Executive was actively
involved in the course of his employment during the 12 months ending on
the Termination Date.
14.4 The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he shall not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period
of 6 months after the Termination Date within the United Kingdom induce
or attempt to induce any supplier of the Company or a Group Company,
with whom the Executive was actively involved in the last 12 months of
his employment to cease to supply, or to restrict or vary the terms of
supply to, the
<PAGE> 14
Company or the Group Company or otherwise interfere with the
relationship between such a supplier and the Company or the Group
Company.
14.5 The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he will not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period
of 6 months after the Termination Date induce or attempt to induce any
person who was a Senior Employee of the Company or Group Company at the
Termination Date, and with whom the Executive had material dealings in
the course of the last 12 months of his employment, to leave the
employment of the Company or Group Company (whether or not this would
be a breach of contract by the Senior Employee) with a view to that
Senior Employee providing to another person, firm or company services
similar to and competitive with those he/she had provided to the
Company or Group Company in the 6 months preceding his/her departure.
14.6 The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he will not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period
of 3 months after the Termination Date deal with or accept orders from
any customer or client of the Company or a Group Company as is referred
to in Clause 14.3 above in respect of the Restricted Business.
14.7 The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he will not encourage, assist or procure any
other person, firm or company to do anything which, if done by him,
would be in breach of any of Clauses 14.2 to 14.6 above.
14.8 Each of the restrictions in each sub-clause in this Clause 14 above
shall be enforceable independently of each of the others and its
validity shall not be affected if any of the others is invalid. If any
of those restrictions is void but would be valid if some part of the
restriction were deleted, the restriction in question shall apply with
such modification as may be necessary to make it valid.
14.9 The Executive acknowledges that the provisions of this Clause 14 are no
more extensive than is reasonable to protect the legitimate business
interests of the Company and the Group, and further that the effect of
those provisions is not such as to prevent the Executive from earning a
living.
15. GENERAL
15.1 As from the effective date of the Appointment the Executive
acknowledges and warrants that all other Agreements or arrangements
between the Executive and any Group Company relating to the employment
of the Executive shall cease to have effect and accordingly any sum or
sums paid to the Executive by way of remuneration or other benefit
under any such other Agreements or arrangements in respect of any
periods since that date shall be deemed to have been received by the
Executive on account of the relevant amounts payable to him under this
Agreement.
15.2 This Agreement shall be governed by and construed in accordance with
English law.
15.3 No collective agreement forms any part of the Executive's contract of
employment.
<PAGE> 15
16. NOTICES
16.1 Any notice or other document to be served under this Agreement shall,
in the case of the Company, be delivered or sent by first class post or
telex or facsimile process to the Company at its registered office for
the time being and, in the case of the Executive, shall be delivered to
him or sent by first class post to his usual or last known place of
residence.
16.2 Any such notice or other document shall be deemed to have been served:
(a) if delivered, at the time of delivery;
(b) if posted, at 10.00 a.m. on the second Working Day after it
was put into the post]; or
(c) if sent by telex or facsimile process, at the expiration of
two hours after the time of despatch, if despatched before
5.00 p.m. on any Working Day, and in any other case at 10.00
a.m. on the Working Day following the date of despatch.
16.3 In proving such service it shall be sufficient to prove that delivery
was made or that the envelope containing such notice or other document
was properly addressed and posted as a pre-paid first class letter or
that the telex or facsimile message was properly addressed and
despatched as the case may be.
IN WITNESS of which this deed has been executed and has been delivered on the
first date which appears on page 1.
EXECUTED as a deed by the Company acting by: )
)
)
and )
)
/s/ W. A. PAGE
............................................
Director
/s/ ROBERT RUDMAN
............................................
Director/Secretary
)
SIGNED as a deed by the Executive )
) /s/ IAN BATEMAN
in the presence of: )
<PAGE> 16
/s/ NIGEL HAMMOND
............................................
Witness signature
NIGEL HAMMOND
............................................
Name
48 Woodley Close
............................................
Abingdon, Oxon.
............................................
Address
<PAGE> 17
SCHEDULE I
EXECUTIVE'S PRIMARY RESPONSIBILITIES
1. The Executive will be expected as part of his duties to create value
for SmarTire's shareholders by leading and managing the European
Operations of the Company.
2. The Executive shall be responsible for the management of the European
Operations of SmarTire including the development and execution of
business plans, marketing strategies, sales and financial objectives
for the Company. The Executive is responsible for providing regular
reports to SmarTire which measure the Company's progress towards
achieving defined goals and objectives and define actions to address
issues. The Executive is responsible for the development of the
European organization structure, staffing and operations to achieve the
Company's business plan and financial objectives. The Executive shall
work with SmarTire management to assist in defining and completing
corporate objectives as may be determined. The Executive shall report
to the President and Chief Operating Officer of SmarTire.
<PAGE> 18
SCHEDULE 2
EXECUTIVE'S BONUS PROVISIONS
1. The Executive shall be entitled to be considered for a performance
related bonus wholly at the discretion of the SmarTire Board of
Directors. The bonus payments shall be calculated by the SmarTire Board
of Directors in accordance with certain criteria to be set by the
SmarTire Board of Directors as the SmarTire Board of Directors may from
time to time notify the Executive, but without any obligation on the
part of the SmarTire Board of Directors to award any bonus payment.
2. In any year in which a bonus payment is approved by the SmarTire Board
of Directors, the bonus payment will be made within four months of the
publication of the annual accounts for the relevant year.
3. Subject to the commencement of the SmarTire's "Incentive Compensation
Plan" (the "Plan"), the Executive's bonus provisions will be governed
by the Plan and the arrangements in paragraph 1 of this Schedule will
cease to apply. As and when the Plan receives formal approval from the
SmarTire Board of Directors the Executive will receive full details of
the Plan and how it applies to him.
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
** THE ITEMS MARKED BY TWO ASTERISKS HAVE BEEN OMITTED FROM THIS FILING AND
HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASIS DEVELOPMENT/PURCHASE AGREEMENT
THIS AGREEMENT effective as of the 13th day of December, 1999.
BETWEEN:
SENSONOR ASA, a company duly incorporated pursuant to the laws of Norway
having an office in Horten, Norway, P. O. Box 196, N-3192 Horten,
Norway.
("SensoNor")
AND:
SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to the laws
of the Province of British Columbia, having an office at 150 - 13151
Vanier Place, Richmond, British Columbia, V6V 2J1
("SmarTire")
WHEREAS:
A. Pursuant to an agreement dated September 1, 1998 ("Agreement No. TA-3727")
among SensoNor, SmarTire and TRW Inc. acting for its Automotive Electronic Group
("AEG"), SensoNor agreed to develop for and supply to each of SmarTire and AEG
an application specific integrated sensor ("ASIS");
B. SmarTire and SensoNor have agreed that SensoNor will develop and supply a
second ASIS (the "SmarTire ASIS") for SmarTire only upon substantially the same
terms and conditions as Agreement No. TA-3727; and
C. Rather than restate the terms and conditions of Agreement No. TA-3727 to
effect the development and supply of the SmarTire ASIS, SmarTire and SensoNor
have agreed to the terms of Agreement No. TA-3727 amended only as set out
herein.
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements herein set forth, the parties hereto agree as follows:
1. Agreement No. TA-3727 shall form a part of this Agreement, and its terms
shall be the terms of this Agreement as amended in this Agreement.
2. All capitalized terms used herein and not otherwise defined shall have the
meaning given to them in Agreement No. TA-3727.
3. For the purpose of this Agreement only, SensoNor and SmarTire acknowledge and
agree that the terms of Agreement No. TA-3727 shall be amended as follows:
(a) delete all references to "TRW Inc." and "AEG" and where
appropriate in the context substitute "SmarTire" therefor; the
Specifications for the SmarTire ASIS
<PAGE> 2
- 2 -
will be designated by SmarTire alone and not in conjunction with
AEG; and any consequential amendments which are necessary to
make this Agreement grammatically correct as a result of this
substitution shall be made;
(b) delete all references to "AEG part number 152008" and substitute
"SmarTire part number 214.0003";
(c) delete all references to "Specification Doc# 152008" and
substitute "Specification Doc# 214.0003";
(d) delete from Paragraph 4 the two references to "**" and opposite
SmarTire substitute "**" ;
(e) delete the schedule of milestone payments in Paragraph 4 and
substitute the following Schedule:
<TABLE>
<CAPTION>
DEVELOPMENT MILESTONES PAYMENT ($ US)
---------------------- --------------
<S> <C>
Upon Signing of the Agreement for the **
Development of the SP11B
Delivery of PVs that meet Specifications for **
Product SP11B
</TABLE>
(f) delete Attachment A, "Project Schedule" and substitute therefor
Attachment A "SP11B Project Schedule", a copy of which is
attached to this Agreement; and
(g) delete Attachment C, "Product Pricing" and substitute therefor
Attachment C "SP11B Product Pricing", a copy of which is
attached to this Agreement; and
(h) delete Attachment E, "Product Specifications" and substitute
therefor Attachment E "SP11B Product Specifications", a copy of
which is attached to this Agreement.
4. The development of the Product, as the definition of that term is amended
herein, shall be governed by the Supplier Development Manual.
5. Other than as amended herein, the terms and conditions set out in Agreement
No. TA-3727 shall be the terms of this Agreement.
6. For greater certainty, SmarTire and SensoNor acknowledge and agree that
Agreement No. TA-3727 among SensoNor, TRW Inc. and SmarTire is not amended by
this Agreement and remains in full force and effect; the amendments made to
Agreement No. TA-3727 are solely in respect of the development and supply of the
SmarTire ASIS.
7. The parties will execute and deliver all such further documents, do or cause
to be done all such further acts and things, and give all such further
assurances as may be necessary to give full effect to the provisions and intent
of this Agreement.
<PAGE> 3
- 3 -
8. This Agreement shall be construed under and governed by the laws of the
Province of British Columbia and the laws of Canada applicable therein.
9. This Agreement may be executed by facsimile and in several counterparts, each
of which shall be deemed to be an original and all of which shall together
constitute one and the same instrument.
10. Delivery of an executed copy of this Agreement by telecopy, telex, or other
means of electronic communication producing a printed copy will be deemed to be
execution and delivery of this Agreement on the date of such communication by
the party so delivering such copy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
13th day of December, 1999.
SENSONOR ASA SMARTIRE SYSTEMS INC.
Per: /s/ SVERRE HORNTVEDT Per: /s/ MARK DESMARAIS
------------------------------- -------------------------------
Authorized Signatory Authorized Signatory
Title: PRESIDENT Title: President & COO
-----------------------------
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
** THE ITEMS MARKED BY TWO ASTERISKS HAVE BEEN OMITTED FROM THIS FILING AND
HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
DATED 30TH DAY OF SEPTEMBER, 1999
TRANSENSE TECHNOLOGIES plc
and
SMARTIRE SYSTEMS INC.
LICENCE AGREEMENT
RELATING TO
TYRE MONITORING SYSTEMS
<PAGE> 2
INDEX
<TABLE>
<S> <C>
1. Definitions and Interpretation..................................................1
2. Grant...........................................................................4
3. Consideration and Royalties.....................................................4
4. Conditional Option..............................................................6
5. Transense's Warranties..........................................................8
6. Exclusion of Liability.........................................................11
7. Infringement...................................................................11
8. Transense's Obligations........................................................12
9. SmarTire's Obligations.........................................................14
10. Term and Termination...........................................................15
11. Share undertaking..............................................................17
12. General........................................................................17
13. Governing Law and Jurisdiction.................................................19
</TABLE>
SCHEDULES:
Schedule 1 The Patents
Schedule 2 Formal Patent Licence Agreement
<PAGE> 3
THIS AGREEMENT made the Thirtieth day of September, 1999.
BETWEEN:
TRANSENSE TECHNOLOGIES plc, Company No 1885075, duly organised and
existing under the laws of England, having its registered office at 36
Elder Street, London, El 6BT, England
(hereinafter called "Transense")
AND:
SMARTIRE SYSTEMS INC., a company duly organised and existing under the
laws of the Province of British Columbia, Canada having its registered
office at Suite 150, 13151 Vanier Place, Richmond, British Columbia,
V6V 2J1, Canada
(hereinafter called "SmarTire")
Transense and SmarTire each being a party to this Agreement are
collectively referred to as "the parties" hereafter.
WHEREAS:
A. Transense develops and licenses the application of certain Surface Acoustic
Wave transducer sensor and other technologies for the automotive industry, and
is the beneficial owner of certain Patents relating to the Products;
B. SmarTire develops and manufactures tyre monitoring systems and components and
desires to obtain a world-wide non-exclusive licence under the Patents and the
Technical Information to make and to sell Products that embody the Patents and
the Technical Information;
C. The parties hereto entered into an agreement dated 4th June 1999 relating to
the Technology under the Patents and setting out the principle terms on which
this Agreement would be concluded.
NOW IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 The terms defined in this Article shall have the meaning ascribed to them
herein whenever they are used in this Agreement, unless otherwise clearly
indicated by the context.
1.2 "L" means British pounds sterling.
1.3 "ASIC" means application specific integrated circuit.
<PAGE> 4
-2-
1.4 "Associated Sub-licensee" is a Sub-licensee of SmarTire hereunder which
either is a subsidiary or a holding company of SmarTire or a subsidiary of any
holding company of SmarTire (as such terms are defined by s736 Companies Act
1985), or is not dealing with SmarTire on arm's length terms.
1.5 "Calendar Quarter" shall mean consecutive periods of three (3) calendar
months ending on the last days of March, June, September and December of each
year until the first of these to occur after expiry or termination of this
Agreement.
1.6 "Chargeable Transaction" shall have the meaning ascribed in Clause 3.3.
1.7 "Closing Date" means the date of this Agreement.
1.8 "Confidential Information" means inventions, designs, drawings, computer
programs, specifications, data and any other information that is provided to
SmarTire by Transense, written or otherwise, that is marked or delivered as
confidential or is specifically identified as proprietary, secret or
confidential (or words of similar import).
1.9 "Improvements" means any and all improvements, or modifications to or
adaptations of any of the inventions, designs or technical information which
Transense is free to licence under Clause 2.1 below, and which might reasonably
be of commercial interest to SmarTire.
1.10 "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System of the United States of America.
1.11 "Net Selling Price" means the gross invoice price of the arm's length sale,
hiring or other disposal of the Products by SmarTire or any Sub-licensee
pursuant to this Agreement, net of freight, insurance, taxes and duties.
1.12 "Patents" shall mean the patents and applications for patents specified in
Schedule 1 and any patents which may be granted pursuant to any of such
applications and any re-issues or extensions of such patents and any divisions
and continuations of such applications.
1.13 "Products" means any tyre pressure monitoring transducer or other tyre
monitoring product (including spare and replacement parts of such products)
which is made, assembled, used, sold, or hired or otherwise disposed of in any
country in the Territory and which:
(a) falls within the scope of, or utilises any method or process
which falls within the scope of, any of the Patents or which
incorporates, or is itself, the invention the subject of any
of the Patents of that country; or
(b) embodies or utilises any of the Technical Information; or
(c) but for this licence would infringe any copyright in the
Technical Information; or
(d) but for this licence would infringe any design right in the
Technical Information.
<PAGE> 5
-3-
1.14 "Revenue Auditor" is the firm or competent individual appointed by
Transense to verify the Royalties payable by SmarTire and SmarTire's Associated
Sub-licensees.
1.15 "Royalties" means the payments specified in Clause 3.3.
1.16 "Sub-licensee" means a party who is at arm's length with SmarTire and who
licenses from SmarTire its rights or a part of SmarTire's rights granted under
this Agreement; and includes Associated Sub-licensees.
1.17 "Technical Information" includes the following, which pertains to the
Surface Acoustic Wave transducer and other Transense technologies for tyre
monitoring applications only and also includes information used in Transense's
normal conduct of business as below:
(a) Detailed formulations and drawings;
(b) Technical information needed in the establishment of the
manufacturing processes for the Products, the incorporation of
such information in SmarTire's own manufacturing and assembly
processes, including where available any plant and equipment
specification, operation and maintenance of the Technology;
(c) Approved sources of supply for components;
(d) Data for inspection and trial operation;
(e) Other engineering information and know-how which the parties
agree shall be necessary to SmarTire for the assembly and
functional understanding of the Technology, provided that
Transense may furnish such engineering information to SmarTire
without violating any law or contractual commitment to others;
and
(f) The Confidential Information and the Improvements.
1.18 "Technology" means the surface acoustic wave transducer technology for tyre
monitoring applications developed or otherwise owned by Transense, and includes
the technology described in the Patents.
1.19 "Territory" means any country in the World.
1.20 "To the knowledge of" means to the best knowledge, information and belief
as at the Closing Date or other date as appropriate of any of the directors,
officers, employees, contractors, servants or agents after due inquiry from all
sources of information likely to provide them with knowledge of the same and
after consulting the appropriate professional advisors.
1.21 The headings to the Clauses of this Agreement are for ease of reference
only and shall not form part of this Agreement.
<PAGE> 6
-4-
2. GRANT
2.1 In consideration of SmarTire's payment of the Royalties and purchase of
shares in Transense pursuant to Clause 3.1, Transense hereby grants to SmarTire
a non-exclusive licence under the Patents and under rights in the Technical
Information to develop, make, use, supply and sell Products within the Territory
on the terms of this Agreement and as set out in Schedule 2, provided always
that SmarTire shall not supply (and shall procure that no Sub-licensee of
SmarTire shall supply) to any party any Products for use in Formula One racing
without the prior written consent of Transense.
2.2 Transense shall at the cost of SmarTire execute any further document which
may be necessary to give effect to this Agreement in any part of the Territory.
2.3 SmarTire shall be responsible for obtaining any requisite registration or
governmental approval of this Agreement and shall expeditiously take all
necessary steps to obtain the same.
2.4 SmarTire shall, subject to Clause 2.5, be entitled to grant non-assignable
sub-licences (with no right to grant further licenses) in respect of the
licenses granted under Clause 2.1 to Sub-licensees or Associated Sub-licensees
as it may in its discretion think fit, provided that SmarTire shall remain
responsible for all acts and omissions of such Sub-licensees and shall be
directly liable to Transense for such acts and omissions as though they were
those of SmarTire. SmarTire shall within thirty (30) days of grant of any such
sub-licence notify Transense of any sub-licence granted pursuant to this Clause,
specifying whether the Sub-licensee is an Associated Sub-licensee and providing
a copy of the sub-licence.
2.5 Each sub-licence granted pursuant to Clause 2.4 shall contain provisions:
(a) imposing obligations on the Sub-licensee at least as onerous
as those imposed on SmarTire herein;
(b) in the case of an Associated Sub-Licensee allowing the same
access by Transense's Revenue Auditor to the premises and
records of the sub-licensee as Transense has to the premises
and records of SmarTire pursuant to Clause 3.12 below;
(c) for termination similar to those contained in this Agreement;
and
(d) for automatic termination of the sub-licence on the
termination of this Agreement.
3. CONSIDERATION AND ROYALTIES
3.1 In addition to the Royalties, the consideration for the grant to SmarTire of
the licenses herein shall be the subscription on the Closing Date by SmarTire
for L 150,000 sterling in aggregate of 250,000 Ordinary Shares of 1p each in the
capital of Transense credited as fully paid. Such subscription shall entitle
SmarTire to options to subscribe for a further 250,000 Ordinary Shares of 1p
each in the capital of Transense credited as fully paid at the lower of L 2 per
share and the average of the middle market price per share during the 30 days
prior to the
<PAGE> 7
-5-
giving of notice to Transense of exercise of such options. Such options shall be
exercisable at any time during the period of two (2) years following the Closing
Date whereupon it shall lapse.
3.2 The sum of L150,000 referred to in Clause 3.1 shall satisfied on the
Closing Date by:-
(a) the payment in cash to Transense of the sum of L100,000
sterling; and
(b) the allotment by SmarTire to Transense of 25,000 common shares
in the capital of SmarTire credited as fully-paid.
3.3 Except as otherwise set out in this Agreement, SmarTire shall, during the
continuance of this Agreement, pay to Transense free of any deduction, set off
or counterclaim Royalties on all Products supplied or sold pursuant to this
Agreement and any sub-licences (a "Chargeable Transaction") commencing on the
date of the first commercial sales (not including sales made purely for
evaluation or testing purposes) at the following percentages:
(a) ** of Net Selling Price up to ** cumulative sales of the
Products;
(b) ** of Net Selling Price over ** but less than ** cumulative
sales of the Products;
(c) ** of Net Selling Price over ** but less than ** cumulative
sales of the Products; and
(d) ** of Net Selling Price over ** cumulative sales of the
Products.
3.4 In the event that Royalties become payable before the patent applications
listed in Schedule 1 are granted by the United Kingdom Patent Office, then the
Royalties otherwise payable shall be reduced by ** percent until the said
patents are granted. If the patent applications listed on Schedule 1 do not
proceed to grant during the term of this Agreement, then the Royalties shall be
permanently reduced by **. If the patent applications listed in Schedule 1
proceed to grant, then SmarTire will pay 100% the Royalties ab initio.
3.5 In any sale or other disposal of any Products or part thereof otherwise than
in any arm's length transaction exclusively for money, the fair market price (if
higher) in the relevant country of disposal shall be deemed to be the Net
Selling Price.
3.6 In the event that Transense grants a licence for the Products to a third
party for use in tyre monitoring applications, or any part thereof, and
negotiates a royalty which is less than the Royalties, the royalty payable by
SmarTire shall be the lower of the Royalties or the royalties paid by such third
party.
3.7 Payments due under Clause 3.3 shall be made in Pounds Sterling within
twenty-eight (28) days of the end of each Calendar Quarter in respect of
Royalties accruing during that Calendar Quarter and SmarTire shall render to
Transense a statement showing the details of sales on which the Royalties due
have been calculated. The exchange conversion from any foreign currency to
Pounds Sterling shall be effected on the last day of the Calendar Quarter for
which
<PAGE> 8
-6-
the payment is being made. Any late payments shall bear interest (at the rate of
interest laid down by the Secretary of State of the United Kingdom from time to
time for the purposes of the Late Payment of Commercial Debt (Interest) Act
1998) on the outstanding amount from the due date until the date of actual
payment, whether before or after judgement.
3.8 Subject to Clause 3.11 below (mandatory withholdings), all sums payable
under this Agreement shall be made in full without deduction of taxes, charges
or other duties that may be imposed except in so far as any such deduction may
be credited in full by Transense against Transense's own tax liabilities. The
parties agree to co-operate in all respects necessary to take advantage of such
tax treaties or agreements that prevent double taxation as may be available.
3.9 SmarTire shall take all necessary steps and pay all necessary fees and
expenses to satisfy all applicable laws and requirements in respect of the
remittance by SmarTire of Royalties and of registering, declaring, reporting and
rendering valid this Agreement; but shall not be responsible for any of
Transense's income or other tax liabilities in receiving the Royalties.
3.10 All sums payable under this Agreement are exclusive of VAT, where
applicable.
3.11 Where any sums payable to Transense by SmarTire under this Agreement are to
be paid after deduction of any mandatory withholding tax, payment shall be
accompanied by such certificate as Transense may reasonably require to enable
Transense to set-off such deduction against its own tax liability.
3.12 SmarTire agrees to keep true and accurate records and books of account
containing all data necessary for the determination of Royalties payable
hereunder, which records and books of account shall, upon reasonable notice of
Transense, be open at all reasonable times during business hours for inspection
by Transense's Revenue Auditor for the purpose of verifying the accuracy of
SmarTire's reports hereunder. If the inspection discloses an underpayment to
Transense of more than 5% of the amount due, SmarTire shall promptly on demand
reimburse Transense the reasonable costs of Transense incurred in respect of the
verification together with interest at the rate specified in Clause 3.7 from the
date on which the payment should have been made to the date on which it is
actually made.
4. CONDITIONAL OPTION
4.1 Transense shall not grant any further non-exclusive licenses of the Products
at any time before the third anniversary of this Agreement unless it has first
served notice on SmarTire that Transense has received a written bona fide offer
("an Offer") from a third party for the grant of such a licence ("a Notice"). An
Offer must involve payments to Transense of at least ** payable within a 12
month period from the date of the Offer; if less, Transense will not grant such
a licence and the provisions of this Section 4 will not apply.
4.2 In the event that a Notice and a copy of the Offer are served upon SmarTire
before the third anniversary of the Closing Date, SmarTire shall have an option,
exercisable only within a 30 day period following receipt by it of such Notice
and Offer, by written notice to Transense (but with effect only from the first
day of the next Calendar Quarter following receipt by Transense of SmarTire's
notice) to substitute an exclusive licence for the non-exclusive
<PAGE> 9
-7-
licence granted in Clause 2.1 above, upon making payment to Transense in
accordance with Clause 4.3 below. If, following service on SmarTire of the
Notice and Offer (if any), SmarTire does not exercise the option within such 30
day period, the option shall lapse, provided that Transense does grant a
non-exclusive licence to the third party on exactly the terms of the Offer
within a period of 90 days of the Offer. Thereafter, Transense shall be under no
obligation to serve Notices in respect of any further Offers, whether before or
after the third anniversary of the date of this Agreement.
4.3 The consideration payable by SmarTire for the substitution of exclusive
licences referred to in Clause 4.2 above shall be the subscription by SmarTire
of such number of Ordinary Shares of 1p each in the capital of Transense
credited as fully paid as shall have a value of ** Pounds Sterling (**) in
aggregate, calculated at the higher of L2 per share and the average of the
middle market price per share for Transense shares trading on a recognized stock
exchange or trading market during the 30 days prior to the date of SmarTire's
notice of subscription of such shares.
4.4 The subscription of ** referred to in Clause 4.3 above shall be satisfied on
the date of SmarTire's notice of subscription by:-
(a) the payment in cash to Transense of the sum of **; and
(b) the allotment by SmarTire to Transense of such number of common
shares in the capital of SmarTire credited as fully paid as
shall have a value of ** aggregate calculated at the higher of
L2 per share and the average of the daily closing prices of such
shares as shown in NASDAQ or such other recognized stock
exchange or trading market upon which SmarTire shares trade on
the 30 trading days prior to the date of SmarTire's notice of
subscription in Transense.
4.5 In the event that SmarTire, following receipt of a Notice and Offer, elects
to exercise the option set out in Clause 4.2 of above within the prescribed 30
day period, the following provisions shall apply to the exclusive licences
thereafter enjoyed by SmarTire:-
(a) the exclusive licences shall be subject to any laws for the time
being in any part of the Territory, including but not limited to
any laws relating to the grant of any compulsory licences or any
licences as of right;
(b) if SmarTire for any reason fails to supply Products which
SmarTire commercially sells in other countries and which will
not require modification to sell in that country, to customers
within any country of the Territory within 6 months following
receipt of a notice from Transense requiring such supply, then
Transense shall be entitled, at any time after the expiry of
such 6 month period, to serve notice on SmarTire substituting
forthwith non-exclusive licences for SmarTire's exclusive
licences in the smallest legal territorial jurisdiction of that
country necessary to sell Products in that jurisdiction in which
such customers carry on their business for which they need
Products.
4.6 If, following the exercise by SmarTire of the option set out in Clause 4.2
above ("the Option"), the Royalties are less than the minimum levels set out in
this sub-Clause 4.6,
<PAGE> 10
- 8 -
Transense shall be entitled to substitute non-exclusive licenses for the
exclusive licenses granted to SmarTire under the Option.
(a) For the purposes of the minimum Royalties set out in this
sub-Clause 4.6, a 'Year of Exclusivity' shall mean any period of
4 consecutive Calendar Quarters, the first Year of Exclusivity
beginning on the day on which the Option exercised by SmarTire
becomes effective, and each subsequent Year of Exclusivity
beginning on an anniversary of such date.
(b) In aggregate over the first 4 Years of Exclusivity, the minimum
Royalties shall be **
(c) In each subsequent Year of Exclusivity, the minimum Royalties
shall be the sum of **
(d) In order to achieve the minimum Royalties hereunder, SmarTire
may supplement the Royalties otherwise payable by a voluntary
cash payment.
4.7 The rights granted to SmarTire under this Section 4 shall not be assignable
to any third party.
4.8 This Section 4 shall cease to be of effect in the event that this Agreement
is terminated by either party in accordance with Clause 10.2.
4.9 Notwithstanding anything else in this Agreement, no further Royalties will
be payable by SmarTire to Transense for use of the Technology after the date
that: (and in such event, Transense may not terminate the license granted herein
for non-payment of the Royalties)
(a) a patent for tyre monitoring systems based upon Surface Acoustic
Wave technology for pressure measurement is issued by a patent
office of the United States, Japan or any European country to
any third party during the term of the Agreement; or
(b) subject to the provisions of Clause 7.1, Transense or SmarTire
is notified by a third party of a potential infringement of a
patent for tyre monitoring systems using Surface Acoustic Wave
technology in the United States, Japan or any European country.
5. TRANSENSE'S WARRANTIES
5.1 Transense warrants and represents to SmarTire, with the intent that SmarTire
shall rely thereon in entering into this Agreement and in concluding the
transactions contemplated hereby, that:
(a) Transense is duly incorporated, validly existing and in good
standing, under the laws of England, and has the power,
authority and capacity to enter into this Agreement and carry
out its terms;
<PAGE> 11
- 9 -
(b) Transense is the registered and beneficial owner of all right,
title and interest in and to the Technology and the Patents
which are free and clear of all encumbrances, except as
disclosed in a disclosure letter (if any) to be delivered by
Transense to SmarTire on or before the Closing Date;
(c) To the knowledge of Transense, there are no grounds for the
Patents being invalid or rejected;
(d) To the knowledge of Transense, the devices produced in
accordance with the Technology are not date sensitive;
(e) The inventions are fully described and claimed in the Patents
and are correctly and completely set out in Schedule 1;
(f) Transense has not granted or agreed to grant any license or any
other agreement whereby Transense is obliged to give to any
other person, firm or corporation any rights to make, use or
sell the Technology except those pertaining to the development
of the Surface Acoustic Wave transducers and ASICs which have
already been disclosed to SmarTire;
(g) Transense has not disclosed the Technical Information, or any of
it, to any other person, firm or corporation except in
connection with the manufacture and sale of the Technology in
the normal course of business, and except pursuant to written
non-disclosure agreements with such persons, firms or
corporations entered into for valuable consideration;
(h) Neither the execution of this Agreement nor the performance of
Transense's obligations hereunder shall give rise to the
creation or imposition of any encumbrance on the Patents;
(I) To the knowledge of Transense, the Technology being transferred
to SmarTire pursuant to this Agreement comprises all knowledge
that is currently available to Transense for use of the
Technology; and Transense will transfer such other knowledge to
SmarTire as it becomes available, and such additional
transferred knowledge will become part of the knowledge
transferred hereunder and will be governed by this Agreement;
(j) To the knowledge of Transense, SmarTire's use of the Technology
as contemplated herein does not and will not infringe upon, or
induce or contribute to the infringement of the intellectual
property rights of a third party;
(k) To the knowledge of Transense, there is no claim of infringement
(or the inducement of or contribution to the infringement) of
any rights of any third party arising from SmarTire's use of the
Technology, nor has Transense received any notice that use of
the Technology infringes upon or breaches any rights of any
third party;
<PAGE> 12
- 10 -
(1) To the knowledge of Transense, there is no infringement or
violation by any third party of any of Transense's rights in the
Technology;
(m) To the knowledge of Transense, there is no fact, reason, action
or inaction that adversely affects the scope, validity or
enforceability of any of the intellectual property rights
related to the Technology;
(n) To the knowledge of Transense, it has made available to SmarTire
a true and complete copy of all patent applications (including
prosecution history), registrations and amendments thereto that
comprise or relate to the Technology;
(o) To the knowledge of Transense, with respect to the Technology
and unless there is an appropriate annotation therein to the
contrary:
(i) the filing and grant dates of the Patents are as set out
in Schedule 1;
(ii) in addition to those listed in Schedule 1, no patent
applications have been filed in any other government
office anywhere in the world, for the Technology or in
respect of some portion or embodiment of the Technology,
whether later abandoned or not;
(iii) the Technology has never been on sale anywhere, it being
understood that an offer to sell under conditions of
secrecy is within the meaning of "on sale";
(iv) the Technology was not patented or described in a
printed publication anywhere in the world prior to the
filing date of the Patents;
(v) the Technology was not known or used by others or first
patented or described in a printed publication anywhere
in the world before the invention thereof by the
inventors set out in Schedule 1;
(vi) the persons listed in Schedule I were substantially
involved in the preparation or prosecution of the
Patents;
(vii) the inventors of the Technology are identified in
Schedule I and there are no others who have a reasonable
claim of co-inventorship or who have made such a claim;
(viii) the testing of the Technology was carried out under
conditions of secrecy and was not for commercial use;
(p) Neither this Agreement nor any document to be delivered by
Transense nor any certificate, report, statement or other
documents furnished by Transense in connection with the
negotiation of this Agreement contains or shall contain any
untrue statement of a material fact or omits or shall omit to
state a material fact necessary to make the statement contained
herein or therein not misleading. Transense has disclosed to
SmarTire everything material or cogent in connection
<PAGE> 13
- 11 -
with the Patents and the Technology, and nothing stated to
SmarTire has been misleading or incorrect.
6. EXCLUSION OF LIABILITY
6.1 SmarTire acknowledges that:-
(a) Transense's business is the invention and exploitation of
intellectual property rights; and
(b) Transense does not have expertise in the design or manufacture
of finally finished products; and
(c) As at the Closing Date the Technology embodied in Products is
experimental; and
(d) SmarTire is under an obligation to test all Products thoroughly
before use and SmarTire acknowledges that Transense has not
performed any such tests on which SmarTire may rely.
6.2 In the light of SmarTire's acknowledgements in Clause 6.1 SmarTire agrees
that the provisions of Clause 6.1 are reasonable.
6.3 Transense shall be under no liability (save for liability for negligence or
willful misconduct) whatsoever to SmarTire for any expense, loss, damage or
injury of any kind (including but not limited to any loss of profit or
consequential damage) sustained by SmarTire or any third party arising or
incurred in connection with the manufacture, use, sale or other disposal of
Products and SmarTire shall indemnify Transense from and against all such
liability.
7. INFRINGEMENT
7.1 If any of the Patents shall be declared to be infringing on another patent,
declared invalid or revoked by a patent office, court or tribunal of competent
jurisdiction, all Royalties shall cease to be payable in respect of the Patent
or Patents held infringing, invalid or revoked as from the date of such
declaration or revocation but, if the decision of the court or tribunal making
such declaration or revocation shall be reversed on appeal, the Royalties shall
become payable from the date of such reversal together with all Royalties which
would have been payable but for the adverse decision.
7.2 The parties shall promptly inform each other of any infringement or
suspected infringement of any of the Patents of which they become aware.
7.3 Transense may, but shall not be obliged to institute suit against a third
party for infringement of the Patents or unlawful use of any portion of the
Confidential Information within one month from a request to do so by SmarTire
and, if it does commence such suit, it shall pursue the same with reasonable
dispatch. If Transense does not institute such suit within such period, SmarTire
may, but shall not be obliged to institute such suit in the name of Transense.
<PAGE> 14
- 12 -
7.4 If Transense institutes and prosecutes to judgement any suit provided for in
paragraph 7.3 hereof (and whether or not requested to do so by SmarTire), all
recovery of damages in such lawsuits shall be payable to Transense unless
otherwise agreed to in writing between the parties hereto.
7.5 If SmarTire institutes a suit for infringement of the Patents or unlawful
use of the Confidential Information, all recovery of damages in such lawsuits
shall be payable to SmarTire unless otherwise agreed to in writing between the
parties hereto.
7.6 If both Transense and SmarTire jointly institute and prosecute to judgement
any proceedings for unlawful use of the trade secrets herein above referred to,
the parties hereto shall bear the cost of such lawsuit equally and all recovery
of damages shall be payable equally to the parties hereto unless otherwise
agreed to in writing.
7.7 Transense shall fully and effectively indemnify, defend and save harmless,
SmarTire from all cost, damage, loss or expense suffered or incurred by SmarTire
(including reasonable legal fees and disbursements invoiced to SmarTire), every
action, suit or proceeding or claim instituted against SmarTire for infringement
of the patent, copyright, trade secrets or other intellectual property rights of
any third party, where such action, suit or proceeding or claim relates to
SmarTire's use, manufacture and/or sale of the Technology as incorporated into
the Products as contemplated herein.
7.8 Transense shall have control of the defense of such lawsuit as specified in
Clause 7.7. SmarTire shall assist Transense, at Transense's sole cost, in the
defense of such suit or action by providing information and witnesses as needed.
SmarTire shall have the right to be represented by its own counsel at its
expense.
7.9 Transense may not settle any lawsuit without the consent of SmarTire, if by
such settlement SmarTire becomes obliged to make any monetary payment, to
transfer any property or interest in property, or become subject to an
injunction.
8. TRANSENSE'S OBLIGATIONS
8.1 Transense shall supply the Technical Information to SmarTire.
8.2 Transense undertakes to inform SmarTire of new tyre monitoring designs and
relevant developments that could constitute Improvements. All patents and patent
applications relating to (and all Technical Information and Confidential
Information embodied in) such Improvements shall be licensed to SmarTire under
the terms of this Agreement, and shall be deemed to be included in definitions
of Patents, Technical Information and Confidential Information respectively,
provided in each case that SmarTire does not reject such Improvement within 28
days of receiving details of such Improvement.
8.3 If SmarTire discovers, invents or acquires any Improvements to the subject
matter of the Technology, the parties acknowledge and agree that any such
Improvements will be the sole property of SmarTire to the exclusion of
Transense, which includes the right to obtain patent or related protection
therefor in all countries at SmarTire's expense, save that SmarTire shall
<PAGE> 15
- 13 -
grant back to Transense a license for applications not related to tyre
monitoring on terms to be agreed between the parties.
8.4 Transense shall, within sixty (60) days of the Closing Date and from time to
time throughout the term of the Agreement when requested by SmarTire, supply
SmarTire with such samples of the Technology that are available and a copy of
all Technical Information and all other information and documentation that is
available to enable SmarTire to practice the Technology, to utilize the
Technical Information, and to manufacture and sell the Products.
8.5 Transense shall supply SmarTire with such product and technical training,
consultation, support, supervision and other assistance as reasonably requested
by SmarTire as is necessary to prepare and commence use of the Technology,
incorporate it into the Products and to commercialize the Technology.
8.6 Upon request of SmarTire, Transense shall send to SmarTire, qualified
specialists, technicians and other personnel ("Technical Personnel") to provide
such technical assistance to such employees of SmarTire as SmarTire shall
designate and to consult with SmarTire in connection with the manufacture and
sale of SmarTire's Products.
8.7 SmarTire shall pay the reasonable disbursements incurred by Transense in
providing any such assistance as set out in Clause 8.6, subject to prior
approval by SmarTire.
8.8 Transense agrees that it will develop, and introduce SmarTire to, a source
or sources for the key acoustic wave and ASIC components for the Products. In
developing the key acoustic wave and ASIC components for tyre monitoring
systems, Transense agrees to require of each source that their relationship be
exclusive such that the supplier is prohibited from selling the key acoustic
wave or ASIC components to any other party in connection with tyre monitoring
systems that is not a licensee of Transense for the Technology.
8.9 Transense shall keep confidential all SmarTire information of a confidential
nature.
8.10 Transense shall pursue promptly the prosecution of the patent applications
listed in Schedule 1 and shall maintain those patent applications in good
standing and shall bear all expenses in connection therewith and shall provide
SmarTire with such information with respect to the patent applications as
SmarTire may require with respect to the prosecution of the applications
therefor and the maintenance of the patent applications in good standing.
8.11 Transense shall pursue promptly the filing and prosecution of patent
applications listed in Schedule 1 in the United States Patent Office for the
inventions as disclosed in the U.K. patent applications and shall maintain in
good standing any patents issued thereunder and shall bear all expenses in
connection therewith and shall provide SmarTire with such information as
SmarTire may require with respect to the prosecution of the applications
therefor and the maintenance of such patents in good standing.
8.12 If Transense fails to satisfy any of the covenants contained in Clause
8.11, this Agreement authorizes SmarTire to pursue on behalf of Transense the
filing and prosecution of the patent applications in the United States Patent
Office for the inventions as disclosed in the
<PAGE> 16
-14-
patent applications listed in Schedule 1 (as applicable), and to maintain in
good standing any patents issued thereunder. Any and all expenses incurred by
SmarTire pursuant to this Clause 8.12 will be borne by Transense and may be
offset by SmarTire against any Royalties payable to Transense.
8.13 SmarTire acknowledges that Transense's license of August 22, 1994 from
Anthony and Brian Lonsdale relates only to cars, commercial industrial and
agricultural vehicles, fork lift trucks, road traffic management, positioning
and location equipment relating to moving vehicles, earth moving equipment,
tracked vehicles and other types of vehicles in the Territory. At SmarTire's
request and cost, Transense will attempt to license such other uses as SmarTire
deems appropriate, and such uses will become part of this Agreement. Any
licensing costs paid by SmarTire will be deducted from the first Royalties
payable relating to the new uses.
9. SMARTIRE'S OBLIGATIONS
9.1 SmarTire undertakes that subject to price, quality and delivery terms being
as favorable to SmarTire as other suppliers offer, and subject to SmarTire being
satisfied as to the protection of its intellectual property rights and the
Technical Information, it shall source the key surface acoustic wave and ASIC
components for SmarTire's Products from suppliers that have been approved by
both Transense and SmarTire, such approval not to be unreasonably withheld.
9.2 Should SmarTire enter into agreements for supply of the key acoustic wave
and ASIC components of the Products with third parties other than those sourced
by Transense as referred to in Clause 8.8, SmarTire undertakes that such
agreements will require those third parties to use the Technical Information
only to produce components for SmarTire's use under this Agreement and to
protect the confidentiality of the Technical Information.
9.3 SmarTire shall ensure that all advertisements, labels, name tags, markings
and other promotional materials relating to the Products comply with all
relevant laws and regulations of all governments and other relevant authorities
in the Territory.
9.4 SmarTire covenants, represents, and warrants that:
(a) SmarTire will, upon their commercial development, use reasonable
endeavours to promote public acquaintance with and esteem for
the Products within the Territory where SmarTire believes a
commercial and profitable market can and will develop;
(b) all Products supplied or sold by SmarTire shall comply with ISO
9000 and QS 9000 requirements and with all other relevant and
recognised quality standards and procedures.
9.5 During the continuance of this Agreement SmarTire shall not act as agent of
Transense and specifically not give any indication that it is acting otherwise
than as principal and, in advertising or selling the Products, not make any
representation or give any warranty on behalf of Transense.
<PAGE> 17
-15-
9.6 SmarTire will take out (and maintain in force for the term of this Agreement
and for five years after its termination, howsoever arising) adequate insurance,
including without limitation professional indemnity and product liability
insurance, and if allowed by the insurer, shall name Transense as an additional
insured, and shall not knowingly vitiate such insurance. Transense agrees,
subject to prior written consent, to pay the cost, if any, of them being added
as an additional insured.
9.7 SmarTire undertakes not to disclose, and to cause SmarTire's officers,
employees or agents not to disclose, any Confidential Information to third
parties other than as is necessary in the course of SmarTire's business.
SmarTire warrants that it will adopt reasonable procedures to protect the
aforementioned Confidential Information, including procedures that exclude from
access to such information all persons who do not require direct access in the
course of SmarTire's business. SmarTire agrees that after expiration or
termination of this Agreement it shall continue to protect and shall cease using
such Confidential Information, shall return all copies of the same to Transense,
and further agrees that it will not use or knowingly permit the use of such
Confidential Information to the disadvantage of Transense. This undertaking
shall not apply to Confidential Information to the extent that such Confidential
Information:
(a) as evidenced by SmarTire's written records, was lawfully known
to SmarTire prior to its communication by or through Transense
and was not communicated to SmarTire subject to any restrictions
on disclosure or use; or
(b) is necessarily disclosed by the sale of Products embodying any
of the Technical Information; or
(c) is or becomes in the public domain otherwise than by any default
of SmarTire or persons acquiring the same from SmarTire; or
(d) becomes known to SmarTire by the action of a third party not in
breach of any obligation of confidence; or
(e) must be disclosed in order to comply with the applicable laws of
any territory.
9.8 SmarTire shall ensure that all Products supplied pursuant to this Agreement
comply with all laws and regulations in operation in the part of the Territory
in which the relevant supply takes place.
9.9 SmarTire is duly incorporated, validly existing and in good standing under
the laws of the Province of British Columbia, Canada, and has the power,
authority and capacity to enter into this Agreement and carry out its terms.
10. TERM AND TERMINATION
10.1 The licences granted under Clause 2.1, and if granted under Clause 4,
shall continue in force in each country of the Territory until all of the
Patents of that country have expired and this Agreement shall remain in effect
for the life of the Patents.
10.2 During the term of this Agreement, in the event that:
<PAGE> 18
-16-
(a) either party is in breach of any material obligation on it
hereunder and, in the case of a breach capable of remedy, it
shall not have been remedied by the defaulting party within 60
days of a written notice specifying the breach and requiring its
remedy; or
(b) either party becomes insolvent, has a receiver, administrator or
administrative receiver appointed over the whole or any part of
its assets, enters into any compound with creditors, has an
order made or resolution passed for it to be wound up or for its
administration (otherwise than in furtherance of a scheme for
amalgamation or reconstruction) or in any other jurisdiction has
a similar or analogous officer appointed, suffers a similar or
analogous resolution or order to be passed or enters into a
similar or analogous arrangement;
(c) SmarTire directly or indirectly and knowingly opposes or assists
any third party to oppose the grant of any of the Patents or
disputes or directly or indirectly and knowingly assists any
third party to dispute the validity of any of the Patents;
(d) without prejudice to the generality of the foregoing is in
breach of its obligations relating to insurance which are set
out in Clause 9.6;
Transense or, in the case of breach or insolvency, the party not in breach of
the obligation or condition or insolvent may forthwith terminate this Agreement
by serving fourteen (14) days' notice without prejudice to the accrued rights of
either party.
10.3 SmarTire may unilaterally terminate this Agreement upon 60 days' notice to
Transense.
10.4 Any sub-licence granted by SmarTire under Clause 2.4 shall forthwith and
automatically terminate on expiry or termination of this Agreement.
10.5 The expiry or termination of this Agreement for any reason shall not bring
to an end:
(a) the confidentiality obligations on the parties hereto
(b) SmarTire's obligations to pay Royalties which have accrued due
and all provisions relating to such payments;
(c) SmarTire's obligations to pay the consideration referred to in
Clause 3.1 and all provisions relating to such payments; and
(d) the provisions of Articles 5 and 8;
(e) expressly or by implication survive termination;
which Clauses shall survive termination of this Agreement.
10.6 On expiry or other termination of this Agreement SmarTire undertakes:
<PAGE> 19
-17-
(a) to sign such notification of cessation of use of the Patents as
is required by Transense;
(b) to cease carrying on the activities permitted by this Agreement;
and
(c) unless Transense otherwise specifies in writing, SmarTire shall
with reasonable diligence remove and efface all references to
Transense where appropriate.
(d) The termination of this Agreement shall be without prejudice to
any rights which have already accrued to either of the parties
under this Agreement.
10.7 Failure of any party hereto to insist upon the strict and punctual
performance of any provision hereof shall not constitute waiver of nor estoppel
against asserting the right to require such performance, nor shall a waiver or
estoppel in one instance constitute a waiver or estoppel with respect to a later
breach whether of similar nature or otherwise.
10.8 Nothing in this Agreement shall prevent a party from enforcing its rights
by such remedies as may be available in lieu of termination.
10.9 The failure or delay of either of the parties hereto to perform any
obligation under this Agreement solely by reason of acts of God, acts of
government (except as otherwise enumerated herein), riots, wars, strikes,
lockouts, (other than strikes or lockouts involving the workforce of the party
seeking to rely upon 'force majeure') accidents in transportation or other
causes beyond its control, constituting 'force majeure', shall not be deemed to
be a breach of this Agreement, provided that the party suffering such 'force
majeure' shall notify the other party in writing within fourteen (14) days after
the occurrence of such 'force majeure' and shall in every instance, to the
extent reasonable and lawful under the circumstances, use its best efforts to
remove or remedy such cause with all reasonable dispatch.
11. SHARE UNDERTAKING
11.1 Transense and SmarTire mutually undertake with each other to use all
reasonable endeavours to ensure that, at all times when either party may be
required to issue shares in accordance with this Agreement, it will have
sufficient authorized but unissued share capital and will obtain all appropriate
consents whether from shareholders or any relevant Stock Exchange, share dealing
body or other regulatory authority, necessary for such issue of shares.
12. GENERAL
12.1 The terms and conditions of this Agreement are the only terms and
conditions upon which Transense and SmarTire are prepared to deal with each
other and they shall govern this Agreement to the entire exclusion of any other
express or implied conditions, superseding any prior promises, representations
(other than fraudulent representations), undertakings, understandings,
arrangements or agreements, oral or written, and constitute the entire
undertaking between the parties in connection with licensing and use of the
Patents and Technical Information and the production, supply or sale of Products
by SmarTire.
<PAGE> 20
-18-
12.2 No changes, alterations, or modifications of the terms of this Agreement
shall be effective unless they are in writing and are signed by authorized
representatives of all parties hereto and, if required, until they have received
government approval.
12.3 If any part or provision of this Agreement is prohibited or is found to
contravene or is rendered void or unenforceable by any regulation or legislation
the validity or enforceability of any other part of this Agreement shall not be
affected, provided this Agreement can be performed by the parties without
reference to that prohibited, void or unenforceable part or provision.
12.4 This contract may be assigned by Transense, but in the event that Transense
wishes to transfer ownership of rights which are licensed under this Agreement
to any third party it shall demonstrate that, at the same time as such transfer,
the third party agrees to be bound to the terms of this Agreement in
substitution for Transense, and the third party shall assume all Transense's
liabilities and obligations hereunder.
12.5 Any notice required or permitted to be given hereunder shall be in writing
and may be given by personal service, recorded delivery certified airmail, or by
air courier, with postage or carriage, or by facsimile successfully transmitted
as the case may be fully prepaid to the following addresses:
Transense: Chief Executive Officer
TRANSENSE TECHNOLOGIES plc
36 Elder Street
London El 6BT England
Fax: 01869 - 238031
SmarTire: Chief Executive Officer
SMARTIRE SYSTEMS INC
Suite 150, 13151 Vanier Place
Richmond British Columbia
Canada V6V 2J1
Fax: (604) 276-2350
12.6 Any notice so given shall be presumed to be received by letter: upon
receipt or seven (7) days after posting, whichever is less;.
12.7 To prove service of notice, it shall be sufficient to prove that a letter
containing the notice was properly addressed and properly dispatched or posted.
12.8 Either party may amend its address set forth above by written notice to the
other party.
<PAGE> 21
-19-
12.9 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
13. GOVERNING LAW AND JURISDICTION
13.1 This Agreement shall be governed by and construed in accordance with
English Law.
13.2 Each of the parties hereto submits to the non-exclusive jurisdiction of the
English Courts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
TRANSENSE TECHNOLOGIES PLC
Per: /s/ James Perry
---------------------------------------
Authorised Signatory
SMARTIRE SYSTEMS INC.
Per: /s/ Robert Rudman
---------------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 11
SMARTIRE SYSTEMS INC.
COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31, January 31, January 31,
2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------
($000's except per share data)
<S> <C> <C> <C> <C>
Net loss 2,821 2,657 4,816 4,467
- ----------------------------------------------------------------------------------------------
Weighted average number
Of common shares 12,553,280 9,532,424 11,591,614 9,458,174
- ----------------------------------------------------------------------------------------------
Basic loss per share .22 .28 .42 .47
- ----------------------------------------------------------------------------------------------
</TABLE>
The stock options and warrants outstanding are anti-dilutive. Accordingly,
diluted loss per share does not differ from basic loss per share for the years
presented herein.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1.45
<CASH> 1,285,382
<SECURITIES> 0
<RECEIVABLES> 225,152
<ALLOWANCES> 0
<INVENTORY> 61,097
<CURRENT-ASSETS> 2,310,489
<PP&E> 1,325,028
<DEPRECIATION> 529,701
<TOTAL-ASSETS> 3,105,816
<CURRENT-LIABILITIES> 1,164,659
<BONDS> 0
0
0
<COMMON> 45,243,357
<OTHER-SE> (43,302,200)
<TOTAL-LIABILITY-AND-EQUITY> 3,105,816
<SALES> 589,153
<TOTAL-REVENUES> 589,153
<CGS> 313,461
<TOTAL-COSTS> 313,461
<OTHER-EXPENSES> 5,091,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,815,976)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,815,976)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,815,976)
<EPS-BASIC> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
